ASBESTOS CLAIMS AND LITIGATION RECENT TRENDS IN THE LAW: EXTERNAL INSULATION CLAIMS SUMMARY AND ANALYSIS

ASBESTOS CLAIMS AND LITIGATION RECENT TRENDS IN THE LAW: EXTERNAL INSULATION CLAIMS SUMMARY AND ANALYSIS April 1, 2008

I. INTRODUCTION Over the last several years, there has been an increase in a number of equipment manufacturer defendants in asbestos litigation. In the past, such manufacturers have been successful in defending asbestos cases using the following dose defenses: (1) no dose (no asbestos-containing product in the equipment, or no release of asbestos-containing material in operation or maintenance of the product); (2) low dose (the asbestos-containing product did not emit asbestos fibers sufficient to cause any asbestos-related disease); and (3) chrysotile (the asbestos-containing materials used in the equipment was limited to chrysotile, which did not cause mesotheliomas, or the dose from the equipment was insufficient to cause an asbestos-related disease). 1 As equipment manufacturers have been doing fairly well using these dose defenses, their opponents have come forward with a strategy to hinder the success of using the dose defenses. The new creative strategy is to make the equipment manufacturers liable for insulation that may end up on their pump, valve, compressor motor or other equipment. As Courts have confronted this new plaintiff strategy, the end results are conflicting, but the trend in some states such as California, New York, Pennsylvania, and Washington -- is to extend liability of the manufacturer for post-sale application of asbestos-containing insulation and other products not supplied or specified by equipment manufacturer. The courts ruling against the equipment manufacturers are making foreseeability the central issue: whether equipment manufacturers should reasonably have foreseen that their product would be used with asbestos-containing materials and that plaintiffs would install, remove or repair their product. The key factor in these cases is that the plaintiffs, or sometimes the defendants by their own admission, provided evidence that the equipment manufacturer knew that asbestos would, or could, be placed on the equipment. The courts holdings appear to focus on this knowledge, finding that the manufacturers should have foreseen subsequent harm to workers and hold there was a duty to warn. Other courts are continuing to find that the most the manufacturers could reasonably foresee is that consumers might be subject to the risks of the manufacturers own product, since those are the only risks the manufacturers are required to know. In the hopes of offering manufacturers a map as they navigate through the extending liability landscape, this paper provides a jurisdictional overview of how courts are approaching the liability of equipment manufacturers for post-sale application of asbestos-containing insulation and other products not supplied or specified by equipment manufacturer. Simply put, in those states where judges are recognizing a duty to warn, manufacturers must be prepared for additional claim filings, more complex litigation. 1 See Fitzpatrick and Fofaria, Potential Liability of Equipment Manufacturers for Post-Sale Application of Asbestos-Containing Insulation and Other Products not Supplied or Specified by Equipment Manufacturer, DRI Asbestos Medicine, November 2007, page 23. 1

They must also be prepared for additional costs and a focus upon more sophisticated defenses. II. JURISDICTIONAL OVERVIEW a. California In Powell v. Standard Brands Paint, 166 Cal. App. 3d 357, 212 Cal. Rptr. 2d 395 (1985), plaintiff used Standard Brands lacquer thinner to remove sealer from a tile floor. The next day, he finished the product with another brand (Grove Chemical). There was an explosion. The California Court of Appeals affirmed summary judgment in favor of Standard Brands, holding that the explosion of the other product was not a reasonably foreseeable consequence of Standard Brands failure to warn, and that the manufacturer s duty is restricted as follows: [I]t is clear the manufacturer s duty is restricted to warnings based on the characteristics of the manufacturer s own product. Understandably, the law does not require a manufacturer to study and analyze the products of others and to warn users of the risks of these products. A manufacturer s decision to supply warnings, and the nature of any warnings, are therefore necessarily based upon and tailored to the risks of use of the manufacturer s own product. Thus, even where the manufacturer erroneously omits warnings, the most the manufacturer could reasonably foresee is that consumers might be subject to the risks of the manufacturer s own product, since those are the only risks he is required to know. See Powell, 166 Cal. App. 3d at 364 (citations omitted)(emphasis in original). The same rule applies where a manufacturer s safe product is used in conjunction with another manufacturer s defective component part. In Garman v. Magic Chef, Inc., 117 Cal.App.3d 634, 173 Cal.Rptr. 20 (1981), the Court of Appeals affirmed summary judgment to stove manufacturer Magic Chef where the plaintiff sought to impose liability for failing to warn about risks from another manufacturer s adjacent pipe and t-joint which leaked propane that was ignited by the stove s nearby flame: [T]he makers of such products are not liable under any theory, for merely failing to warn of injury which may befall a person who uses that product in an unsafe manner or in conjunction with another product which because of a defect or improper use is itself unsafe. See Garman, 117 Cal.App. 3d at 638 (emphasis added). As the Court explained, [t]o say that the absence of a warning to check for gas leaks in other products makes the stove unsafe is semantic nonsense. Id. Similarly in Blackwell v. Phelps Dodge Corp., 157 Cal.App. 3d 372, 203 Cal.Rptr. 706 (1984), the court specifically distinguished between the defendant supplier s acid and the defective tank manufactured and supplied by a third party which was used to transport the acid with respect to the duty to warn: 2

