Recalls of Lithium-Ion Laptop Batteries Continue

laptopfire-1Despite over a decade of laptop battery recalls, one of the latest chapters in the lithium-ion fire hazard saga unfolded on June 23, 2016, when HP issued a sweeping recall of batteries installed in its notebook computers. The particular lithium-ion batteries subject to the recall, the company states, “have the potential to overheat, posing a fire and burn hazard to customers.” The Consumer Product Safety Commission is currently advising owners of laptops containing batteries covered in the recall to stop using them immediately, remove the battery, and contact HP for a free replacement. The recall covers approximately 41,000 devices sold between March 2013 and August 2015. Models affected included the HP Probook, HP Envy, Compaq Presario, and HP Pavilion notebook computers.

This recall comes on the heels of an unprecedented string of recalls issued by HP over the last two months involving similar lithium-ion batteries. Over the first half of 2016, recalls of lithium-ion batteries installed in HP and Compaq laptop computers reportedly total over 200,000 units.  Since spring 2010, HP has reportedly received at least 40 reports of lithium-ion laptop batteries overheating and rupturing. Several of these incidents have caused personal injuries to owners and nearly all have resulted in property damage. A complete list of model numbers and battery bar codes associated with the ongoing recall can be found at the CPSC website.

The recent flood of recalls across the industry further solidifies the fire hazards posed by lithium-ion batteries. Claimants seeking damages from overheating batteries have an increasingly easier path to establishing a product defect and ensuing liability, especially if the specific lithium-ion battery is subject to a recall. But the window to pursue claims premised on a product defect or negligence theory may not stay open long. As time passes and more batteries are recalled, potential plaintiffs will begin to face the growing obstacle of comparative negligence for failing to timely respond to a prior recall. For now, claimants should remain cognizant of the relevant timeframe between the date of loss and corresponding product recall when evaluating liability.

About The Author
Tagged with: , , , ,
Posted in Cyber; IoT and Technology, Product Liability

Compliance With Hague Convention When Serving Foreign Entities

world-1In today’s economy, it is no surprise to find that the product at the heart of a product liability suit was manufactured by a company outside of the United States. But properly serving that foreign manufacturer appears to cause some confusion. If strategy dictates the need for a claim against a foreign entity, especially in a product liability suit, it is necessary for the plaintiff to properly serve them under a hybrid of U.S. and international law.

This lesson was recently imparted on a subrogee attempting to bring suit against a South Korean company. Allstate Ins. Co. v. Hewlett-Packard Co., 2016 U.S. Dist. LEXIS 18155 (M.D. Pa. Feb. 16, 2016). The plaintiff’s insured purchased a computer that overheated, caused a fire, and resulted in significant property damage to the insured’s home. During litigation, the plaintiff learned that a potential cause of the fire was the computer’s battery, manufactured by Samsung SDI Co. Ltd., a South Korean company. The plaintiff filed a complaint against both Samsung’s South Korean company and its domestic company (Samsung SDI America, Inc.). The relevant issue arose when Samsung’s South Korean entity argued the plaintiff failed to properly serve it under the rules of the Hague Convention, and did not even attempt service until 14 months after filing the complaint.

Any nation that is a signatory of the Hague Convention—which includes the U.S. and the Republic of Korea (aka “South Korea”)—must follow its guidelines when bringing suit against a resident of another signatory. Federal Rule of Civil Procedure 4(f) provides for application of the Hague Convention in such situations. In part, this requires a U.S. plaintiff to contact the foreign signatory’s “central authority” (established to receive requests for service), and then have service performed in accordance with that nation’s internal law. That central authority will provide a certificate of service that states whether service has been performed, the method of service, and the place, date, and person on who service was made. This certificate is then filed in the U.S. court.

Equally important is the time in which to make service on the foreign entity. A plaintiff generally has 90 days to serve a party after filing the complaint, pursuant to Federal Rule 4(m) (this was a recent change from the 120 days prior to the December 2015 amendments to the Rules). Yet, the Rule makes exception and does “not apply to service in a foreign country.” Fed. R. Civ. P. 4(m). But as courts consistently remind us, this does not eliminate a timing requirement. See, Allstate Ins. Co. v. Hewlett-Packard Co., 2016 U.S. Dist. LEXIS 18155, at 12. Instead, courts generally look to see whether the plaintiff diligently attempted service during that time period. Id.

