The Iowa Supreme Court has made it easier to sue manufacturers for product liability claims involving out-of-warranty vehicles when no personal injury is involved.
Lawyers for plaintiffs and defendants say a new decision in a defect case against Ford Motor Co. could lead to more litigation by owners and their insurance companies.
The situation arises when only a vehicle no longer under warranty is damaged or destroyed due to an alleged defect, no other property is damaged and no injury occurs.
In the Iowa case, Gary Foust claimed his 1991 Ford F-150 pickup spontaneously caught fire in 1996 when he started it. Foust's insurer, American Fire & Casualty Co., paid him about $12,000 - the value of the truck - and sued Ford to recoup its money, contending an ignition switch defect caused the fire.
A judge in Polk County District Court dismissed the case without trial, saying Iowa's so-called economic loss doctrine prohibits tort claims for purely financial losses. Because the warranty had expired on Foust's pickup, the insurer could not sue for breach of contract, either.
The state Supreme Court said the economic loss doctrine does not apply when an allegedly defective product poses a risk. Hazard and danger distinguish tort liability from contract law, the court said, and 'distinguish the disappointed consumers from the endangered ones.'
The fact that nobody was hurt in the fire made no difference.
Des Moines attorney Hugh Cain, who represents the insurer in the appeal, said the ruling 'will probably make for more lawsuits by plaintiffs' and insurance carriers.
Ford counsel Michael O'Reilly said the decision blurs what had been 'the clear line between tort and contract.
'This basically extends the warranty forever. The buyer and seller made a deal on the warranty term, and this imposes a different agreement,' he said.
The case was returned to the district court for further action.