State Farm Insurance Companies v. Premier Manufactured Systems, Inc.

Citations: 172 P.3d 410; 217 Ariz. 222; 2007 Ariz. LEXIS 142Docket: CV-06-0338-PR

Court: Arizona Supreme Court; December 3, 2007; Arizona; State Supreme Court

SummaryOriginalCytator Case TreatmentAnalysis

EnglishEspañolSimplified EnglishEspañol Fácil

The Arizona Supreme Court addressed whether tortfeasor liability in strict products liability cases is joint and several or several only. The court determined that the 1987 legislative abolition of joint and several liability applies to strict products liability, establishing that liability is several only, necessitating fault apportionment among tortfeasors. The case arose when a State Farm insured discovered water damage caused by a defective filtration system, resulting in State Farm paying $19,270.86 for damages. State Farm sued Premier Manufactured Systems, Inc. and Worldwide Water Distributing, Ltd. for strict liability. Worldwide did not respond, leading to a default judgment against it. In a motion for partial summary judgment, State Farm contended that both defendants were jointly and severally liable, while Premier argued for several liability under A.R.S. 12-2506. The superior court sided with Premier, leading to a stipulated judgment attributing 75% fault to Worldwide and 25% to Premier, limiting State Farm’s recovery to 25% due to Worldwide's insolvency. The court of appeals upheld this, affirming that A.R.S. 12-2506 mandates several liability and fault allocation, and rejected State Farm's constitutional challenge regarding the application of comparative fault in strict products liability cases. The Supreme Court granted review based on the statewide significance of the issue and confirmed jurisdiction under the Arizona Constitution and relevant statutes.

Joint and several liability under common law allowed a plaintiff to recover full damages from any of multiple defendants responsible for a single injury. A defendant who paid the plaintiff could not seek contribution from other tortfeasors, resulting in potential disproportionate financial burdens. In 1984, Arizona's legislature enacted the Uniform Contribution Among Tortfeasors Act (UCATA), allowing a defendant who paid more than their fair share to seek contribution from others, with liability apportioned according to each tortfeasor's degree of fault. However, joint and several liability persisted, meaning defendants remained liable for the entire judgment amount, even if some were insolvent. 

In 1987, the legislature amended UCATA to abolish joint and several liability in most cases, establishing a system of comparative fault where each tortfeasor is responsible only for their percentage of fault. This shift meant that plaintiffs faced the risk of insolvent tortfeasors. State Farm contended that this amendment did not extend to parties strictly liable for defective products, but the court disagreed, affirming that under A.R.S. 12-2506(A), liability for personal injury, property damage, or wrongful death, including strict products liability, is several only, barring specific exceptions.

Section 12-2506 outlines three exceptions to the principle of several-only liability, which generally holds each defendant accountable only for their own fault. The exceptions allow for a party to be liable for another's fault if: 1) both were acting in concert; 2) the other was acting as the party's agent or servant; or 3) the liability arises from a duty under the federal employers' liability act. In this case, State Farm acknowledges that neither the first nor third exceptions apply.

State Farm's argument relies on A.R.S. 12-2506(D)(2), asserting joint liability due to an agency relationship between Worldwide and Premier. However, State Farm fails to demonstrate a conventional principal-agent or master-servant relationship, as Premier merely purchased a defective product from Worldwide and incorporated it into its system. The relationship between a buyer and seller does not establish agency.

State Farm cites Wiggs v. City of Phoenix to support its claim for an imputed agency relationship. In Wiggs, the City was held vicariously liable for the negligence of an independent contractor responsible for maintaining a streetlight, due to a non-delegable duty. The court concluded that the contractor acted as an agent of the City, leading to the City being fully liable for the contractor's fault. However, the comparison does not effectively apply to the current case, as no such agency relationship exists between Premier and Worldwide.

State Farm is not protected by the Wiggs doctrine, which holds that each entity in the distribution chain has a non-delegable duty to avoid distributing defective products. Relevant case law supports that manufacturers cannot evade liability for defects by blaming component suppliers, and strict liability requires proof that a product was defective when it left the defendant's control, rendering it unreasonably dangerous, and that the defect caused the plaintiff's injuries. The judgment did not impose vicarious liability on Premier or Worldwide; each is liable for its own actions. The 1987 amendment of the Uniform Contribution Among Tortfeasors Act (UCATA) clarifies that various types of fault, including strict liability and products liability, must be compared for responsibility allocation. Each defendant's liability arises from their own conduct in distributing the defective product, not from their relationships with other wrongdoers. State Farm's argument regarding A.R.S. 12-2509, which pertains to joint and several liability and contribution among tortfeasors, is flawed. This statute does not establish a general rule of joint liability in strict products liability cases but rather provides a framework for contribution among parties when joint liability exists, which was the standard before the 1987 amendment that limited joint liability in most cases. Thus, post-amendment, contribution claims will be largely unnecessary in future actions.