The plaintiff here failed to follow these requirements, and the court dismissed its action against the South Korean entity. The record showed the plaintiff filed an unsworn certificate of service attached to an untranslated document (apparently in Korean) along with its filing. Without any translation accompanying the Korean documents, the court was unable to determine whether service was made in conformance with the Hague Convention. This led the court to dismiss the action for a failure of service.

The court also discussed the defendant’s alternative argument that service was not attempted within a reasonable amount of time. In its ruling, the court found the plaintiff failed to even attempt service until 14 months after the complaint was filed. This, the court held, was an “extraordinary delay,” without good reason, and therefore, stated this was an additional reason to dismiss the complaint against Samsung’s South Korean entity. Although service typically need not be completed within the timing restraints of FRCP 4(m), it must at least be attempted in good faith.

Once it appears that suit will be brought against a foreign entity, it is necessary to determine whether the foreign nation is a signatory of the Hague Convention. If so, there can be no delay in following its guidelines if the plaintiff wants to avoid a dismissal of its claim.

About The Author
Tagged with: , , ,
Posted in International Claims

Subcontract Language Can Prevent Enforcement of AIA Waiver of Subrogation

contract-1The United States District Court of Maryland recently held that a waiver of subrogation clause found in an AIA agreement can be superseded by subsequent contract language between the contractors. In Turner Construction Co. v. BFPE Int’l, 2016 WL 1169938 (D. Md. Mar. 25, 2016), a general contractor brought suit against its subcontractor for property damage that occurred during renovations of a commercial property. The subcontractor argued that it was free from liability pursuant to the waiver of subrogation clause found in the prime contract between the owner of the property and the general contractor (AIA Document 201-2007™) (the “Prime Contract”).

At issue was the battle between provisions from two separate contracts: (1) the Prime Contract between the owner and the general contractor; and (2) the Subcontract between the general contractor and the subcontractor. The Prime Contract included a waiver of subrogation clause that the subcontractor sought to enforce; it stated “[t]he Owner and Contractor waive all rights against . . . each other and any of their subcontractors” (emphasis added). On the other hand, the Subcontract included an assumption of liability clause wherein the subcontractor “assumed the entire responsibility and liability for any and all actual or potential damage or injury of any kind whatsoever . . . to all property . . . caused by, arising out of or occurring in connection with the execution of the [Subcontract] Work.”

The subcontractor attempted to invoke the waiver of subrogation clause found in the Prime Contract and moved for summary judgment. At bottom, the two competing interests were whether the Prime Contract’s waiver was applicable to a subcontractor who was not a signatory, or whether the Subcontract’s assumption of liability clause applied.

Although the court recognized that in some instances other courts found that a subcontractor can rely on the waiver of subrogation clauses in prime contracts, no case dealt with an assumption of liability clause as strong as the one at issue here. The court stopped short of ruling that the assumption of liability clause controlled, and instead, determined that because of the ambiguity as to the parties’ intent between the Prime Contract and Subcontract, additional extrinsic evidence was needed. But tellingly, the court recognized that the burden to enforce the waiver was on the subcontractor, and without extrinsic evidence displaying the parties’ intent that the waiver controlled, the assumption of liability found in the subcontract would be enforced.

In reaching this decision, the court stated that this may be a “case in which the obvious public-policy benefit of orderly and predictable insurance planning at the outset of a venture must yield to the explicit arrangements between a general contractor and the subcontractors with which it chooses to transact.”

About The Author
Tagged with: , , ,
Posted in Contractual Issues

Michigan Court of Appeal – Waiver of Subrogation Clause Does Not Preclude Gross Negligence Claims

waiver.1In a Per Curium unpublished opinion dated August 9, 2016, an intermediate appellate court in Michigan overruled a trial judge’s grant of summary judgment based on a waiver of subrogation but affirmed the ruling that the plaintiff had not plead sufficient facts of gross negligence to state a claim. The subrogated claim involved an alleged failure of a dry pipe sprinkler system. The general contractor and a subcontractor moved for summary judgement based on a standard waiver of subrogation provision in the form contract. The plaintiff agreed the ordinary negligence claims were barred but public policy precluded exculpating oneself from gross negligence and opposed the motion. The trial court granted summary judgement on the grounds that it failed to state a claim for gross negligence and the claim for gross negligence was barred by the statute of limitations. The trial court specifically did not address whether the waiver of subrogation clause barred the claim for gross negligence.

