Lead Opinion
ON PETITION TO TRANSFER
We grant transfer to address the parameters of recovery for property damage under Indiana's Strict Product Liability Act.
Facts
The Reeds operate a dairy farm under the name of Pinehurst Farm, which is devoted to the breeding of pure-bred dairy cows and to the production of milk. The Reeds claim their dairy cattle were damaged after eating contaminated feed.
National is a rendering company that produces meat and bone meal as a byproduct of rendered animals. National sold meat and bone meal, allegedly contaminated with the pesticide Aldrin,
In January 1986, the Reeds purchased the contaminated feed. The cows ate it daily from January 8 through January 14, 1986, and from time to time between January 14 and February 20, 1986. The Reeds first observed side effects on January 9. Some cows were sick, nervous and restless; some had upset stomachs, bloody noses, and poor appetites. Milk production was down. The Reeds claim that the tainted feed had a long term effect on the cows: some aborted calves or gave birth to stillborn calves, some would not breed, some could no longer be used to harvest embryos for sale, and some died.
The Reeds sued National and Central Soya for negligence, breach of implied warranty, and strict liability in tort. The Reeds also sought punitive damages. Defendants moved for summary judgment. The trial court entered summary judgment for National on the breach of warranty and negligence claims because there was no privity between the Reeds and National. The trial court denied summary judgment to Central Soya on the negligence and strict liability in tort claims. The trial court entered summary judgment for both National and Central Soya on the punitive damage claim because there was no evidence to support that claim. The Reeds' request for reconsideration of the ruling on punitive damages was denied; the judgment was made final pursuant to Indiana Trial Rule 56(C). The Reeds appealed.
The Court of Appeals concluded that the Reeds could not recover compensatory damages under Indiana's Strict Product Liability Act because the damage was not "sudden, major damage to property" as defined in Ind. Code § 38-1-1.5-2, and directed the trial court to enter summary judgment in favor of National and Central Soya on the strict liability in tort claim. The court affirmed summary judgment in favor of National on the issue of punitive damages because no claim for compensatory damages remained pending against National. With respect to Central Soya, the Court of Appeals affirmed the denial of summary judgment on the negligence claim. In addition, the court could not determine as a matter of law that there was not clear and convincing evidence to support punitive damages, so summary judgment in favor of Central Soya on the punitive damage claim was reversed.
The Reeds seek transfer and raise the following issues in their petition:
(1) Whether the damage to the dairy cows was recoverable on a theory of strict liability in tort; and
(2) Whether there is a genuine issue of material fact concerning Reeds' entitlement to punitive damages.
This case was resolved in the court below by summary judgment. Summary judgment is appropriate only if the pleadings and evidence sanctioned by Indiana Trial Rule 56(C) show "there is no genuine issue as to any material fact and ... the moving party is entitled to judgment as a matter of law." T.R. 56(C). Once the movant shows entitlement to summary judgment, the non-moving party "must set forth specific facts showing that there is a genuine issue for trial." TR. 56(E). On appeal, summary judgments, like all trial court judgments, are clothed with the presumption of validity, but the reviewing court faces the same issues that were before the court which granted summary judgment and follows the same process. Sullivan v. American Casualty Co. (1992), Ind.,
II. "Property Damage" Under Indiana's Strict Product Liability Act
The Reeds assert that the damages they sustained are recoverable under the Act. Defendants maintain that the Reeds do not have a valid claim because (1) the feed presented no risk of personal injury; (2) the Reeds suffered only economic damage; or, (3) the damage suffered by the Reeds was gradually-evolving damage to property rather than sudden, major damage.
The Reeds' claim is governed by Indiana's Strict Product Liability Act, which imposes strict Hability in tort on one who places into the stream of commerce any product in a defective condition unreasonably dangerous to the property of a user or consumer. Ind. Code § 88-1-1.5-8. Prior to passage of the Act, Indiana recognized strict liability in tort as embodied in § 402A of the Restatement (Second) of Torts (1965) which imposes liability on manufacturers and sellers for injuries caused by unreasonably dangerous products.
