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Tennessee Farmers Mutual Insurance Company v. Ford Motor Company6/17/2002
This is a consolidated appeal of three products liability cases. Plaintiff/Appellant Tennessee Farmers Mutual Insurance Company ("Tennessee Farmers") provided automobile insurance to the three insureds involved in these cases: Dwight E. Paschal, Bill Craig, and Billy M. Crum. All of these insureds owned vehicles manufactured by the Defendant/Appellee, Ford Motor Company ("Ford").
At different times in 1996 and 1998, the Ford vehicles owned by the insureds spontaneously ignited, allegedly due to a malfunction or defect in the vehicles' steering columns. Each vehicle was totally destroyed by the fire. It is undisputed that none of the fires caused any personal injury or damage to property other than damage to the vehicle itself. Tennessee Farmers paid each insured the value of his vehicle and is subrogated to the rights of each insured as authorized in each individual policy and by Tennessee Code Annotated ยง 56-7-1204.
Tennessee Farmers filed a lawsuit against Ford as subrogee of each of the insureds under legal theories of negligence and strict liability in tort. In the cases involving Paschal and Craig, Ford responded by filing a motion to dismiss; in the case relating to Crum, Ford filed a motion for summary judgment. In each case, Ford asserted that the economic loss doctrine, as adopted by the Tennessee Supreme Court in Ritter v. Custom Chemicides, 912 S.W.2d 128 (Tenn. 1995), restricted the plaintiff's recovery to contract damages, since the product at issue damaged only itself. On December 8, 1998, the trial court entered orders granting the two motions to dismiss in the Paschal and Craig cases, and on November 29, 2000, the same court entered an order granting the motion for summary judgment in the Crum case. Tennessee Farmers appealed the trial court's decision in each case. Those appeals have been consolidated for purposes of our review.
On appeal, Tennessee Farmers argues that the economic loss doctrine does not prevent its recovery in these cases because (1) the economic loss doctrine does not apply to a products liability case; (2) the doctrine does not apply to a consumer transaction; and (3) the destruction of each vehicle constituted "property damage," rather than economic loss. Each issue will be addressed in turn.
The trial court's grant of a motion to dismiss is reviewed by taking all the allegations of fact in the plaintiff's complaint as true, and construing the facts liberally in favor of the plaintiff. Stein v. Davidson Hotel Co., 945 S.W.2d 714, 716 (Tenn. 1997). In this case, the only issues on appeal are questions of law; consequently, we review the trial court's legal conclusions de novo, with no presumption of correctness. Id. We also review the trial court's grant of summary judgment de novo, with no presumption of correctness. Warren v. Estate of Kirk, 954 S.W.2d 722, 723 (Tenn. 1997).
The seminal case applying the economic loss doctrine is East River Steam Ship Corp. v. Transamerica Delaval, Inc., 476 U.S. 858 (1986), decided under admiralty law. In East River, a shipbuilder had plans to build four oil-transporting supertanker ships. It contracted with the defendant turbine manufacturer to design, manufacture, and supervise the installation of the turbines, which are the ships' main propulsion units. East River, 476 U.S. at 859. When each ship was completed, it was chartered to a chartering company, which assumed the cost of any repairs to the ships. Within months after the ships had set sail, each turbine malfunctioned and caused damage to itself. Each of the ships were repaired and resumed travel. Id. at 860-61. The plaintiff chartering company sued the defendant turbine manufacturer, alleging five counts of tor
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