This is an appeal from a summary judgment in favor of the defendants, Clark Equipment Company and Aetna Insurance Company (hereinafter collectively referred to as "Clark Equipment Company").
On February 16, 1976, the plaintiff, Lloyd Wood Coal Company ("Wood"), leased a Model 475B Michigan front-end loader from Simmons Machinery Company. The front-end loader was manufactured by Clark Equipment Company and, pursuant to the lease agreement with Simmons, Wood was required to take out fire insurance on the machinery. Aetna Insurance Company, the other plaintiff in this case, issued the insurance policy to Wood.
A few months after Wood leased the equipment, the right hydraulic pump hose had to be replaced. An employee of Simmons Machinery Company replaced the hose; however, the replacement hose was approximately 23 inches longer than the original hose. This hose ruptured in June 1976, causing a fire that resulted in substantial damage to the machinery. No one was injured and no other property was damaged. Aetna, pursuant to the insurance policy, issued a check to Simmons Machinery in the amount of $253,477.56.
This is a claim solely for damage to the product itself, the front-end loader, which was for commercial use, as opposed to consumer use. As stated above, there is no claim for personal injury or for damage to any property other than the front-end loader itself.
The plaintiffs claim that the equipment was negligently designed and they argue that a cause of action arises in tort (under theories of negligence, wantonness, strict liability, or the Alabama Extended Manufacturer's Liability Doctrine (AEMLD)) when a commercial product malfunctions or is defective and the malfunction or defect results in damage only to the product itself. We disagree, and we affirm the judgment of the trial court.
While there is no case law directly on point in this state, we are persuaded by the rationale expressed in the admiralty case of East River S.S. Corp. v. Transamerica Delaval, Inc., 476 U.S. 858, 106 S.Ct. 2295, 90 L.Ed.2d 865 (1986). In East River, the United States Supreme Court considered the very issue before us today: "... whether injury to a product itself is the kind of harm that should be protected by products liability or left entirely to the law of contracts." East River, supra, 476 U.S. at 859, 106 S.Ct. at 2296. That Court recognized that different states have resolved this issue differently and, in his opinion, Justice Blackmun set forth an explanation of the three approaches as follows:
"At the other end of the spectrum is the minority land-based approach, whose progenitor, Santor v. A and M Karagheusian, Inc., 44 N.J. 52, 66-67, 207 A.2d 305, 312-313 (1965) (marred carpeting), held that a manufacturer's duty to make nondefective products encompassed injury to the product itself, whether or not the defect created an unreasonable risk of harm. See also LaCrosse v. Schubert, 72 Wis.2d 38, 44-45, 240 N.W.2d 124, 127-128 (1976). The courts adopting this approach, including the majority of the Courts of Appeals sitting in admiralty that have considered the issue, e.g., Emerson G.M. Diesel, Inc. v. Alaskan Enterprise, 732 F.2d 1468 (CA9 1984), find that the safety and insurance rationales behind strict liability apply equally where the losses are purely economic. These courts reject the Seely approach because they find it arbitrary that economic losses are recoverable if a plaintiff suffers bodily injury or property
Id., 476 U.S. at 868-70, 106 S.Ct. at 2300-02.
The Supreme Court adopted the majority approach, thereby rejecting the minority approach, which it felt would result in unrealistic damages and too much overlap between the law of contract and products liability, id., 476 U.S. at 870, 106 S.Ct. at 2302, as well as the intermediate approaches, which "are too indeterminate to enable manufacturers easily to structure their business behavior." Id.
"`The distinction that the law has drawn between tort recovery for physical injuries and warranty recovery for economic loss is not arbitrary and does not rest on the "luck" of one plaintiff in having an accident causing physical injury. The distinction rests, rather, on an understanding of the nature of the responsibility a manufacturer must undertake in distributing his products.' Seely v. White Motor Co., 63 Cal.2d, at 18, 45 Cal.Rptr., at 23, 403 P.2d, at 151. When a product injures only itself the reasons for imposing a tort duty are weak and those for leaving the party to its contractual remedies are strong.
