Products Liability Law Daily Wal-Mart maintains ‘innocent seller’ status in space-heater fire suit
Friday, August 3, 2018

Wal-Mart maintains ‘innocent seller’ status in space-heater fire suit

By Susan Engstrom

In an action stemming from a post office fire allegedly caused by a defective space heater, a property insurer that had paid nearly $1.7 million to cover the resulting damage failed to present evidence that would obviate Wal-Mart’s status as an innocent seller of the product, a Texas appeals court ruled. There was no evidence identifying the manufacturer of the heater or indicating whether that manufacturer was insolvent such that an exception to the state’s innocent seller statute would apply. Thus, the lower court did not err in granting Wal-Mart’s no-evidence summary judgment motion on that basis (International Insurance Co. of Hannover SE v. Wal-Mart Stores, Inc., August 2, 2018, Hinojosa, L.).

The insurer of the fire-damaged post office filed this subrogation action against Wal-Mart after an investigation revealed that a malfunctioning space heater might have started the fire. The insurer asserted causes of action for products liability and negligence. Wal-Mart filed a no-evidence motion for summary judgment, asserting that there was no evidence that it had sold the heater. In the alternative, it argued that it was shielded from liability pursuant to Texas’s innocent seller statute.

Innocent seller statute. Texas law protects sellers from products liability suits unless they significantly and intentionally participated in the design or production of the product. The term "seller" is defined as an entity that distributes or places a product into the stream of commerce for commercial purposes. Under the innocent seller statute, a non-manufacturing seller is not liable for harm caused by a product unless at least one of seven exceptions is established. Here, the insurer relied on only one exception: "the claimant proves … that the manufacturer of the product is … insolvent."

The evidence proffered by the insurer to show that the heater’s manufacturer was insolvent had identified only the distributor of the heater. A research report submitted by the insurer had concluded that the damaged heater was nearly identical to FlowPro heaters sold exclusively at Wal-Mart. Attached to the report were CPSC recall notices for FlowPro heaters as well as a document identifying Aloha Housewares, Inc. as the owner of the FlowPro trademark. The insurer relied on the forfeiture of Aloha’s corporate charter as evidence that the company was insolvent. In the court’s view, however, this evidence failed to establish that Aloha was the manufacturer of the damaged heater. In fact, the recall notices established only that Aloha had imported and distributed the FlowPro heaters, which were manufactured by an unidentified Chinese company. According to the court, the insurer seemed to confuse "seller" (which includes a distributor such as Aloha) and "manufacturer," which includes entities that participate in the design, formulation, construction, rebuilding, fabrication, compounding, processing, or assembling of a product. There was no evidence that Aloha had engaged in any manufacturing activity concerning the FlowPro heaters. Thus, the insurer failed to overcome Wal-Mart’s statutory protection as an innocent seller.

The case is No. 13-17-00349-CV.

Attorneys: James Thomas Busenlener (Matthiesen, Wickert & Lehrer, SC) for International Insurance Co. of Hannover Se as Subrogee to Association of United States Postal Lessors. Lisa M. Wright (Wright Close & Barger, LLP) and Jaime A. Drabek (Daw & Ray, LLP) for Wal-Mart Stores, Inc., Wal-Mart Associates, Inc. and Wal-Mart Stores Texas, LP.

Companies: International Insurance Co. of Hannover Se as Subrogee to Association of United States Postal Lessors; Wal-Mart Stores, Inc.; Wal-Mart Associates, Inc.; Wal-Mart Stores Texas, LP

MainStory: TopStory DefensesLiabilityNews InsuranceNews HouseholdProductsNews TexasNews

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