While failure to warn may create liability for harm caused by use of an unreasonably dangerous product, that rule does not apply where it was not any unreasonably dangerous condition or feature of defendant s product which caused the injury. See Blackwell, 157 Cal.App.3d at 377 (emphasis added). However, in Gill Tellez-Cordova v. Campbell-Hausfeld/Scott Fetzger Co., 129 Cal.App.4 th 577 (2 nd Dist. 2004), a grinders manufacturer was found to have a duty to warn where the evidence showed that the use of manufacturer s products with asbestoscontaining materials was inevitable. In Gill Tellez-Cordova, a lamp maker cut, sanded and ground metal parts while working with and around mini grinders, angle head die grinders, straight shaft die grinders, disc grinders, random orbital sanders, and cut-off saws manufactured by defendant. The injury to plaintiff was a result of breathing in the dust from asbestos-containing materials with which he used the various defendantproducts. 2 Defendants won a motion to dismiss at the trial level. While the California appellate court acknowledged the importance of holding a manufacturer liable for failure to warn about the risks of another s product, the court emphasized evidence that the use of defendants products with asbestos-containing materials was inevitable. Accordingly, the court found that the defendants should have foreseen the use and resulting injuries to workers and had a duty to warn. Most recently, in the case of Hall v. Alfa Laval, Inc., Case No: BC 373038, Superior Court in the County of Los Angeles, where a final decision has not yet been issued, Judge Green has asked Defendants to prepare an order granting the defendants motion for directed verdict and finding that equipment manufactures are responsible only for injuries associated with the original equipment and are not responsible for external insulation (or other insulation/equipment) applied by third parties or other components later inserted into the equipment (i.e., replacement gaskets/packing). If Judge Green grants defendants motion for directed verdict in this fashion, the courts in California will clearly be split, since the Hall decision that a plaintiff must demonstrate harm from the original asbestos-containing equipment in order to recover will contradict the court s reasoning in Gill Tellez-Cordova v. Campbell-Hausfeld/Scott Fetzger Co., 129 Cal.App.4 th 577 (2 nd Dist. 2004). b. New York In Rastelli v. Goodyear Tire & Rubber, 79 N.Y.2d 289, 591 N.E.2d 222 (1992), plaintiff alleged that tire manufacturer Goodyear negligently failed to warn of the danger of using the tire on a multi-piece rim which exploded when inflating a Goodyear tire. While a product manufacturer could indeed be held liable in strict liability or negligence under New York law for failure to provide adequate warnings regarding its own products, the New York Court of Appeals expressly: 2 Id. at page 28. 3

