Wade Clark Mulcahy LLP

In<em> <a href="https://www.wcmlaw.com/wp-content/uploads/2023/03/Erie-Ins.-Co.-v-.Childrens-Palace-Childcare-Ctr.-Inc.pdf">Erie Ins. Co. v .Children's Palace Childcare Ctr., Inc</a>.</em>, a New York trail court awarded summary judgment to Dell Computers, Inc. (“Dell”) and Children’s Palace Childcare Center, Inc. (“Children’s Palace”), in a subrogation action brought against them by Erie Insurance Company (“Erie”). Erie insured several businesses that sustained property damage from a fire, paid their property damage claims, and sought to recover against Dell and Children’s Palace.

The fire started inside Children’s Palace, which leased space in a commercial strip plaza. The owner of Children’s Palace purchased two Dell computers from an Office Max store. Each computer came in a box which contained a power cord that was plugged into power strips used by the business. Erie claimed that the fire was caused by a defective power cord manufactured by Dell and that Children’s Palace failed to take appropriate precautions to prevent the fire.

Though it was undisputed that the plug of the power cords supplied with the Dell computers was composed of sub-standard materials, Dell submitted evidence it only supplied power cords with proper conductors and plug blades. So, even though the power cords came in the box with Dell computers, the “affirmative evidence” proffered by Dell allegedly showed that it did not manufacture the cords at issue. Erie had sought to place the burden on Dell to prove a negative, that is, how non-Dell power cords got into a box with Dell computers.

The Court rejected that argument, holding that a defendant is not required in moving for summary judgment to prove a negative on an issue it does not bear the burden of proving. The Court looked to common experience of people returning items to a store without the original box, purchasing new equipment in a re-sealed box, or swapping out power cords with newer, and perhaps unknowingly, sub-standard power cords. Erie was only able to show that a power cord was in a box with a Dell computer system sold by a third-party seller. It could not show the “reasonable probability" that Dell manufactured the product that allegedly caused the fire. Any inference that Dell manufactured the power cords based on the cords being in the same box as the Dell computers was speculative and not sufficient to defeat summary judgment.

The Court further held that even if Dell was determined to have manufactured the defective power cord, it could not be held liable because it was “undetermined” as to what caused the fire. Children’s Palace had no notice of any dangerous or defective conditions concerning the cords or property that caused or contributed to the fire. There was no proof the Children’s Palace knew that the power cords were defective or a fire hazard. The Court found no support for Erie’s argument that a commercial tenant should know of latent electrical issues with a tenancy or have a duty to examine each outlet for “faulty wiring.”

There are two important takeaways from this decision. The first is having proper factual and expert causation evidence in subrogation claims stemming from fire losses. Speculative evidence as to the cause of a fire will not likely survive summary judgment. The second takeaway is that a commercial tenant has no duty in respect of latent and unknown electrical issues.

Please contact <a href="jdiffley@wcmlaw.com">John Diffley</a> with any questions.