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Alloway v. General Marine Industries6/30/1997
(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for the convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please note that, in the interests of brevity, portions of any opinion may not have been summarized).
Samuel P. Alloway, III, and New Hampshire Insurance Company v. General Marine Industries, L.P. and Mullica River Boat Basin (A-48-96)
Argued November 18, 1996 -- Decided June 30, 1997
POLLOCK, J., writing for the Court.
The primary issue in this appeal is whether New Hampshire Insurance Co. ("New Hampshire") and its insured, Samuel P. Alloway III ("Alloway"), may recover from General Marine Industries, Inc. ("GMI") in negligence and strict liability for economic loss caused by a defect in a power boat purchased by Alloway and insured by New Hampshire.
In 1990, GMI purchased from Glasstream, a company in bankruptcy , substantially all of its assets "free and clear of any interest in such property." At some point before then, Glasstream had made the boat at issue and sold it to Mullica. In July 1990, Alloway purchased the thirty-three foot Century Grande XL from Mullica for $61,070. Century had expressly warranted for twelve months following the purchase that the boat was free from defects. Following his purchase, Alloway obtained from New Hampshire a comprehensive general insurance policy on the boat.
Three months later, while docked at the Bayview Marina in Manahawkin, the boat sank as a result of a defective seam in the swimming platform. No other property was damaged nor was anyone injured. Alloway filed a claim with New Hampshire, which spent over $40,000 to repair the boat. Alloway paid approximately $2,500 towards the repairs pursuant to his deductible under the policy. After completion of the repairs, he received a trade-in credit of over $38,000 for the Grande on the purchase of a new boat.
Thereafter, Alloway filed a three-count complaint against Mullica and GMI, seeking recovery for his economic loss. In the first count of the complaint, Alloway sought to recover for Mullica's breach of the manufacturer's warranty for repair or replacement of any defective part. The second count alleged a strict-liability claim asserting that Century had manufactured a defective boat for which GMI was liable as Century's successor. The third count alleged that Glasstream negligently manufactured and inspected the boat, that GMI was liable to Century's successor, and that Mullica had failed to discover the defect. Alloway then assigned his claims to New Hampshire, but retained a claim for the loss in value of the boat and for the deductible he had paid towards the repair of the boat.
The Law Division subsequently granted GMI's motion to dismiss the complaint for failure to state a cause of action, holding that a purchaser could not maintain an action in strict liability for economic loss. The Law Division also relied on an Appellate Division case that held that a consumer who had purchased a yacht that was not as represented could sue the manufacturer under the Uniform Commercial Code ("U.C.C.") for breach of warranty, but not in strict liability. That case viewed the U.C.C. as providing the consumer with an exclusive remedy for economic loss resulting from breach of warranties.
The Appellate Division reversed, observing that one of the cases on which the Law Division relied precluded a commercial purchaser, but not a consumer, from recovering economic losses in strict liability. The Appellate Division further relied on a New Jersey Supreme Court case, Santor v. A&M;Karagheusian, Inc., which recognize
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