As of September 1, 1993, a manufacturer’s duty to indemnify a seller in a products liability action became statutorily mandated in Texas. See Tex. Civ. Prac. & Rem. Code Ann. § 82.002 (Vernon 1997) (“Chapter 82”). Chapter 82, also known as the Products Liability Act, made changes that place the burden on a manufacturer to indemnify and hold harmless a seller against loss arising out of a products liability action, except for any loss caused by the seller’s negligence, intentional misconduct, or other act or omission such as negligently modifying or altering the product, for which the seller is independently liable. This discussion will provide a quick reference guide that manufacturers can consult to MAN UP defenses when hit with a claim under Chapter 82.
M is for Must defend
Section 82.002 requires manufacturers to indemnify a seller “without regard to the manner in which the action is concluded.” Tex. Civ. Prac. & Rem. Code § 82.002(e)(1); see also Meritor Automotive, Inc., 44 S.W.3d at 90; General Motors Corp. v. Hudiburg Chevrolet, Inc., 199 S.W.3d 249, 255-56 (Tex. 2006). “To escape the duty to indemnify, the indemnitor [here, the manufacturer] must prove the indemnitee [here, the seller]’s independent culpability.” General Motors Corp., 199 S.W.3d at 255-56. Manufacturers should beware that a plaintiff’s mere allegation that a seller is negligent is not sufficient to invoke the exception. See Meritor Automotive, Inc., 44 S.W.3d at 90. Instead, the manufacturer must defend a seller until the manufacturer obtains a finding that the seller’s independent conduct was a cause of plaintiff’s injury.” Freeman Financial Inv. Co. v. Toyota Motor Corp., 109 S.W.3d 29 (Tex. App.—Dallas 2003, pet. denied) (referring to Tex. Civ. Prac. & Rem. Code Ann. § 82.002(a)); Fresh Coat, Inc. v. K-2, Inc., 318 S.W.3d 893 (Tex. 2010). Since the determination of whether indemnity is owed is not determined until after a judgment is entered, manufacturers are on the hook through trial. Id. In the same vein, a plaintiff’s amendment of a products liability claim, so as to abandon any claim against the manufacturer, does not retroactively relieve the manufacturer of its duty to indemnify the seller for defending claims related to the manufacturer while the manufacturer was a party to the action. Seelin Medical, Inc. v. Invacare Corp., 203 S.W.3d 867 (Tex. App.—Eastland 2006, pet. denied).
Under Chapter 82, manufacturers must MAN UP and provide a defense and indemnity to a seller until manufacturers seek and obtain a finding that the seller was independently liable. If the manufacturer proves the seller’s independent liability, manufacturers can MAN UP and seek reimbursement from a seller’s damages and expenses for losses they cause. Panatrol Corp. v. Emerson Elec. Co., 163 S.W.3d 182 (Tex. App.—San Antonio 2005, pet. denied).
A is for Action
Chapter 82 by definition applies to “products liability action” for “the recovery of damages arising out of personal injury, death, or property damage allegedly caused by a defective product whether the action is based in strict tort liability, strict products liability, negligence, misrepresentation, breach of express or implied warranty, or any other theory or combination of theories.” Therefore, if a lawsuit hasn’t been filed against a seller arising out of the aforementioned theories, the manufacturer can MAN UP with the defense that its duty to defend and indemnify has not been triggered.
Component parts manufacturers can MAN UP, too: for a component-product manufacturer to be subject to a duty to indemnify a seller in a products liability suit, the claimant’s pleadings must include an allegation of a defect in the component itself, not merely a defect in the seller’s product of which the component was part. General Motors Corp. v. Hudiburg Chevrolet, Inc., 199 S.W.3d 249 (Tex. 2006); R.H. Tamlyn & Sons, L.P. v. Scholl Forest Industries, Inc., 208 S.W.3d 85 (Tex. App.—Houston 14th Dist. 2006, no pet.). If the claimant’s pleadings allege defects due to a component unrelated to the manufacturer’s product or only to the product as a whole, a component-product manufacturer does not have a statutory duty to indemnify a seller for losses. Hudiburg Chevrolet, Inc., 199 S.W.3d at 249; Seelin Medical, Inc., 203 S.W.3d at 867.
Manufacturers should be on notice that products liability actions in Texas have a 15 year statute of repose that can be extended in a few circumstances—for example, when dealing with warranties or diseases. With respect to warranties, if the written warranty provides for a longer term of safe usage, the statute of repose is extended to the end of the warranty period. Tex. Civ. Prac. & Rem. Code Ann. § 16.012(b) and (c); see Burdett v. Remington Arms Company, L.L.C., 854 F.3d 733, 735 (5th Cir. 2017) (applying Texas law). With respect to diseases, when the claimant 1) alleges exposure to the product at issue within 15 years of when the product was first sold, 2) is exposed to the product that caused the disease on which the cause of action is based, and 3) suffers symptoms of the disease that did not manifest themselves to a degree and duration that would cause a reasonable person to be put on notice of their injury, the repose deadline can also be extended. Tex. Civ. Prac. & Rem. Code Ann. § 16.012(d). The benefits of this discovery rule are specifically not extended to other products liability actions based on any other laws. Tex. Civ. Prac. & Rem. Code Ann. § 16.012(e). Therefore, manufacturers can MAN UP and assert that the statute of repose is not extended for any other products liability actions that fall outside of 16.012(c) and (d).
