State Farm not bound by UCC rules governing statute of limitations for property damage
The Uniform Commercial Code (UCC) is a so-called "uniform" law that was adopted by most of our 50 states to codify the rights and duties arising out of certain commercial transactions. For example, it defines when a seller of goods can be sued, outlines what remedies buyers may have, and limits warranty and other negligence or contract claims arising out of the transaction. It includes a short statute of limitations for "property damage" and a different limitation for "personal injury." It came in to play when State Farm sued the Ford Motor Company for damages to a household that State Farm had insured.The Sredzinski family bought a used 1994 Ford F-150 pickup in 2001 for personal use. The pickup caught fire while parked in their garage and destroyed their home. State Farm had to pick up the tab ($123,000.00) because it had written insurance on the Sredzinski's household. State Farm's investigators concluded that a defective cruise control deactivation switch was responsible for the fire and filed suit against Ford Motor Company as a "subrogee" of the Sredzinskis.
Ford argued that under the sale of goods' provisions in the UCC, the Sredzinskis (or the initial purchasers) were required to file a product liability claim within four years of buying the pickup from the manufacturer--even though that was years before the fire. State Farm responded by arguing that this short statute of limitations--applying to all "economic loss" claims--did not apply to a "consumer" transaction like the Sredzinski's purchase. State Farm argued that this case should be treated as a run-of-the-mill "product liability" claim because "other property" besides the pickup was destroyed.
The judges concluded that the so-called "economic loss doctrine," adopted by the Michigan Supreme Court in 1992 as part of activist "tort reform," was never intended to apply to a transaction and occurrence of this nature. Rather, it was intended to apply where a purchaser's expectations in making a commercial purchase were frustrated by a disappointingly dysfunctional product. In essence, the judges held that burning one's household down is an injury of a different nature than a simple failure to fulfill the purchaser's anticipated performance goals. One Judge disagreed and would have upheld the trial court's dismissal of State Farm's claim.