On reconsideration, the court reversed its ruling on the statute of limitations issue and also held that the waiver did bar claims for gross negligence. The plaintiff appealed.

The court of appeals held that the trial court erred in dismissing the claim for gross negligence based upon the waiver of subrogation clause citing Michigan law that a party cannot by contract protect oneself from gross negligence or willful and wanton misconduct. In a footnote the court recognized an argument advanced by the defendants that the public policy concerns regarding gross negligence may be weaker or non-existent in a sophisticated commercial setting involving the allocation of the risk of property damage. “Nonetheless, the language of the cited cases is broad, and is not limited to non-commercial settings.” The court concluded by stating it was unnecessary to consider the issue further in light of its affirmance on the ground that plaintiff had failed to state a claim of gross negligence under the facts.

The reasoning in Lexington Ins. Co. v. The Alan Group, No.326921, Mich. App.; 2016 Mich. App. LEXIS 1486 can be helpful for subrogating carriers in cases in Michigan involving waivers of subrogation if the facts support a claim for gross negligence or willful and wanton conduct. Since the decision is unpublished, court rules may limit its precedential value.

About The Author
Tagged with: , , ,
Posted in Contractual Issues

Subrogation in the Internet Age: Claims Against Online Providers

online shopping picRecently, a subrogation action was filed on behalf of an insurer alleging that a product sold on eBay and Amazon caused a fire for which the insurer is seeking recovery. The action was filed in state court and thereafter removed to federal court. This lawsuit again reminds us in the subrogation world of the difficulty the law is facing in applying 20th Century tort concepts to the internet age.

The law of strict liability for products was created in California in the early 1960s and developed through the end of the 20th Century. Most states have some form of strict product liability either by way of statute or common law. At its core, this development in tort law attempted to shift the burden for harms created by products manufactured in the modern age to manufacturers and sellers rather than consumers. In the most simplistic setting, you would have a single manufacturer who sold the product to a distributor who sold it to the public. Component part manufacturers and multi-level distribution chains will, of course, add nuances and complexity. Legislatures and courts address those issues in product liability statutes or decisions applying the law to specific facts.

With the advent of the internet and companies like eBay and Amazon, the picture became even more complex. Internet providers sometimes act as matchmakers pairing sellers with buyers or allow individual to buy items, mark them up, and re-sell them. The first issue this internet driven fact pattern creates is determining exactly who is a seller or distributor in a given transaction and whether a particular state statute or common law doctrine applies to the individuals or companies in the chain after the product leaves possession of the manufacturer.

Another issue that must be addressed is the Communications Decency Act (“CDA”), 47 U.S.C. §230. The CDA was Title V of the Telecommunications Act of 1996. The original intent of the Act appears to have been an attempt to regulate pornography and obscenity in cyber space. Nevertheless, at least two courts have held that the broad immunity provisions established by Congress in the CDA barred all claims filed against internet-service providers for the sale of products that allegedly caused harm.

In Hinton v., LLC, 72 F. Supp.3d 685 (E.D. Miss. 2014), Judge Starrett dismissed a claim against Amazon and eBay alleging negligence, intentional conduct, gross negligence, breach of the implied warranty of merchantability, failure to warn, breach of the duty of good faith and fair dealing, violation of the Mississippi Consumer Protection Act, and violation of federal law. The judge noted that eBay had been held immune under the CDA in federal and state litigation concerning the sale of defective or illegal items, and concluded that all of the purchaser’s claims against eBay arose from the publication of information created by third parties and, therefore, that CDA immunity would attach in the absence of a statutory exception.

In Inman v. Technicolor USA, Inc., 2011 WL 5829024 (W.D. Pa. Nov. 18, 2011), Chief Judge Lancaster dismissed a product liability claim under Pennsylvania law against eBay based on the CDA’s immunity provision. The “sale” was “facilitated by communications for which eBay may not be held liable under the CDA.”

