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No duty to warn unidentified customers

A manufacturer of a motor in a potentially dangerous heat-recovery ventilator had no duty to warn consumers of the risk where it had no records of who or where they were, the Minnesota Supreme Court ruled this week in Great Northern Insurance Company v. Honeywell International Inc. et al. It is the first case setting a general standard for the post-sale duty to warn in Minnesota.

The court also ruled that the 10-year statute of repose did not bar claims because the ventilator is machinery installed upon real property and therefore excepted from the statute, Minn. Stat. sec. 541.051, subd. 1 (e).

The case clarifies that component parts are part of the machinery exception to the statute of repose, said Thomas Kane, who represented Great Northern. The decision on the duty to warn makes sense, he continued. “Who are you going to tell? It would have been interesting if the court had ruled the other way,” he said.

10-year statute of repose

The case is a subrogation action brought by Great Northern, which paid a claim for a fire at the insured’s home. The fire occurred 16 years after the ventilator was installed. It caused extensive property damage but no injuries

Great Northern asserted product liability, negligence and warranty claims against manufacturer McMillan Electric Company, which manufactured the motor in the ventilator. One of its claims was breach of a post-sale duty to warn of the risk of fire caused by the ventilators at issue. It asserted subrogation claims against other entities not involved in the appeal because they settled their claims.

McMillan argued that the claims were barred by the 10-year statute of repose and Great Northern countered that the statute’s exception for “equipment or machinery installed upon real property” applied to save the claim.

The District Court agreed that the statute of repose barred all the claims except a post-sale duty to warn. It also concluded that there was no duty to warn as a matter of law. The Court of Appeals reversed and remanded all the claims, determining that the statute of repose did not bar the claims and McMillan had a post-sale duty to warn. The Supreme Court affirmed in part and reversed in part in a unanimous opinion written by Justice Margaret Chutich.

McMillan’s attorney, Cortney Sylvester, had no comment on the case.

Transmission of mechanical energy

The Supreme Court agreed that the plain language of the statute of repose said that the claim was not barred. The statute states that its limitations periods do not apply to the manufacturer or supplier of equipment or machinery installed on the property.

The installed equipment or machinery must be an improvement to real property, which the parties agreed it was. The court observed that “materials” for an improvement to real property are covered by the statute of repose, so equipment or machinery must be specific types of materials to be carved out of the law. That means that whether material is part of the subset of equipment or machinery depends on the nature and function of the material, the court said.

The court said it construed that nature and function narrowly to ensure that the exception does not swallow the rule, leaving the term materials useless. It also observed that the statute is disjunctive, pertaining to equipment or machinery. It concluded that a ventilator is machinery under dictionary definitions of a machine and did not define equipment.

“The ventilator consists of a motor, fans, air filters, and a heat-exchange core that modify and transmit mechanical energy to efficiently regulate a home’s climate. And when connected to an electrical outlet, the ventilator works to recover heat and remove humidity from the home,” Chutich wrote. It rejected the McMillan’s argument that the ventilator was absorbed into the home’s structure and therefore was more like building materials than machinery.

Post-sale duty to warn

The Supreme Court has recognized that a manufacturer may have a post-sale duty to warn, but has not articulated a rule governing its application until now.

It discussed the issue in Hodder v. Goodyear Tire & Rubber Co. in 1988 but articulated a holding limited to that case. That case used a balancing test composed of five factors regarding the knowledge and extent of the danger and whether the defendant had warned of the product’s danger on its own accord.

But the court rejected that test in favor of the factors set forth in the Restatement (Third) of Torts with the intent of better limiting the post-sale duty to warn to “special cases.” It eliminates consideration of any warnings undertaken by the manufacturer and add a requirement that a warning can be effectively communicated to an acted on by those to whom a warning might be provided.

The other elements of the rule are the seller knows or reasonably should know that the product poses a substantial risk of harm to persons or property; those to whom a warning might be provided can be identified and can reasonably be assumed to be unaware of the risk of harm; and the risk of harm is sufficiently great to justify the burden of providing a warning.

All the requirements of the rule must be met before the duty to warn attaches, which eliminates the need to balance them on a case-by-case basis, Chutich wrote. Furthermore, the rule avoids the “undertaking a warning” consideration that may incent defendants not to warn and thereby reduce their risks of liability, the court said.

It also uses a reasonableness standard to apply to any member of the chair of distribution. “This reasonableness standard parallels our general law regarding warnings, in which the duty to warn may depend upon a product user’s knowledge and a party’s connection to product consumers,” the court said. Finally, the standard incorporates some of the elements present in Hodder and is consistent with that case.

Under this standard, McMillan did not have a post-sale duty to warn because it did not meet all of the Restatement requirements. It could not identify and communicate to those to whom a warning might be provided, the court said. It did not have records regarding the distribution of the ventilators using the motors because its only client was the manufacturer of the ventilators.

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