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From Products Liability Law Daily, April 11, 2017

Home ventilator fell within exception to statute of repose for improvements to real property

By Robert B. Barnett Jr., J.D.

Minnesota’s 10-year statute of repose for improvements to real property did not bar a homeowner’s insurer’s product liability suit against the manufacturer of a motor used in a heat-recovery ventilator that allegedly caused a house fire because the heat-recovery ventilator fell within an exception for "equipment or machinery installed upon real property’ under Minnesota law, the Minnesota Court of Appeals ruled in reversing and remanding a lower court’s grant of summary judgment to the manufacturer. The manufacturer also had a post-sale duty to warn customers about potential fire hazards, even though it no longer manufactured the device’s motor, because it knew of the danger, the danger was hidden, and the fire risks were serious (Great Northern Ins. Co. v. Honeywell Int’l, Inc., April 10, 2017, Kirk, M.).

In 1996, a married couple constructed a new home that included the installation of a two heat-recovery ventilators (Honeywell HR200 Model 2355). The heat-recovery ventilators each contained two fans, two air filters, a heat-exchange core, a motor, and two ventilation openings. The ventilators were attached by metal straps and brackets to overhead ceiling joists in the basement, and they were plugged into standard electrical outlets. A humidity-control dial located in the bathroom determined the settings.

In May 2012, a fire occurred in one of the Honeywell ventilators, causing substantial damage to the home. The homeowners filed a claim under their homeowner’s policy, which Great Northern Insurance Company, their insurer, paid. Great Northern, as subrogee, then filed a lawsuit in Minnesota state court that included claims for products liability, breach of warranty, and post-sale duty to warn against Honeywell International Inc. (the ventilator seller), Nutech R. Holdings Inc. (the ventilator designer and manufacturer), and McMillan Electric Company (the manufacturer of the motor in the ventilator). The suit also alleged breach of contract and negligence claims against the company that installed the ventilators and the company that serviced the ventilator 10 days before the fire. Honeywell, Nutech, and McMillan filed motions for summary judgment. The court granted McMillan’s motion for summary judgment, ruling that Minnesota’s 10-year statute of repose barred the claim. In its ruling, the court specifically determined that the ventilator was not "equipment or machinery," which are exempt from the statute of repose. The trial court also concluded that, as a matter of law, McMillan, as the motor manufacturer, had no post-sale duty to warn because it had no direct contact with the distribution chain, its name was not identified with the product, and Nutech (which bought the motor from McMillan) knew of the hazard and was taking action. Great Northern appealed the trial court’s grant of summary judgment in favor of McMillan.

Statute of repose. The definition of "equipment or machinery" in the Minnesota statute still was an open question. The statute itself did not define the term, and the Minnesota courts had not ruled on exactly what constituted either term. Opting to give the words their ordinary meaning, the appellate court determined that "equipment" is an implement used in an activity and refers to all fixed assets other than land and buildings, while a "machine" is an apparatus consisting of interrelated parts with separate functions used in the performance of some kind of work. The court ruled that the ventilator was both "equipment" and a "machine," thus satisfying the statutory exception under either definition. The ventilator was a highly engineered device consisting of multiple parts to recover heat from the house and remove humidity. As a result, Great Northern met its burden of proving that its claim against McMillan fell within the "equipment or machinery" exception to the 10-year statute of repose. The appellate court reversed the trial court’s grant of summary judgment for McMillan on the ground that the ventilator was not "equipment or machinery," and it remanded for further proceedings.

Duty to warn. A post-sale duty to warn arises only in special cases. The factors used in Minnesota to consider whether such a duty exists are (1) the defendant’s knowledge of the problem for years, (2) the hidden nature of the danger, (3) the fact that serious injury could result, (4) the defendant remained in that line of business and had advertised the product within five years of the injury, and (5) the defendant had undertaken a duty to warn of product dangers. The court acknowledged that items four and five were not met in this case, especially given that McMillan had stopped manufacturing the motor in 1998. Also, McMillan had refused to cooperate with Nutech in issuing a recall in Canada, and it did not participate in any recall in the U.S. Nevertheless, the court said, the other three factors were so strong in this case that it concluded that McMillan had an ongoing duty to warn. McMillan was aware that its motors were a fire hazard years before the fire in this case. The great potential harm to homeowners from these fires also weighed in favor of a post-sale duty to warn, as did the fact that the danger was not known to the homeowners. Also, McMillan should not be allowed to benefit from its failure to cooperate with Nutech in recalling the product. Whether McMillan breached that duty would be for the jury to determine, but a duty existed, requiring McMillan to warn consumers of the known danger. As a result, the court reversed the lower court’s grant of summary judgment for McMillan on the ground that no post-sale duty to warn existed.

The case is No. A16-0997.

Attorneys: Thomas P. Kane (Cozen O'Connor) for Great Northern Insurance Co. Cortney G. Sylvester (Nilan Johnson Lewis PA) and Webster A. Hart (Herrick & Hart, S.C.) for Honeywell International, Inc. and McMillan Electric Co.

Companies: Great Northern Insurance Co.; Honeywell International, Inc.; McMillan Electric Co.

MainStory: TopStory SofLReposeNews WarningsNews HouseholdProductsNews MinnesotaNews

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