"Damage to a product itself is most naturally understood as a warranty claim. Such damage means simply that the product has not met the customer's
A commentator has concisely stated the Court's holding:
"Recovery of Pure Economic Loss in Product Liability Actions: An Economic Comparison of Three Legal Rules," 11 U. of Puget Sound L.Rev. 283, 293 (1987).
In the case sub judice, there was no personal injury or property damage other than to the product itself. Of course, an action in tort would have arisen had there been personal injury or damage to property other than the product itself.
East River, supra, 476 U.S. at 866, 106 S.Ct. at 874. We are inclined to agree with the rationale in East River and the United States Supreme Court's considerations in reaching its decision.
To the extent that our case of Joe Sartain Ford, Inc. v. American Idem. Co., 399 So.2d 281 (Ala.1981), is in conflict with this opinion, it is hereby overruled. (We do point out that in that case we were not directly presented with the issue that is before us today, although the result reached there implies that we would allow a claim such as the one in the case sub judice.)
For the foregoing reasons, the judgment of the trial court is affirmed.
AFFIRMED.
HORNSBY, C.J., and MADDOX, ALMON, SHORES, HOUSTON, STEAGALL and KENNEDY, JJ., concur.
JONES, J., dissents.
JONES, Justice (dissenting).
I respectfully dissent. The majority, by adopting the rationale in East River S.S. Corp. v. Transamerica Delaval, Inc., 476 U.S. 858, 106 S.Ct. 2295, 90 L.Ed.2d 865 (1986), "and the United States Supreme Court's considerations in reaching its decision" in that case, has effectively rendered remediless that class of plaintiffs who, as the result of the malfunction of a commercial product, have suffered neither personal injury nor damage to property other than to the product itself, but have either lost the product, or sustained severe damage to it. This is not only new law in Alabama, but, in my opinion, it is also bad law.
The appellants correctly assert that to be relegated to commercial law (breach of warranty) for their remedy is to be without a remedy. It is fallacious reasoning to presume that commercial law will furnish an adequate remedy for damage to the product. The rationale of East River is to the effect that sophisticated buyers and
The manufacturer of standardized products either elects to warrant the product or not to warrant the product; and, if it warrants the product, it can limit both the quality and the quantity of that warranty as it sees fit. I have never heard of the purchaser of a piece of machinery having any input into either the nature or the extent of any warranty given by the manufacturer. Such warranties are standardized by the manufacturer and are not subject to bargained-for variances by the purchaser. There may be a rare exception, of course, where the manufacturer builds a product to the purchaser's specifications; but standardized products come with standardized warranties, if any.
Under the holding in this case, all of the competing manufacturers of standardized products could simply agree to withdraw all warranties, and the purchaser would be without any remedy whatsoever, either in contract or in tort, for damage to the product itself arising out of a defect in the product.
The law should make no distinction between classes of plaintiffs whose injury or loss results from a defective product. Indeed, I can find no valid policy reason for denying a cause of action in tort to those plaintiffs who, fortuitously, have not suffered personal injury or property damage other than damage to the defective product itself, but who, as here, are denied an action in contract because the defective product is not covered by any form of extended warranty. See Recovery for Economic Loss Under a Product Liability Theory: From the Beginning Through the Current Trend, 70 Marq.L.Rev. 321 (1987); see, also, Recovery of Economic Damages Under the Alabama Extended Manufacturers Liability Doctrine, 35 Ala.L.Rev. 329 (1984). By so holding, the majority declares that tort law has abandoned the purchaser of a commercial product purchaser by failing to impose on the manufacturer any duty to build and sell a non-defective product, thus, with respect to defects that damage or destroy the product itself, the purchaser is relegated to a breach-of-warranty remedy that, as here, may not exist. And, in my opinion, the most unfortunate consequence of all is the Court's abandonment of its own beneficent policy of holding accountable for their culpable conduct those who manufacture and sell defective products.
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