Acceptance of State Farm's argument would undermine A.R.S. 12-2506, as A.R.S. 12-2509(A) encompasses contribution among all tortfeasors, including those based on negligence. The statute's requirement for joint and several liability in cases under A.R.S. 12-2509 would render A.R.S. 12-2506 ineffective. A.R.S. 12-2509 should only apply in limited cases where joint and several liability is explicitly allowed. State Farm's claims regarding A.R.S. 12-684's indemnity provisions also fail, as those provisions were enacted before the 1987 abolition of joint and several liability and do not conflict with the several-only liability established by A.R.S. 12-2506. A.R.S. 12-684(A) permits a seller to seek defense from a manufacturer in product liability cases; if declined, the manufacturer must indemnify the seller unless the seller knew of the defect. This statutory framework is compatible with apportioning fault under A.R.S. 12-2506. State Farm's reliance on out-of-state precedents regarding joint and several liability in product defect cases is misplaced, as these do not align with Arizona's statutes. The court emphasizes that legislative intent, which abolished joint and several liability except in specified situations, precludes the addition of further exceptions based on policy preferences.

The statute A.R.S. 12-2506(F)(2) mandates that strict liability and products liability are included in the types of 'fault' to be apportioned by the finder of fact. This broad definition requires that fault among all tortfeasors be compared in strict products liability cases. State Farm and its allies contend that interpreting A.R.S. 12-2506 to eliminate joint and several liability in such cases would violate Article 18, Section 6 of the Arizona Constitution, which protects the right to recover damages for injuries and prevents the abrogation of tort actions. The anti-abrogation clause ensures access to the courts and prohibits statutes that entirely abolish a right of action. However, the legislature can regulate tort actions, provided it does not effectively deny claimants the ability to seek legal redress. Strict products liability claims are protected under this constitutional provision, as evidenced by Hazine v. Montgomery Elevator Co., which deemed unconstitutional a statute limiting the timeframe for filing such actions. In contrast, the abolition of joint and several liability does not prevent claimants from pursuing actions against responsible parties, meaning A.R.S. 12-2506 does not violate the anti-abrogation clause. Nonetheless, State Farm argues that removing joint and several liability undermines the tort of strict products liability, asserting that it complicates fault allocation and deprives claimants of suing 'innocent' sellers within the distribution chain.

Claimants can sue all parties in the chain of distribution for a defective product and recover the full amount of damages, as A.R.S. 12-2506 does not exempt any responsible party from liability. Under strict products liability, a defendant is liable if they distribute a defective and unreasonably dangerous product. Such defendants are considered at 'fault' under A.R.S. 12-2506(F)(2), allowing claimants to recover under a several-only liability framework. This framework has been upheld in case law, indicating that jurors can assess relative fault among manufacturers and distributors despite potential difficulties in allocation. The statute's application does not contravene Article 18, Section 6 of the Arizona Constitution, which prohibits limitations on damages, as it regulates responsibility without capping recoverable damages. Although a claimant may struggle to recover full damages if a defendant is insolvent, the Constitution does not guarantee complete collectibility from any single responsible party. The legislature's amendment in 1987 abolished joint and several liability for defective product distribution participants, and the court affirms the lower court's judgment.

The 1984 Arizona legislation was influenced by both the Uniform Contribution Among Tortfeasors Act (UCATA) and the Uniform Comparative Fault Act, while also including specific provisions unique to Arizona. UCATA allows for reallocation of contribution shares when a tortfeasor's share is uncollectible, but this can lead to a defendant paying more than their fair share, especially in cases where only one defendant is solvent. Following the 1987 abolition of joint and several liability, such liability may still apply in strict products liability cases if a master-servant or principal-agent relationship exists among those in the distribution chain. The Restatement (Third) of Torts outlines general common law principles but does not interpret Arizona statutes. Even before the abolition of joint and several liability, UCATA required fault allocation among strictly liable tortfeasors for contribution rights. In this case, the parties agreed on the fault distribution between them, thus eliminating the need to define fault assessment standards under Arizona law. The finder of fact must evaluate the roles and responsibilities of all parties in the distribution of a defective product to determine fault. Additionally, Arizona's constitutional provision prohibits laws that limit damages for personal injury or death; however, this case focuses solely on property damage, making that provision inapplicable.