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.

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.