decline[d] to hold that one manufacturer has a duty to warn about another manufacturer s product when the first manufacturer produces a sound product which is compatible for use with a defective product of the other manufacturer. Goodyear had no control over the production of the subject multi-rim, had no role in placing that rim in the stream of commerce, and derived no benefit from its sale. Goodyear s tire did not create the alleged defect in the rim that caused the rim to explode. See Rastelli, 79 N.Y.2d at 297-298. More recently, however, in Berkowitz v. A.C. and S, Inc., 288 A.D.2d 148 (N.Y.A.D. 1 Dept. 2001), a pump manufacturer was found to have a duty to warn where its own witness indicated that the government provided certain specifications involving insulation. In Berkowitz, plaintiff sued a manufacturer of pumps that were subsequently used with asbestos insulation that it did not manufacture or install. In its opinion, the court focused on the inability of certain plaintiffs to identify the manufacturer of the pumps that they worked on and determined that by the defendant s own admission, a high percentage of Navy ships during the relevant time period had defendant s pumps. Id. In regards to the duty to warn, the court focused on foreseeability of use of defendant s product with asbestos. Id. The court reasoned: Nor does it necessarily appear that [defendant] had no duty to warn concerning the dangers of asbestos that it neither manufactured nor installed on its pumps. While it may be technically true that its pumps could run without insulation, defendants own witness indicated that the government provided certain specifications involving insulation, and it is at least questionable whether pumps transporting steam and hot liquids on board a ship could be operated safely without insulation, which [pump manufacturer] knew would be made out of asbestos. Id. Because the pump manufacturer knew or should have known that its product would be used with asbestos, it had a duty to warn. Id. c. Pennsylvania In Toth v. Economy Forms Corp., 391 Pa. Super. 383, 571 A. 2d 420 (1990), plaintiff s decedent was killed when a wooden plank broke on a construction scaffold. Plaintiff alleged that the scaffold manufacturer had a duty to warn about the inherent dangers of using wooden planks on its metal product. The court rejected this argument: [Plaintiff s] theory would have us impose liability on the supplier of metal forming equipment to warn of dangers inherent in wood planking it did not supply. Pennsylvania law does not permit such a result. 4

Id. at 391 Pa. Super. at 388-389, 571 A. 2d at 423. In Korin v. Owens Illinois, Inc., No. 3323 EDA 2003 (Pa. Super. August 2, 2004), the court faced circumstances where there was no evidence of asbestos manufactured or supplied by the defendant: Id. at 6. [T]here is no evidence that General Electric made any of the asbestos insulation on the General Electric products with which Korin came in contact. General Electric is not liable if it made a product that was later insulated with someone else s asbestos. The insulation here was all on the outside of the General Electric components. However, in Chicano v. GE Company et al., 2004 W.L. 2250990 (E.D. Pa. 2004), a turbine manufacturer was found to have a duty to warn where manufacturer had knowledge that the Navy would put asbestos on its product. In Chicano, a sheet metal mechanic defeated a motion for summary judgment against a turbine manufacturer. Chicano claimed that he developed mesothelioma as a result of the dusty conditions surrounding GE s turbines. Chicano sued defendant for failing to warn about the dangers posed by exposure to asbestos-containing insulation attached to the turbines it manufactured. Although the court noted that Pennsylvania law limited a manufacturer s duty to warn where it supplies a component of a product that is assembled by another party and the dangers are associated with the use of the finished product, the court considered distinctions from numerous cases and constructed an exception whereby such limitation would not exist if the dangers associated with the finished product were foreseeable. Id. at *6. The Chicano court concluded that defendant knew its product would ultimately be combined with asbestos-containing insulation and, together, the two would constitute a defective product. Id. The defendant s knowledge that the Navy would put asbestos on its product made the dangers to the ultimate user foreseeable and created a duty to warn on the part of defendant. d. Washington The Chicano case in Pennsylvania was followed by two recent Washington cases Simonetta v. Viad Corporation, 137 Wash.App. 15 (Div. 1 2007) and Braaten v. Saberhagen Holdings et al., 137 Wash. App. 32 (Div. 1 2007) in which manufacturers were held liable for diseases caused by other products based upon foreseeability of the end user and dangers of asbestos. In Simonetta, a machinist mate testified that he removed block insulation, asbestos mud and asbestos cloth from an evaporator, or distiller, using a hammer. See Simonetta, 137 Wash. App. at 19. He also reinsulated the evaporator with the same materials. Id. The evaporator was manufactured and shipped to the Navy without asbestos insulation. Id. The lower court granted defendant summary judgment, but a 5

