Federal Court in Indiana Rejects State Farm's Product Liability Lawsuit Against General Motors

June 3, 2014

Recently, a federal court in Indiana ruled against State Farm Fire and Casualty Company, which had claimed that a vehicle fire at a customer's home was due to the vehicle being defective.

car-fire-1240763-m.jpgIn January 2010, Kenneth Burkhart's vehicle, a 2006 GMC Sierra, caught fire, damaging his home as well as his personal property. Three years later, his insurer, State Farm, filed a product liability lawsuit against General Motors, claiming that the fire was caused by defective manufacturing of the vehicle, defective design of the vehicle, negligent manufacturing of the vehicle, negligent design of the vehicle, and breach of implied warranty of merchantability.

General Motors removed the case to federal court and argued that it should be dismissed because each claim was outside of the applicable statute of limitations and must therefore be dismissed due to being time-barred. Since State Farm conceded that the warranty of merchantability claim was time-barred, that left the federal court to determine whether the other four claims were still good.

The court noted that, a few days after the 2010 fire, State Farm's Product Investigation Unit sent a written notice to General Motors, advising of the fire and of State Farm's potential subrogation against General Motors. The notice mentioned that a "preliminary investigation" indicated that General Motors could be responsible for the loss and gave General Motors the opportunity to inspect the vehicle. In response, General Motor's third-party administrator stated that State Farm had not provided sufficient evidence that the damage was caused by a product defect.

State Farm then hired a firm to conduct an investigation of the fire and examination of the vehicle. The investigator concluded that the fire was "an accidental combustible fluid fire" that ignited when oil leaked from the valve cover/gasket on the passenger's side engine onto hot surfaces of the manifold. As for the mechanical examination, the firm found that there was a broken sealing line and residue buildup on the right cylinder head in the front and rear portions of the engine. In April 2010, State Farm sent another letter to General Motors' third-party administrator, stating that it had mechanical evidence of a defect. Then, in December 2010, State Farm met with the investigative firm, which noted that the fluid that caught fire could have been spilled during a recent servicing done at the local car dealership. The words "product liability issue" were never explicitly stated. State Farm went ahead and filed a subrogation complaint against General Motors and other defendants.

In March 2012, a member of the investigative firm was deposed by one of the defendants, and he stated his belief that the oil leakage was caused by a defective oil cover gasket. State Farm allegedly realized for the first time that the claim was for product liability and not negligence. As a result, State Farm's negligence claim against the car dealership was dismissed without prejudice in April 2013, and State Farm was sanctioned. The Indiana trial court found that State Farm was aware, prior to filing the suit, that the car dealership did not cause the fire. State Farm then went ahead in May 2013 and filed the current product liability lawsuit against General Motors.

State Farm argued that its product liability claims were within the statute of limitations based on the discovery rule, which states that the statute of limitations begins to run from the date the plaintiff knew or should have discovered the injury caused by the product. In that case, the statute of limitations should run from 2012 rather than 2010. The court rejected this idea, noting that it had been rejected in previous cases, and that as early as 2010, State Farm had asked the investigation firm if the damage could be due to a product defect.

Since State Farm had all of the facts available as early as 2010, the federal court granted a summary judgment motion against it and dismissed the case with prejudice.

Miller & Falkner is an Indiana and Kentucky plaintiffs law firm serving residents of Kentucky and Indiana. Located in Louisville, Kentucky, the firm provides representation in the areas of personal injury and employment law. If you need an Indiana or Kentucky personal injury attorney, contact us today for a free consultation.

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