On April 21, 2009, the Connecticut Supreme Court issued Sylvan R. Shemitz Designs, Inc. v. Newark Corp.,[1] which addresses whether a plaintiff's cost in repairing and replacing goods previously sold to third parties constitutes compensable "damage to property" or noncompensable "commercial losses."
The distinction between damage to property and commercial losses is important, because the Connecticut Product Liability Act [2] provides that in product-liability actions between commercial parties, damage to property is recoverable-but commercial loss is not.
The defendant in Sylvan R. Shemitz Designs, Inc. manufactured capacitor boots, an insulation product used in lighting fixtures.[3] The plaintiff, in turn, used the defendant's capacitor boots in its lighting fixtures.[4] In 2004, the plaintiff's customers began complaining that their lighting fixtures were failing.[5] When the plaintiff investigated these complaints, it learned that the cause of lighting-fixture failure was faulty capacitor boots.[6] The plaintiff subsequently brought suit against the capacitor-boot manufacturer to recover the plaintiff's costs in repairing and replacing its customers' light fixtures.[7]
At the trial court, the defendants moved to strike the plaintiff's complaint, arguing that both parties were commercial parties and that the plaintiff's repair and replacement costs were commercial losses.[8] Therefore, the defendants argued, the suit did not fall within the Connecticut Product Liability Act.[9] The trial court granted the defendants' motion, concluding that because the plaintiff had sold its lighting fixtures to its customers, it no longer had any property interest in them and, thus, could not recover for "property damage" under the Connecticut Product Liability Act.[10]
On appeal, the plaintiff argued that its expenses in remedying the damage caused by defective capacitor boots were not a nonrecoverable commercial loss simply because it no longer owned the light fixtures.[11] The defendant, on the other hand, argued that the trial court correctly concluded the phrase "damage to property" only pertains to property that is owned by the party seeking to recover under the Connecticut Product Liability Act.[12]
Writing for the Court, Justice Palmer rejected the defendant's argument. Justice Palmer's opinion concludes that the defendant's interpretation of the phrase "damage to property" would "contravene[] not only the express provisions of the act that permit and promote the allocation of liability along a product's chain of distribution to the ultimate responsible party but, also, the act's purpose of engendering responsible business practices."[13] Accordingly, the plaintiff's cost in remedying damage to a third party's property fell within the Connecticut Product Liability Act.
What this means for you: Commercial plaintiffs should take comfort that the Connecticut Supreme Court has expanded their ability to recover-under the Connecticut Product Liability Act's theory of strict liabilitytheir losses in mitigating the harm caused by their suppliers' defective products. Defendants, though, must guard against plaintiffs' forthcoming efforts to repackage noncompensable, downstream losses as compensable "damage to property."