Washington appellate court reversed on both negligence and strict liability grounds. Id. at 20. The negligence holding was based upon foreseeability and that defendant knew or should have known its product would be used with asbestos insulation. Id. at 24-25. In regards to the duty issue, the court stated as follows: Once a duty is found, the jury determines the scope of that duty based on the foreseeable range of danger. Under negligence law, a defendant has a duty to exercise ordinary care, and [a] manufacturer s duty of ordinary care is a duty to warn of hazards involved in the use of a product which are or should be known to the manufacturer. This manufacturer s duty to warn attaches when a reasonable person using the product would want to be informed of the risk and requires the use of ordinary care to test, analyze and inspect products and keep abreast of scientific knowledge in its product field. Id. at 21, quoting Reichelt v. Johns-Manville Corp., 107 Wash.2d 761, 772 (1987)(other citations omitted). The court held that defendant understood with certainty that the evaporator would need insulation to work properly, that the Navy used asbestos-containing insulation and that the asbestos-containing insulation would be applied to the unit and be distributed during routine service. Id. at 24-25. The court acknowledged that it was not Viad s product that was, in and of itself, defective. Id. However, the court reasoned that the circumstances warranted a logical extension of the law to hold one manufacturer liable to warn of another manufacturer s defective product. Id. at 25. In Braaten v. Saberhagen Holdings et al., 137 Wash. App. 32 (Div. 1 2007), the plaintiff worked as a Navy pipe fitter for 35 years, maintaining ship valves, pumps and turbines. Several manufacturers obtained summary judgment because they did not owe a duty to warn since they neither manufactured nor installed the asbestos insulation. However, on appeal, the court relied on evidence that each manufacturer knew the design of the valves, pumps and turbines required use with asbestos insulation and, therefore, knew or should have known of this use. Accordingly, the court found that the defendant manufacturer had a duty to warn because such use and subsequence injury to workers was foreseeable. 3 2008. The Washington Supreme Court will be hearing the appeal of these two cases in 3 Id. at page 27. 6

e. Other States In several states, courts have refused to impose liability on one company for the hazards of another company s products: * In Walton v. Harnischfeger, 796 S.W.2d 225 (Tex. App. San Antonio 1990), plaintiff alleged crane manufacturer Harnischfeger failed to warn about or provide instructions for rigging a nylon strap which broke and caused a load of tin to fall and injure him. The Texas Court of Appeals held that an equipment manufacturer had no duty to warn of potential dangers associated with another manufacturer s products: Appellee did not manufacture, distribute, sell, or otherwise place the nylon straps or any other rigging material into the stream of commerce; appellee is not in the business of manufacturing or selling any rigging material; and rigging is a complex art that requires different loads to be rigged in a multitude of different ways. We hold that, under the facts of this case, appellee had no duty to warn or instruct users of its crane about rigging it did not manufacture, incorporate into its cranes, or place into the stream of commerce. See Walton, 796 S.W.2d at 227-228. See also Firestone Steel Products Co. v. Barajas, 927 S.W.2d 608, 613-16 (1996)(manufacturer has no duty to warn about another company s products, even though those products may be used in connection with manufacturer s own products); Braaten v. Certainteed Corp., No. 25489 (Tex. Dist. Brazoria County November 19, 2004)(pump manufacturer not required to warn of dangers associated with asbestos solely because asbestos was installed on or around pumps manufactured by [defendant] ). * Fricke v. Owens-Corning Fiberglass Corp., 618 So.2d 473, 475 (La. Ct. App. 1993)(manufacturer had no duty to warn about asbestos product that it neither manufactured nor sold). Louisiana follows the rule in Section 402A. See Weber v. Fidelity & Casualty Ins. Co., 250 So. 2d 754, 755 (1971); Chauvin v. Sisters of Mercy Health Sys., 818 So.2d 833, 841 (2002). * Ford Motor Co. v. Wood, 703 A. 2d 1315, 1331-32 (Md. Ct. Spec. App. 1997)(expressly refusing to hold that a manufacturer has a duty to warn of the dangers of a product that it did not manufacture, market, sell, or otherwise place into the stream of commerce ). * Mitchell v. Sky Climber, Inc., 396 Mass. 629, 487 N.E. 2d 1374, 1376 (Mass. 1985)(refusing to hold manufacturer liable for failure to warn of risks created solely in the use or misuse of the product of another manufacturer ). While Massachusetts had not formally adopted Section 402A, its courts have reached essentially the same result using a U.C.C. breach of warranty analysis. See Colter v. Barber-Greene Co., 525 N.E. 2d 1305, 1313 (1988); Mason v. General Motors Corp., 490 N.E.2d 437, 441 (1986); Hayes v. Ariens Co., 462 N.E.2d 273, 277 (1984). 7

