This update examines the Chemnitz District Court decision of December 14 2009.(1) The decision is noteworthy – and simultaneously perplexing – because the district court awarded damages based on the creeping defect concept, pursuant to Section 1, Paragraph 1 of the Product Liability Act.
The plaintiff filed a complaint for product liability damages before the Chemnitz District Court. The plaintiff's complaint concerned engine damage to his BMW 525 TDS. The alleged product defect was that when the oil level was low, neither the yellow oil level indicator light nor the oil pressure gauge registered this condition. Even the vehicle's electronic control unit failed to detect any improper functioning of the warning lights. As a result, the vehicle was driven with a low oil level over a considerable distance, which eventually led to engine damage. The plaintiff argued that the defendant should be liable for repair costs – including the cost of a replacement engine – incurred as a result of the defect. Defendant BMW responded, among other things, that a marten (a weasel-like animal) had chewed through the insulation covering the wires to the oil level sensor and data line, and that this was the reason for the inoperable fault diagnosis. The defendant argued that since the resultant condition was due to a violent external intervention (ie, a marten bite), it should be absolved from liability. Importantly, the defendant further argued that the claim was not actionable under the Product Liability Act because the act does not cover claims where the damage is limited solely to the product itself.
A court-appointed expert analysed the technical aspects of the claim and provided an opinion, which the court then adopted. The expert concluded that the electronic control unit on the vehicle was indeed defective, in the sense that despite its ability to monitor the oil level and connectivity, it failed to transmit this information to the driver. Although the expert report asserted that for model year 2000 vehicles, the state of the art was only a limited self-monitoring of the electronic control unit, in the court's view this offered the defence no relief. According to Section 3(a) of the act, a product is defective if it fails to ensure the safety which can justly be expected, taking into account all factors – especially the product's presentation, its use (that can be reasonably expected) and the date on which it was put into circulation.
According to the district court, in 2000 the expectation was that such a system would detect the failure of both the warning lights and the internal control system, and would relay this information to the driver. A point which seemed to carry weight with the court was the fact that there was no warning of any kind in the vehicle owners' manual regarding any limitation of this self-monitoring function.
This case, according to the district court, involved a design defect since the subject product failed to fulfil the task for which it was conceived and manufactured. The defective control system on the plaintiff's vehicle led to further damage – specifically, engine damage. Such defects have been referred to as creeping defects. As a result, the district court held that the defendant was liable under Section 1.
The district court based its decision on the Product Liability Act. Arguably, however, its interpretation and ruling are incorrect.
The court correctly stated that this case concerned creeping defects. The vehicle's control unit was not stoffgleich (of the same material) as the damaged engine. In fact, the control unit was functionally distinguishable from the engine (for further details of these concepts please see "Liability for creeping defects").
The court's opinion is arguably flawed due to its reference to Section 1, Paragraph 1 of the act, which states that property damage can be compensated only when "a thing is damaged apart from the damaged product itself". This was clearly not the case here, as the damage was limited to the product itself. In fact, this interpretation is adopted by Article 9(2) of the EU Product Liability Directive (85/374/EEC). This appears to be the only reported decision in which a court has so construed the creeping defect concept under Section 1 of the Product Liability Law.
However, the decision could have been premised on Section 823, Paragraph 1 of the German Civil Code (Bürgerliches Gesetzbuch), which refers to fault-based liability. This would have actually been more advantageous for the plaintiff, in that the €500 deductible pursuant to Section 11 would not have been applicable.
For further information on this topic please contact Daniel Schulz or Michael B Hixson at Carroll Burdick & McDonough by telephone (+49 7031 439 9600), fax (+49 7031 439 9602) or email ([email protected] or [email protected]).
Endnotes