Outside Inhouse Lawyer Blog : New York & Seattle Corporate Dispute Lawyer & Attorney : Grace M. Healy : Outside counsel : King County, Tacoma, Bellevue

Good news for any business (or individual for that matter) that has sold a property containing asbestos wrapped piping or boilers.  In Sycamore Industrial Park Associates v. Ericsson, Inc. the Seventh Circuit has ruled that there is no CERCLA or RCRA liability where the seller simply left the insulated equipment in place.  The appellate court affirmed summary judgment in the seller’s favor.

The seller left an old heating system in place when it sold the property to one of its employees.  The seller was no longer using the facility and the buyer wanted to use it as an industrial park.  The old unused asbestos insulated heating system was left in place.  Nineteen years later, asbestos was discovered in the old system.  The buyer sued the seller to compel removal of the asbestos.  It claimed that leaving the material there was a violation of CERCLA and RCRA.  However, the court ruled that the sale of the property was not “disposal” of the asbestos. The court did describe some circumstances in which this might not apply – such as a facility owner who wants to get rid of  a toxic retaining pond and sells a facility to an unsuspecting purchaser.

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Taking it a step further, in a second asbestos product liability case decided today, Braaten v. Saberhagen Holdings  the Washington Supreme Court refused to hold a manufacturer liable for duty to warn of dangers of exposure to  asbestos in replacement parts that it did not manufacture. 

The products in issue were pumps, which used asbestos packing and gaskets.  The manufacturers did not specify that asbestos packing and gaskets had to be used when the original packing and gaskets were replaced.

The defendant manufacturers did not sell replacement packing or gaskets and plaintiff was not able to sufficiently demonstrate that he was exposed to the original product.  The court noted that even where the replacement products were virtually the same as the original there would be no liability where defendant was not the manufacturer.  This opinion is pretty strong, but maybe there would be a claim for design defect if asbestos containing components were specified by the manufacturer, or, if this didn’t involve asbestos.

The case also refused to impose liability in connection with exposure to the asbestos insulation used around the pumps.

Again, three judges dissented.

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Today, the Washington Supreme Court refused to hold a manufacturer liable for failing to warn of the danger of another manufacturer’s product.  The case Simonetta v. Viad Corporation involved a claim for personal injury as a result of asbestos exposure. Because the plaintiff was exposed to asbestos before 1981, the court decided the case using common law principles of negligence and strict liability rather than the Washington Product Liability Act.

Defendant manufactured and sold an evaporator, which did not contain asbestos but which was encapsulated with insulation (asbestos) when it was used.  In order to maintain the product, the insulation had to be disturbed.  In an extensive opinion, the court ruled that there was no duty to warn of the dangers of asbestos because defendant did not manufacture, supply or sell it.  Liability for negligent failure to warn is limited to those in the chain of distribution of the hazardous product.  Strict liability attaches to the manufacturer of a product.  Here the dangerous product was asbestos not the evaporator.  The opinion is must reading for anyone who wants (needs to) distinguish between strict liability for failure to warn and negligent failure to warn. 

There was a three judge dissent which would have found that plaintiff stated a prima facie case for negligence and strict liability.


 

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Until yesterday, I was under the mistaken impression that a lawyer could be terminated without collecting damages – other than for work already performed.  I was wrong -- at least in Oklahoma.  In McQueen, Rains, & Tresh, LLP v. Citgo Petroleum Corporation,  the Supreme Court of Oklahoma ruled that – under certain circumstances – a liquidated damages provision may be enforced; it is not per se unenforceable. 

The court was careful to limit its holding to the facts presented – a fixed term agreement, a large sophisticated corporate client who was represented by a skilled negotiator, an unambiguous liquidated damages provision, detrimental reliance by the law firm, and a recognition in the contract that there would be additional costs incurred by the law firm to meet the terms of the contract. On remand, the District Court found that a question of fact was present regarding the reasonableness of the liquidated damages.

I doubt that advocates of alternative billing arrangements really give much thought to this sort of a problem or event.  In the long run, bringing a case like this probably has a more negative impact on the outside lawyer – win or lose.






 

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Last week, the Washington Supreme Court ruled in St. Paul Fire and Marine Ins. Co. v. Onvia, Inc.  that an insured may have bad faith and Washington Consumer Protection Act claims against its insurance carrier even though the carrier did not have to defend or indemnify -- if the carrier made procedural missteps in deciding that there was no coverage. 

That is correct – the insurer did not have an obligation to defend or indemnify, and the insured still may have a claim for damages.  But, harm and damages must be proven. 

Here, it appears that there was a delay of almost nine months between tender and denial of coverage, during which time the insured defended itself in the litigation and entered settlement negotiations.  Because the duty of good faith toward an insured applies to the handling of the claim, if the claim was handled badly, there may be a claim for procedural bad faith. As for the Consumer Protection Act cause of action, a violation of the investigative requirements of the Washington Administrative Code automatically establishes the first element of a claim under the Consumer Protection Act.  Under the Washington Administrative Code, an insurer has a duty to act promptly in communication and investigation after a claim is tendered.

The message for insureds is to keep track of the efforts made in connection with tender of a claim so that you can prove damages, if necessary.  For carriers, the clock is ticking on handling that tender of claim.
 

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