We can expect further cases on this topic as more are more products continue to be sold via the online marketplace. As this area develops, we will continue to provide updates.

About The Authors
Tagged with: , , , , , , , , ,
Posted in Cyber; IoT and Technology

Soy Based Wiring Coating – Potential Attraction for Mice

mouse.1The old joke in school used to be, “…the dog ate my homework.” Well, now, as a consequence of manufacturers moving toward more “green” ecologically fashionable products, the wiring in automobiles and common outdoor appliances is becoming feast food for rats, mice and vermin.

The intention for utilizing “soy” based wiring coatings was to eliminate greater use of plastics which are less biodegradable in the environment. However, usage of this type of wiring in vehicles and appliances has resulted in an all too inviting prise du jour for small fur covered creatures.

Various lawsuits have been filed alleging that manufacturers knew and have known that these electrical wire coatings and insulation were a potential enticement to “small critters” seeking not only the warmth of vehicles but also the chew friendly insulation materials which cover the electrical wiring.

Numerous automobile manufacturers have been placed on notice of claims related to the usage of the wiring coatings and insulation that attracts the furry four-legged critters which apparently utilize the wiring as a type of “dental floss” to keep their rapidly growing fangs in check. The common result of the intrusion of rats and mice is to result in the destruction of the electrical connections of the appliance or vehicle which may result in arcing and possibly fire.

Certainly when examining a common vehicle or appliance fires, it is always important to consider the potential impact on cause from a rat, mice or vermin attack when there is supporting evidence of their presence at or near the area of origin. Ruling this in or out also becomes important if it is determined that the wiring was “spiced” with soy based products.

About The Author
Tagged with: , , , , ,
Posted in Construction

First Known Fatal Accident Involving Autonomous Vehicle

autonomous car.1The first known fatal accident involving a vehicle operating in a type of autopilot mode occurred in Williston, Florida on May 7, 2016. The accident involved a Tesla Model S electric car that was engaged in Autopilot mode. The driver was killed when the Tesla crashed into a large 18-wheel tractor-trailer. The National Highway Traffic Safety Administration (NHTSA) has opened a formal investigation into the accident. According to the NHTSA, preliminary reports indicate the crash occurred when the tractor-trailer made a left turn in front of the Tesla at an intersection on a non-controlled access highway, and the car failed to apply the brakes. The car continued to travel after passing under the truck’s trailer. According to Tesla Motors, “neither autopilot nor the driver noticed the white side of the tractor-trailer against a brightly lit sky, so the brake was not applied.” The car drove full speed under the trailer, “with the bottom of the trailer impacting the windshield of the Model S.” The truck’s driver told the Associated Press the Tesla driver was “playing Harry Potter on the TV screen” at the time of the crash and driving so quickly that “he went so fast through my trailer I didn’t see him.” Tesla stated that it is not possible to watch videos on the Model S touch screen.

An incident of this nature is surely to place a microscope over the benefits and risks associated with autonomous driving, including whether as a society we are ready for this technology at its associated risk level. An autonomous car is defined as a vehicle capable of sensing its environment (using radar, lidar, GPS, odometry, and computer vision), and navigating without human input. Proponents of autonomous cars have argued that an assortment of anticipated benefits will come with autonomous cars, including reduction in traffic collisions caused by human driver errors such as delayed reaction time, tailgating, and other forms of aggressive driving that increases the risk of an accident. Indeed Tesla has argued that this was Tesla’s first known autopilot death in over 130 million miles driven by its customers with autopilot engaged, as compared to a fatality every 94 million miles among all types of vehicles in the U.S. And prior to this incident, Google had driven their fleet of driverless cars in autonomous mode a total of 1.4 million miles with a positive track record. Of the 14 collisions to date, 13 were the fault of other drivers, either rear ending the Google car at a stop light, side swiping the Google car, or one instance where the Google employee was manually driving the car. The sole blemish on Google’s self-driving car record was when it attempted to avoid sandbags blocking its path during which it struck a bus. This of course raises a concern of how do autonomous systems factor in ethical decisions such as the dangers associated with maneuvering to avoid an accident, should such maneuvering cause danger to other drivers, pedestrians, or the occupants of the autonomous vehicle.