The liability imposed by § 402A is founded on tort, not on contract. As such, strict liability in tort eliminated the need for privity in cases involving defective goods that cause physical harm. See, e.g., Ayr-Way Stores,
In 1983, the legislature made significant changes to the Act. General Electric Co. v. Drake (1989), Ind.App.,
A. Risk of personal injury is not necessary.
Defendants rely on Sanco, Inc. v. Ford Motor Co.,
Tort law has traditionally allowed recovery for property damage even in the absence of personal injury. Barnes v. Mac Brown and Co. (1976),
Defendants' reliance on Sanco is misplaced. Sanco involved a fleet of trucks that had been plagued with a number of problems, including nonfunctioning gauges, electrical shorts, and cracking windshields. The purchaser sued in negligence for the cost of repair and lost profits. Defendants point to the statement in the opinion of the district court that "as a general rule, when damage is sudden and calamitous, resulting from an océurrence hazardous to human safety, recovery may be had in tort,"
Defendant's reliance on General Elec. v. Drake,
The Reeds' claim does not fail because they allege only property damage. The Act continues to follow the common law rule that allows a tort recovery for property damage alone.
B. Recovery of Economic Damages.
Alternatively, the defendants claim that the loss allegedly suffered by the Reeds was solely economic in nature and that such losses are not recoverable under the Act. Instead, they argue, such damages are more appropriately recovered through contract remedies.
Economic loss is not defined in the Act, but has been defined by Indiana courts as "the diminution in the value of a product and consequent loss of profits because the product is inferior in quality and does not work for the general purposes for which it was manufactured and sold." Prairie Production, Inc. v. Agchem Div.-Pennwalt Corp. (1987), Ind.App.,
The Act allows recovery for "sudden, major" damage to property, but excludes recovery of "gradually evolving damage to property or economic losses from such damage." Ind.Code § 33-1-1.5-2 {emphasis added). Like the court in Yasuda Fire & Marine Ins. v. Lake Shore Elee. Corp.,
Where, however, only economic loss is alleged, no recovery is allowed under the Act. This has been the rule in Indiana for some time. For example, in Dutton v. International Harvester,
We hold that where the loss is solely economic in nature, as where the only claim of loss relates to the product's failure
The justifications for adhering to this rule are several. The law of sales set out in Article 2 of the Uniform Commercial Code governs the economic relations between buyer and seller; the dissatisfied buyer may avail himself of those statutory remedies fashioned by the legislature.
The Reeds claim they have suffered the following damages as a result of thirty-eight cows ingesting the feed: reduced milk production, aborted calves, stillborn calves, cows that would not breed, and cows which could not be used to harvest embryos for sale. In short, assert the Reeds, the cows became worthless as breeding stock. As a result, the Reeds claim a decrease in the fair market value of the affected cows. Defendants assert that diminution in the value of cows is economic loss, not property damage.
Domestic cattle are regarded as property. Greives v. Greenwood (1990), Ind.App.,
C. "Sudden, Major" Damage to Property.
The Restatement and the original 1978 Indiana Strict Product Liability Act would have allowed the Reeds to proceed with their claim for property damage because neither imposed any restrictions on the nature of the property damage sustained. The 1983 amendment to the Act, however, limited recovery for property damage to that which is "sudden and major." Ind. Code § 88-1-1.5-2.
The words "sudden" and "major" are not defined in the statute and few cases have discussed the nueaning of these words in the context of the Act. In our attempt to discern the meaning intended by the legislature, we keep the Act's purpose and scope in mind and give words their common and ordinary meaning without overemphasizing a strict, literal or selective reading. Indianapolis Convention & Visitors Ass'n. v. Indianapolis Newspapers, Inc. (1991), Ind.,
Webster's Third New International Unabridged Dictionary (1976) defines "sudden" as "happening without notice or with very brief notice; coming or occurring unexpectedly." Thus "sudden" contemplates both the elements of time during which the damage occurs, as something marked by abruptness or haste, and the element of surprise in relation to the damage. "Major" is defined as "greater in number or extent, notable or considerable in effect or
We conclude that this approach is consistent with the intent of the legislature that property damage claims under the Act are of the nature traditionally recoverable on a strict liability theory by eliminating recoveries for damages that otherwise are more appropriate for breach of contract actions. The Act does, for example, exclude from strict liability recoveries damage which manifests itself incrementally over time rather than in a calamitous event.
Our interpretation of this definition is consistent with previously decided Indiana cases. Mac's Eggs, Inc. v. Rite-Way Agri Dist.,
Here, the defendants argue that the damage allegedly suffered was not sudden and major because it occurred gradually over a number of years. In support, they point to the Reeds' statement that the claimed losses were still evolving five years after consumption of the tainted feed. They claim that the damage was not major because not every cow was affected.
We agree with defendants that the reaction of the cows to the feed from January 8 through February 20 is not the type of sudden, major damage contemplated by the Act. According to the Reeds, the damage to cows manifested itself incrementally over a period of time; it did not occur in a calamitous event. Thus summary judgment is appropriate on the strict liability claims.