* Shaw v. General Motors Corp., 727 P.2d 387, 390 (Colo. App. 1986)( The burden of guarding against the injury suffered here should appropriately be placed upon the entity that designed the final product, arranged for the acquisition of all the component parts, and directed their assembly. ) * Niemann v. McDonnell Douglas Corp., 721 F. Supp. 1019, 1030 (S.D. Ill. 1989)(Ill. law)(airplane manufacturer had no duty to warn about replacement asbestos chafing strips it did not manufacture). * Sperry v. Bauermeister, Inc., 804 F. Supp. 1134, 1140 (E.D. Mo. 1992), aff d, 4 F. 3d 596 (8 th Cir. 1993)(Mo. Law)(nondefective component seller not liable for incorporation of its parts into system designed by another). * Lindstrom v. A-C Prods. Liab. Trust, 264 F. Supp. 2d 583, 591, 595 (N.D. Ohio 2003), aff d, 424 F. 3d 488 (6 th Cir. 2005)(Ohio law)( a manufacturer is responsible only for its own products and not for products that may be attached or connected to the manufacturer s product ). * Thorndike v. DaimlerChrysler Corporation, 2003 US dist. LEXIS 8626 (2003), aff d by Thorndike v. DaimlerChrysler Corp., 288 F. supp. 2d 50 (D. Me. 2003)(Court considered it likely that the Maine highest court would recognize that a component part manufacturer is not responsible for an unreasonably dangerous condition in a finished, composite product unless it participates in the design, manufacture or assembly of the composite product or unless it component part directly contributes to the finished product s dangerous condition by virtue of either a defect in the component part or a failure by the component part manufacturer to manufacture the component part in compliance with specifications set by the designer of the composite product. ) III. CONCLUSION While the majority rule from most jurisdictions is that a company that supplies a component subsequently integrated into a finished product by a sophisticated manufacturer is not liable for a failure of that product, the trend in several jurisdictions such as California, New York, Pennsylvania, and Washington is that courts are focusing more on foreseeability as the central issue and if there is evidence that equipment manufacturers should reasonably have foreseen that their product would be used with asbestos-containing materials and that plaintiffs would install, remove or repair their product, courts are finding that the manufacturers had a duty to warn. In light of this trend, manufacturers should expect to see an increase of claims against equipment manufacturers for post-sale application of asbestos-containing insulation and other products not supplied or specified by equipment manufacturer, at least in the states where courts have already extended liability in this fashion. 8

For further information concerning the matters expressed in this Report, please contact members of the ALRA Group. They may be contacted through: www.alragroup.com. ALRA Group April 1, 2008 Robert D. Brownson Brownson & Ballou, PLLP 225 South Sixth Street Suite 4800 Minneapolis, MN 55402 (612) 332-4020 (612) 332-4025 FAX rbrownson@brownsonballou.com Clayton F. Farrell Collins, Einhorn, Farrell & Ulanoff, PC 4000 Town Center Suite 909 Southfield, MI 48075-1473 (248) 351-5433 (248) 351-5454 FAX Clay.Farrell@ceflawyers.com David M. Governo Governo Law Firm LLC 260 Franklin Street 15th Floor Boston, MA 02110 (617) 737-9045 (617) 737-9046 FAX dgoverno@governo.com F. Grey Redditt, Jr. Vickers Riis Murray & Curran, LLC 11th Floor, Regions Bank Building 106 Saint Francis Street P.O. Box 2568 Mobile, AL 36652 (251) 432-9722 (251) 432-9781 FAX gredditt@vickersriis.com James N. Sinunu Sinunu Bruni LLP 333 Pine Street Suite 400 San Francisco, CA 94104 (415) 362-9700 (415) 362-9707 FAX JSinunu@sinunubruni.com Steven Wright Wright & Associates, PA 615 Congress Street P.O. Box 4077 Portland, ME 04101 (207) 775-7722 (207) 775-7727 FAX sfw@legalwrights.com Copyright 2008 Asbestos Liability Risk Analysis Group. All rights reserved. 9