Regardless of where one stands on the issue, we are certainly moving quickly in the direction of autonomous vehicles. As of 2016, 8 states have passed legislation that allows public road testing of driverless cars (CA, NV, UT, ND, IL, TN, FL, and DC). California earlier this year (Assembly Bill 2866) introduced legislation that would completely allow driverless vehicles to operate on the road, including those without a driver, steering wheel, or pedals. While the bill has yet to pass the assembly, it is an example of the direction we are moving on the issue. Manufacturers appear ready to fill any demand as legislation continues to be introduced. Currently 25,000 Model S Tesla’s have this autopilot feature. Google’s development of their own autonomous vehicle has been well document, including their own website on the topic: There are also a host of players working to deploy their own version of this technology. Ford, GM, Honda, and Toyota are all working internally or with outside entities devoted to this technology to continue development. Mercedes has developed a semi-truck with autonomous capabilities. Even Apple has been reported to be creating an Electric car dubbed “Titan” with target ship dates of 2019.

As this technology continues to develop, certainly the discussion of whether and to what extent as a society we are ready for autonomous vehicles is warranted. In the upcoming years as more companies test drive their own version of the autonomous vehicle we can expect more data to be circulated as to the benefits and risks associated with going driverless. But one thing seems certain from the significant development being put into this industry – it is not a matter of if driverless cars become an everyday reality in our society, but when.

About The Authors
Tagged with: , , , , ,
Posted in Cyber; IoT and Technology, Transportation

CPSC Recalls Hoverboards for Fire Hazards

hoverboard.1On July 6, 2016, the Consumer Product Safety Commission (CPSC) issued a recall for more than 500,000 hoverboards due to fire hazards. The recall involves ten manufacturers, retailers, online retailers and/or US importers, with over half involving the popular Swagway model. The basis for the recall is: “The lithium-ion battery packs in the self-balancing scooters/hoverboards can overheat, posing a risk of the products smoking, catching fire and/or exploding.” According to the CPSC’s recall, there have been 99 incidents of fire, with some involving personal injury and property damage.

The recall warns consumers and users to “immediately stop using these recalled products and contact the recalling company to return their hoverboard for a full refund, a free repair or a free replacement depending on the model.” This warning, when combined with news reports of fires from hoverboards, also presents a challenge to recovery professionals handling new claims involving these models. Inevitably, as more time passes from the recall, and more news of hoverboard fires gets circulated in the media, the parties to this recall will start to have a defense that insureds and users should have stopped using the devices altogether due to known hazards. While there are of course counter arguments to be made in response to such a defense of comparative fault, which would vary by jurisdiction, this is certainly a point all insurance claim professionals, recovery personnel and subrogation counsel need to explore with their insureds as more time passes.

Another interesting piece of information included in this recall is a Note at the end which provides:

At the request of the Commission, Alibaba Group has taken voluntary action to require certifications from testing agencies for hoverboards listed by third-parties on the and online marketplaces. Consumers are urged to immediately stop using hoverboards which do not comply with applicable safety standards and dispose of them in accordance with local and state regulations.

This Note goes beyond standard recall language and shows the CPSC is actively engaging online retailers to protect consumers, which may signal a new trend of the CPSC taking greater action to address defective products in the global marketplace, especially since Alibaba is a Chinese e-commerce group with online marketplaces where products are sold to US consumers. The notion of third-party testing agencies for products sold through online marketplaces is also a sign that perhaps new obligations may start to be imposed on online marketplaces and hosting sites to ensure products sold online are tested and certified to applicable safety standards.

The following is a link to the CPSC’s full recall, which also contains a useful chart by recall company which links to each company’s individual recall:


About The Authors
Tagged with: , , , , ,
Posted in Cyber; IoT and Technology, Product Liability

Utah Supreme Court to Rule on Named Plaintiff in Subrogation

hello.1The Utah Appellate Court recently issued an opinion in a medical subrogation case that contained broad language regarding subrogation law in Utah. See Wilson v. Educators Mut. Ins. Ass’n., 2016 UT App 38. The decision, read out of context, can be used to suggest that a subrogation case in Utah must be brought in the name of the insured.

At common law, there was no right of subrogation for reimbursement of medical expenses. However, some states, including Utah, carve out statutory exceptions to this bar in certain instances, such as worker’s compensation claims. See Johanson v. Cudhay Packing Co., 152 P.2d 98 (Utah 1944).

