National Union Fire Insurance v. Pratt & Whitney Canada, Inc. , 107 Nev. 535 ( 1991 )

Rose, J.,

dissenting,

with whom Mowbray, C. J., agrees:

The majority holds that a plaintiff who lost his entire airplane due to the malfunction of a defective compressor blade cannot recover from the manufacturer on a strict liability theory because such damage is an economic loss. I find this conclusion inconsistent with both Nevada case law on economic losses and with the reasoning in cases from other jurisdictions. For this reason, I dissent.

We have already considered why economic loss should not be recoverable in a strict products liability action and have indicated that it is a different type of loss than property damage.

The doctrine of strict products liability was developed to assist plaintiffs who could not prove that products which caused physical injury at the point of use had been manufactured negligently. The doctrine is unavailable for purely economic loss; its application is limited to personal injury and property damage. Russell v. Ford Motor Co., 575 P.2d 1383 (Or. 1978); Morrow v. New Moon Homes, Inc., 548 P.2d 279 (Cal. 1965) (dicta); Rodrigues v. Campbell Industries, 151 Cal.Rptr. 90 (Cal.App. 1978); Mid Continent Aircraft v. Curry Cty. Spraying Serv., 572 S.W.2d 308 (Tex. 1978); Restatement (Second) of Torts § 402A (1965).

Local Joint Exec. Bd. v. Stern, 98 Nev. 409, 411, 651 P.2d 637, 638 (1982).

And again in Oak Grove Inv. v. Bell & Gossett Co., 99 Nev. 616, 668 P.2d 1075 (1983), we stated that the recovery of property damage is permissible in a claim based on strict products liability.

Strict liability applies to claims based on property damage as well as to personal injury cases. See Worrell v. Barnes, 87 Nev. 204, 484 P.2d 573 (1971); Rocky Mountain Fire & Cas. Co. v. Biddulph Oldsmobile, 640 P.2d 851, 855 (Ariz. 1982). See also Local Joint Exec. Bd. v. Stern, 98 Nev. 409, 751 P.2d 637 (1982). . . .

Id. at 625, 668 P.2d at 1080.

We later state that property damage is different than economic loss and while the former is recoverable, the latter is not.

To guide the district court upon remand, however, we shall note that appellant alleged in both its strict liability and negligence causes of action that the defective plumbing and heating system caused “substantial leakage of water throughout, and damage to, the apartment [sic] within the . . . complex.” The amount of property damage sustained is a question for the finder of fact. Appellant is not seeking to recover purely economic losses, and therefore has stated causes of action in negligence and strict liability. See Local Joint Exec. Bd. v. Stern, supra. See also Hales v. Green Colonial, Inc., 490 F.2d 1015, 1022 (8th Cir. 1974); Russell v. Ford Motor Co., 575 P.2d 1383, 1387 (Or. 1978).

Id. at 625, 668 P.2d at 1081.

In Oak Grove and Local Joint, we clearly held that economic loss is something other than property damage. Economic losses include lost profits, lost productivity, lost wages, business expectations and other losses that flow from the loss of the things damaged by the defective product. However, a plaintiff is not precluded from recovering for loss caused to property on theories of negligence and strict liability. The majority ignores this very clear direction in our prior cases and now states that property damages are precluded when the product “injures itself.” I find that this distinction is contrary to our previous definition of “economic loss” and that it has little basis in reason. I see no reason to permit recovery on a strict products liability basis for damage to personal property, but to preclude it if the personal property has been incorporated with the defective component.

This distinction makes no sense because it ignores the possibility of great disparity in size and value between the component part and the whole. It is as arbitrary as the rule proposed by some legal theorists that property damages should be recoverable in products liability actions only when the plaintiff suffers an accompanying personal injury. Such a rule would mean that a plaintiff could recover for the loss of a million dollar airplane so long as the defect which destroyed the plane also caused the plaintiff to stub a toe. The modern trend is that courts have moved away from arbitrarily drawing lines to mark the break in the causation chain. We could have refrained from doing so in this case by following our prior case law, and drawing the line between property damage and economic loss.

Many courts have recognized that although plaintiffs in products liability actions should not recover for economic losses, they may recover personal property, which includes an entire product into which a defective part was incorporated. International Knights of Wine, Inc. v. Ball Corp., 168 Cal.Rptr. 301 (1980); Hiigel v. General Motors Corporation, 544 P.2d 983 (Colo. 1975); Santor v. A. & M. Karagheusian, Inc., 207 A.2d 305 (N.J. 1965). In these cases, the courts realized that there is no reason to distinguish between the different physical items that the defective product destroyed, and permit recovery for some but not for others. Therefore, the better rule is to permit recovery for a product destroyed by a defective component.

The majority opinion also observes that it would be inequitable to allow National Union to recover for the occurrence of a risk for which it had already been paid a premium. I am sure National Union was paid a premium for insuring the airplane. However, I would suspect that the rate structure upon which that premium was based took into account the fact that some losses would be eliminated or reduced by subrogation actions against third-party tortfeasors. Additionally, I think we should promote, rather than prohibit, recovery by people injured and their subrogees against the tortfeasor and its insurance carrier. An insurance company subrogated to the rights of an injured party should have the same rights as its insured and we should encourage its reimbursement from third-party tortfeasors when possible.

This court has always been reluctant to establish laws or give advisory opinions, especially when unnecessary and broad in scope. See Spears v. Spears, 95 Nev. 416, 596 P.2d 210 (1979); Union Pacific R.R. Co. v. Adams, 77 Nev. 282, 362 P.2d 450 (1961). Although unnecessary to the analysis of this case, the majority opinion states that the economic loss doctrine was never intended to apply to construction projects. While this may be our decision when that issue is presented to us and carefully briefed, we should refrain from making such broad gratuitous legal statements until properly before this court.

For the reasons stated, I dissent from the majority opinion and would reverse the summary judgment and remand this case for trial.