A California appellate court recently held the “government contractor” defense, which provides a complete defense for federal government contractors against certain product liability claims, may apply to products that are made available to commercial markets.

In Kase v. Metalclad Insulation Corporation (No. A143590, Cal. Ct. App., 1st Dist; Nov. 22, 2016), the plaintiff filed suit against a supplier of asbestos insulation alleging exposure to the asbestos during his employment with the U.S. Navy. The defendant supplier asserted the government contractor defense precluded the plaintiff's defective design claim.

The government contractor defense bars certain product liability claims against manufacturers and suppliers of government equipment and is intended to protect the federal government’s exercise of discretion and judgment when contracting out its design requirements. To establish the government contractor defense, a contractor generally must show: (1) the U.S. government approved reasonably precise specifications; (2) the equipment conformed to those specifications; and (3) the supplier warned the government about the dangers in the use of the equipment that were known to the supplier but not to the government. If the defense is successfully established, liability pursuant to state law is displaced and cannot be imposed. 

The plaintiff argued the asbestos insulation fell under an exception to the defense, as it was readily available to commercial users in a substantially similar form as those ordered by the government. The court rejected the plaintiff’s attempt to use the exception, holding that the product’s commercial availability does not necessarily preclude the government contractor defense, but rather the selection of a particular design may reflect a significant policy judgment by government officials whether or not the contractor, rather than the government, developed the design. The court focused on whether the government, with due deliberation, selected the design feature at issue, and not on whether the government or the contractor developed that feature in the first instance. The defendant supplier was held to have sufficiently proved that the government understood the risks associated with using the insulation product and nonetheless selected the product anyway, thus allowing the supplier to claim it was contractually obligated to supply the product and assert the government contractor defense. 

California’s interpretation of the government contractor defense broadens its applicability to manufacturers and suppliers of widely available commercial products provided the government’s required specifications for the products are reasonably precise. Further, this case illustrates that while still limited in its applicability, the government contractor defense is a powerful tool that can provide for a complete affirmative defense. The case may be appealed to the Supreme Court of California.