The Wilson court was considering a case where subrogation was being sought by an insurer that had made medical payments to a victim in a car accident. The negligent driver had a policy limit of $100,000. In addition to the subrogating carrier, the victim’s parents had claims against the driver.

The Wilson court held that absent a statutory right, the insurer could not bring a subrogation action in its own name. This is consistent with the common law bar on subrogation for personal injury claims. However, be aware that defendants will likely use the broad language in the Wilson decision to argue that all subrogation rights, not just in personal injury claims, are limited.

A petition for review of the Wilson decision has been submitted to the Utah Supreme Court.  Certification was granted today by the Utah Supreme Court.  While the matter is pending, it is important to be aware of this decision and its potential impact on your subrogation cases in Utah.

About The Authors
Tagged with: , , , ,
Posted in Legal and Evidentiary Issues

Cyber Attacks Reach Subrogation

cyber blog pic.2It was just a matter of time. As cyber-attacks rose and the data security breaches became increasingly devastating to businesses and individuals, cyber breach insurance became more prevalent. And where insurance appears, subrogation recovery follows.

We have not seen an overwhelming number of cyber claims or lawsuits filed – yet. One of the main lawsuits filed involves a claim for $154,711.34, brought by Travelers Insurance as the insurer of Alpine Bank. Alpine Bank incurred over $150,000 in costs associated with notifying its customers of a security breach that occurred while Ignition Studio, Inc. was under contract to design and service the bank’s security system. Travelers alleges that Ignition failed to perform basic updates to the security system or place basic anti-malware software on the bank system server. Following the security breach, Travelers paid Alpine Bank under its insurance policy. The claim was likely covered by a clause similar to the following common policy language which states in part (click on picture for enlarged view):

Cyber Policy Section 5.2

Alpine Bank got off relatively easy, as did the defendant security provider that settled out on this claim well before this ever got to trial. Cyberattacks are becoming increasingly costly, with an estimated 300 million records leaked and over $1 billion stolen in 2015. Not surprisingly, this loss totaling less than $155,000 settled before really being litigated. The docket shows that the complaint was filed on January 21, 2015 and a motion to dismiss for failure to state a claim was denied as moot likely because the matter was settled for an undisclosed amount in April 2015.As a result, we unfortunately do not have much judicial reasoning to look to for future cases.

However, many of the same lessons found in a run-of-the-mill subrogation case for negligent service or a faulty product will apply in cyber cases. To secure recovery, an insurer will still need a defendant that has liability insurance to cover negligent cyber security service/software or has sufficient assets to pay for the damages arising out of the cyberattack. The insurer will also have to demonstrate that the cyber security company failed to follow the basic standard of care for the industry (which is continuously evolving) or otherwise breached the security contract.

Additionally, the insured have to be fault-free is some jurisdictions or at least less than 51% responsible for the harm in others. This means that an insured company that provides no training to its employees about the danger of opening spam or downloading malware may destroy its insurer’s subrogation case before the case even starts.

Had Travelers’ case been larger, the outcome may have been very different. On one end Travelers may have had to deal with a defense of an insured never telling bank employees not to open strange emails. Alternatively, Travelers may have secured a verdict for its damages, but faced the possibility that it would not collect because there was no insurance and the security company became bankrupt by the claim. We do not know for sure how this case would have turned out if there had been more at stake. But we do know with absolute certainty that more cases are coming.

Lastly, we would be remiss if we did not mention that the expected rise in cyber related losses will be influenced by the internet of things. Currently there are 8 billion devices connected to the Internet. By 2020, that number will rise to over 20 billion and continue to grow exponentially. As more devices, computer, cars, homes, businesses, etc. become more interconnected, the potential for cyber related claims (and corresponding negligence lawsuits) will increase for a party’s failure to act reasonably to protect from a breach. Further, as the Internet of Things grows, we will owe a greater duty to our “network neighbors” to act reasonably to protect the network so others on the network don’t get hacked.



About The Author
Tagged with: , , , ,
Posted in Cyber; IoT and Technology
Subscribe To Our Posts


Recent Comments
    Cozen O’Connor Blogs