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If you can’t stand the heat: Duty to warn debated

If you can’t stand the heat: Duty to warn debated

November 27
08:07 2018

If you can’t stand the heat: Duty to warn debated

Scott and Leah Rued worked with a contractor to build a house in Eden Prairie, Minnesota. A subcontractor installed two Honeywell HR200 Model 2355 ventilators in the heating, ventilation, and air-conditioning system in the house’s original construction. The ventilators contained two fans, two air filters, a heat exchange core, two ventilation openings, and a motor manufactured by McMillan. The owners moved into the house shortly after its completion in April 1996. The ventilators stayed in place year round and operated continuously as part of the HVAC system.

Although the ventilators carried the name of Honeywell International, Inc., they were actually designed and manufactured by Nutech R. Holdings, Inc., a Canadian company. From 1992 to 1998 Nutech contracted with McMillan to manufacture custom motors for Nutech’s ventilators. Nutech distributed the ventilators to purchasers in Canada and contracted with Honeywell to distribute the ventilators under Honeywell’s name in the United States. Overall, Honeywell distributed about 18,000 Nutech ventilators containing McMillan’s custom motors to American consumers, and Nutech distributed about 48,000 of the same ventilators in Canada. The ventilators came with a warranty and had to comply with industry performance standards.

On May 19, 2012, a fire occurred in one of the Rueds’ ventilators. The fire caused substantial property damage, but no one was injured. The Rueds filed a claim with their homeowners insurer, Great Northern Insurance Company, and the insurer paid their claim in full.

Great Northern suspected that the ventilator’s motor had caused the fire. The insurer, as subrogee of the Rueds, sued McMillan and others. It asserted claims for product liability, breach of warranty, and negligence, including a claim for breaching a post-sale duty to warn consumers of the risk of fires in motors installed in Nutech ventilators. McMillan moved for summary judgment, arguing that the claims were barred by Minnesota’s 10-year statute of repose for improvements to real property. Great Northern, however, asserted that the statute’s exception for “equipment or machinery installed upon real property” applied, so the claims should survive.

The court granted McMillan’s motion for summary judgment. It determined that the 10-year time bar applied to Great Northern’s claims of negligence, product liability, and breach of warranty but not to its claim of a post-sale duty to warn because that claim did not relate to the construction of an improvement to real property. The court concluded, as a matter of law, that McMillan did not have a post-sale duty to warn. Great Northern appealed.

The court of appeals reversed the district court’s decision and remanded the case for further proceedings on all of Great Northern’s claims, including the claim of a post-sale duty to warn. The Minnesota Supreme Court granted McMillan’s petition for review.

The statute of repose for improvements for real property provides in relevant part:

Subdivision 1 …. (a) Except where fraud is involved, no action by any person in contract, tort, or otherwise to recover damages for any injury to property, real or personal, or for bodily injury or wrongful death, arising out of the defective and unsafe condition of an improvement to real property, shall be brought against any person performing or furnishing the design, planning, supervision, materials, or observation of construction or construction of the improvement to real property … more than two years after discovery of the injury, nor in any event shall such a cause of action accrue more than ten years after substantial completion of the construction.

….

(e) The limitations prescribed in this section do not apply to the manufacturer or supplier of any equipment or machinery installed upon real property.

The parties disputed only whether the heat recovery ventilator, which contained McMillan’s motor, was “equipment or machinery installed upon real property” that is excepted from the statute’s time bar. The court of appeals held that the exception in subdivision 1(e) applied—and the statute of repose did not bar Great Northern’s claims—because the ventilator was both “equipment” and “machinery” under the dictionary definitions of those words. McMillan asserted that this interpretation was overly broad and would “extend the exception to many, if not all, of the constituent parts of homes and other structures.”

The supreme court held that the heat recovery ventilator that contained McMillan’s motor was “machinery” under subdivision 1(e) of the statute of repose. The court held that subdivision 1(a) did not bar Great Northern’s claims against McMillan, stating: “Because the heat recovery ventilator fits the exception in subdivision 1(e) for ‘machinery installed upon real property,’ the time bar of the statute of repose is inapplicable.” The court affirmed the judgment of the court of appeals and remanded the case to the district court for further proceedings on Great Northern’s claims of product liability, breach of warranty, and negligence.

Great Northern Insurance Company vs. Honeywell International, Inc.-Supreme Court of Minnesota-May 9, 2018-A16-0997.

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