N is for Not a seller
Manufacturers can MAN UP with the defense that it owes no duty to a tendering party under Chapter 82 when the party cannot establish it is a “seller.” In 2016, the Texas Supreme Court held that a general contractor was not a “seller,” under Chapter 82. In Centerpoint Builders, a truss collapsed when a subcontractor stepped on it. The general contractor sought indemnity from the truss manufacturer in its subcontractor’s product liability action, but the court held that the general contractor was not a retailer or wholesale distributor of trusses, and that any sale of trusses by general contractor was incidental to its contract to provide services necessary to construct building. This was consistent with fact that general contractor did not, by contract, set prices on materials to achieve a gain or profit, and general contractor’s contract with property owner covered innumerable construction products and materials. Tex. Civ. Prac. & Rem. Code Ann. §§ 82.001(3), 82.002(a). Centerpoint Builders GP, LLC v. Trussway, Ltd., 496 S.W.3d 33 (Tex. 2016).
U is for Unsafe
In Texas, a manufacturer is not liable in a product liability action if the product is inherently unsafe, the product is known to be unsafe by the ordinary consumer who consumes the product with the ordinary knowledge common to the community, and the product is a common consumer product intended for personal consumption, such as sugar, castor oil, alcohol and butter. Tex. Civ. Prac. & Rem. Code Ann. § 82.004(a). Chapter 82 specifically includes tobacco and oysters. Tex. Civ. Prac. & Rem. Code Ann. § 82.004(a)(2). Manufacturers of these consumer goods can MAN UP and assert this defense if sued in a products liability action.
P is for proportionate responsibility
Chapter 82 doesn’t prohibit manufacturers from apportioning fault to other parties, provided they can meet the requisite burden of proof. To MAN UP with this defense, manufacturers should ensure they retain the proper experts to support a submission to the jury that a party other than the manufacturer—including the plaintiff—caused or contributed to the plaintiff’s injuries. Chapter 33.003 of the Texas Civil Practice & Remedies Code states that “the trier of fact, as to each cause of action asserted, shall determine the percentage of responsibility, stated in whole numbers, for the following persons with respect to each person’s causing or contributing to cause in any way the harm for which recovery of damages is sought, whether by negligent act or omission, by any defective or unreasonably dangerous product, by other conduct or activity that violates an applicable legal standard, or by any combination of these: (1) each claimant; (2) each defendant; (3) each settling person; and (4) each responsible third party who has been designated under Section 33.004.” Tex. Civ. Prac. & Rem. Code §33.003(a). On the statute’s face, it provides that Chapter 33 applies to products liability actions but will not “allow a submission to the jury of a question regarding conduct by any person without sufficient evidence to support the submission.” Tex. Civ. Prac. & Rem. Code §33.003(b).
Because Chapter 33 applies to “any cause of action based in tort in which a defendant, settling person, or responsible third party is found responsible for a percentage of the harm for which relief is sought,” a plaintiff’s claims against a manufacturer in a products liability action are considered to sound in tort, and Chapter 33 will apply. Under Texas law, a plaintiff who is more than 50% comparatively negligent is barred from recovery. JCW Electronics v. Garza, 257 S.W.3d 791 (in a breach of warranty products liability action, Plaintiff was barred from recovering at all due to the fact that the jury apportioned 60% of the liability to Plaintiff).
Sellers who settle pre suit with a claimant and fail to bring the manufacturer in as a party cannot pay and chase. Sun Gro Horticultural Corp. v. Scotts-Sierra Horticultural Prod. Co., No. 6:01CV441, 2002 WL 34586920 (E.D. Tex. March 22, 2002). In Scotts-Sierra, SunGro settled claims of the injured party, Sessions, on behalf of itself and on behalf of the distributor of the product, BWI, prior to any suit being filed by Sessions. SunGro purchased Sessions’ and BWI’s rights to sue. SunGro then sued the manufacturer, Scotts-Sierra, for indemnity under Chapter 82 and for contribution under Chapter 33. The court held that SunGro had no cause of action under Chapter 82 because at the time SunGro settled Sessions’ claims, Sessions had not yet filed suit. The court held SunGro’s claims were further barred under Chapter 33 because SunGro was not permitted to pay for more than SunGro’s liability and seek indemnification for same. The court noted that Texas law does not permit a settling joint tortfeasor (here, SunGro) to preserve a right to reimbursement or contribution from a non-settling joint tortfeasor (here, Scotts-Sierra) by taking an assignment of the common plaintiff’s cause of action.
Sellers under both Chapter 33 and Chapter 82 are required to bring the manufacturer to the table (Chapter 33) and/or have claimant file a products liability cause of action before accepting the settlement (Chapter 82). Therefore, manufacturers can MAN UP and deny payment under Chapter 82 if the underlying settlement between a seller and a claimant does not arise from a products liability action and under Chapter 33 if a seller resolves more than the seller’s share of liability in a settlement and takes an assignment of the common plaintiff’s cause of action to sue a manufacturer.
Because Section 82.002 requires manufacturers to indemnify a seller “without regard to the manner in which the action is concluded,” manufacturers should be reminded that although a seller can’t overpay a claim, receive an assignment, and seek indemnification from a manufacturer for an overpayment, a seller can settle its own portion of liability in a products liability action and seek reimbursement for indemnity under Chapter 82 from the manufacturer. Tex. Civ. Prac. & Rem. Code § 82.002(e)(1). Also beware of subcontractors who seek to obtain indemnification under Chapter 82 which is contractually prohibited. See, e.g., Fresh Coat, Inc. v. K-2, Inc., 318 S.W.3d 893, 895 (2010) (where subcontractor’s independent negligence caused plaintiff’s damages, contract with general contractor precluded indemnification under Chapter 82).
Contact Cozen O’Connor’s skilled and experienced team of product liability litigators the next time you are faced with these kinds of claims in Texas, and protect your company from being a MAN DOWN.