Punitive Damages
Theoretically, punitive damages may be awarded if the Reeds (1) establish a right to compensatory damages in a tort action, Sullivan v. American Cas. Co. (1992), Ind.,
Having concluded that the Reeds cannot, as a matter of law, recover compensatory damages against National and Central Soya under the Strict Product Liability Act, the Reeds are not entitled to recover puni
However, a negligence action remains pending against Central Soya. Along with that action the Reeds asserted a claim for punitive damages. In its initial ruling on the punitive damages issue, the trial court found "a complete lack of evidence in the record" of this cause to support a claim for punitive damages. That original holding was affirmed by the trial court following submission by the Reeds and defendants of additional deposition testimony. Although we find little evidence to suggest that the Reeds would be sue-cessful in meeting their burden of proof on their punitive damage claims, we are unable to conclude on the basis of the record before us that as a matter of law there is no genuine issue of material fact left for resolution by the finder of fact. Therefore, summary judgment is not appropriate.
Conclusion
Accordingly, we grant transfer, and vacate the opinion of the Court of Appeals. This case is remanded to the trial court with instructions to enter summary judgment in favor of National and Central Soya on the strict product liability claim; to enter summary judgment in favor of National on the punitive damage claim; and to reverse summary judgment in favor of Central Soya on the punitive damage claim so far as it relates to the negligence claim.
Notes
. This Act has been commonly referred to as the "Product Liability Act" although the legislature gave it no formal title. Because the Act now applies only to product liability actions based on strict liability in tort and not to actions based on negligence, we refer to it here as the "Strict Product Liability Act."
. Aldrin is the name of a corn insecticide used from 1958 through 1974. In 1974, the Environmental Protection Agency banned the use of Aldrin for domestic agricultural purposes in the United States. When consumed by animals, Aldrin stores in the fatty tissues and is oxidized into dieldrin.
. Turner is not a party to this appeal.
. Section 402A of the Restatement provides: Special Liability of Seller of Product for Physical Harm to User or Consumer.
(1) One who sells any product in a defective condition unreasonably dangerous to the user or consumer or to his property is subject to liability for physical harm thereby caused to the ultimate user or consumer, or to his property, if
(a) the seller is engaged in the business of selling such a product, and
(b) it is expected to and does reach the user or consumer without substantial change in the condition in which it is sold.
(2) The rule stated in Subsection (1) applies although
(a) the seller has exercised all possible care in the preparation and sale of his product, and
(b) The user or consumer has not bought the product from or entered into any contractual relation with the seller.
. The Uniform Commercial Code, codified in Ind.Code §§ 26-1-2-101 through 26-1-2-725, constitutes a comprehensive system for determining rights and duties of buyers and sellers with respect to contracts for the sale of goods. The code provides for express warranties regarding the quality of goods, Ind.Code § 26-1-2-313, as well as implied warranties of merchantability. Ind.Code § 26-1-2-314. The buyer may also recover economic loss. Ind.Code § 26-1-2~715.
Concurrence Opinion
concurring and dissenting.
The majority opinion correctly observes that the definition of "physical harm" in Ind.Code § 88-1-1.5-2 operates to permit strict product liability recovery for sudden, major damage to property, including resulting economic losses, and that it excludes gradually-evolving property damage and its associated economic losses. However, I disagree with the majority's conclusion that the plaintiffs' damage claim falls outside the "sudden, major damage" definition as a matter of law.
The majority notes the plaintiffs' claim that the tainted feed had a long-term effect on the cows but fails to recognize that there was evidence of immediate and substantial harm. Within the first 24 hours after the plaintiffs' 38 cows began eating the contaminated feed, symptoms of substantial illness appeared and the herd's milk production diminished. While consumption of the bad feed did result in delayed effects (aborted or stillborn calves, refusal to breed, etc.), the decrease in the fair market value of the cows as a breeding and dairy herd occurred immediately upon the plaintiffs' discovery that the cows had ingested contaminated feed, thus substantially impairing the cows' normal capacity to produce an adequate amount of milk or to breed in the future.
At a minimum, these facts demonstrate a question of fact precluding summary judgment on the issue of whether all or part of the plaintiffs' claims result from sudden and major damage. There is substantial merit to the argument that, while not entitled to economic losses from gradually-evolving property damage, the plaintiffs are entitled to seek damages from the sudden loss in fair market value upon discovery that their cows had eaten the contaminated feed. Whether property damage is sudden and major should be a matter for determination by a finder of fact, not a question of law for resolution by the court.
While I disagree with the majority's declaration that the issue of sudden, major damage is a question of law, in all other respects I concur.
DeBRULER, J., concurs.