September 3, 2015

Extending tort liability on the basis of indirect economic benefit

By Deborah J. La Fetra Senior Attorney

In Sherman v. Hennessy Industries, the California Court of Appeal held that the manufacturer of an “arcing machine”—essentially a highly calibrated saw used to customize brake linings—is liable for injuries caused by asbestos dust released by certain brake linings even though the machine itself contains no asbestos. The decision creates a broad exception to the California Supreme Court’s decision in O’Neil v. Crane Co., which held that “California law does not impose a duty to warn about dangers arising entirely from another manufacturer’s product, even if it is foreseeable that the products will be used together.” The appellate court in this case held that the manufacturer should nonetheless be held liable because it sold the machines to businesses that were likely to use them on brake linings containing asbestos, and thus, the court reasoned, the manufacturer received an “indirect economic benefit” from the asbestos-containing products sufficient to render it financially responsible for any subsequent asbestos-related injuries.

No court has ever gone so far, and Hennessy Industries is asking the California Supreme Court to review the case. As we point out as amicus supporting the petition for review, the decision results only in wealth distribution, by tapping a solvent defendant to compensate for injuries caused by long-bankrupt defendants. Moreover, extending product liability to defendants outside the chain of commerce of the injury-producing product significantly increases potential liability for manufacturers of benign products at great potential cost to the productive economy. And liability would not further the policies underlying strict liability or negligence because the manufacturer of the benign product has no ability to alter the injury-producing product or to warn purchasers or users of the injury-producing product.

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