Expert Commentary

Subcontractor Liable for Using Asbestos-Laden Materials

A janitor at a large commercial complex developed mesothelioma cancer from his alleged exposure to asbestos-laden products that were used by a drywall subcontractor at the facility 30 years earlier. He filed suit against several parties, including the subcontractor.


Environmental
June 2016

The complaint against the subcontractor included a strict liability count that was dismissed on summary judgment by the trial court. This was reversed on appeal, with the court stating that the subcontractor was within the "stream-of-commerce" and was responsible for having placed the product where the janitor would be exposed to it. Hernandezcueva v. E.F. Brady Co., Inc., 243 Cal. App. 4th 249, 196 Cal. Rptr. 3d 594 (2015).

Stream-of-Commerce Rule

In California, even though they are not necessarily involved in the manufacture or design of the final product, parties may be subject to strict liability for "passing the product down the line to the consumer" because they "were able to bear the cost of compensating for injuries." This is called the "stream-of-commerce" approach to strict liability. Under this approach, no precise legal relationship to the member of the enterprise causing the defect to be manufactured or to the member most closely connected with the customer is required before courts will impose strict liability.

In the appeal, the court explained that its inquiry concerned the propriety of imposing strict liability on a subcontractor that bought and installed defective products in fulfilling its contract. The subcontractor's bid for the work included buying and installing the materials necessary for the job. His selection of the particular brand of joint compound was agreed upon by the architect.

The court said the following.

In view of the evidence concerning [the subcontractor's] practices in submitting bids, a jury could reasonably find that [it] was more than an "occasional seller" of drywall and joint compounds whose provision of those products was merely incidental to its services.

Court Rejected Subcontractor as "End User," Not "Seller"

The subcontractor argued that instead of being the manufacturer or seller of a defective product, it was actually the "end user" of the product in question. It asserted that this was evidenced by the fact that it paid sales tax in buying the product from the supply house for use on the project.

The court rejected that argument. It explained that "the imposition of strict liability hinges on a party's 'participatory connection' to the stream of commerce regarding the defective product, rather than the party's 'precise legal relationship' to members of that stream."

Public Policy Considerations Afford No Protection

The American Subcontractor's Association filed an amicus brief supporting the subcontractor in this appeal, in which it argued that considerations of public policy dictate that subcontractors involved in construction projects should not be subject to strict liability when they provide products complying with the architect's specifications. The court rejected that broad argument as being "inconsistent with existing law, which predicates the imposition of strict liability on a party's 'participatory connection'—rather than its 'precise legal relationship'—to the stream of commerce."

The court also rejected a legal argument that considerations of public policy preclude the imposition of strict liability in this case due to there being an alternative source of compensation potentially available to the janitor—namely, the asbestos bankruptcy trust system that was created pursuant to federal bankruptcy law. That system apparently includes trusts established by approximately 100 companies to compensate worker claims due to exposure to asbestos.

That contention failed in this case, said the court, because no evidence was presented to show that the individual here had received compensation from any bankruptcy trust.

Conclusion

In summing up, the court held that the trial court erred in dismissing the janitor's claim for strict product liability for the reasons explained herein. It is important to note that the construction work that was involved here took place decades before the janitor was diagnosed with cancer and filed suit against the subcontractor. There was no discussion in the case of whether the suit might have been time-barred by a statute of limitations or statute of repose. Applying the "discovery rule," the statute of limitations would not come into play until after the janitor discovered the asbestos in the drywall joint compound had allegedly caused his injury.

There was also no discussion of what insurance, if any, might have responded to the claim. This case provides a good lesson, however, in the importance of having an insurance policy that will cover damages arising out of asbestos and, if it is a claims-made policy, having a retroactive date going back far enough in time to pick up claims arising out of work performed long ago.


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