John J. Gazzola | Pepper Hamilton LLP | July 26, 2018
Great N. Ins. Co. v. Honeywell Int’l, Inc., No. A16-0997, 2018 Minn. LEXIS 236 (May 9, 2018)
This case arises out of a residential construction project and the installation of ventilators into a home’s HVAC system. Sixteen years after completion of the work, a fire occurred in one of the ventilators, causing property damage. After paying the homeowners’ insurance claim, Great Northern Insurance (“Great Northern”), as subrogee, filed suit against McMillan Electric Company (“McMillan”), the manufacturer of the motors in the ventilators, asserting claims for product liability, breach of warranty, and negligence, including a claim for breach of a post-sale duty to warn consumers of the risk of fires in ventilator motors.
The trial court granted McMillan summary judgment concluding that Minnesota’s 10-year statute of repose barred all of Great Northern’s claims except for the post-sale duty to warn claim, which also failed because McMillan owed no such duty. The Court of Appeals reversed both holdings. On appeal, the Supreme Court affirmed the Court of Appeals’ decision that McMillan’s motor was “machinery,” to which the statute of repose does not apply.
In reaching this conclusion, the Supreme Court explained the purpose of Minnesota’s statute of repose and the types of claims to which it applies. According to the Court, the statute is intended to avoid litigation of stale claims by barring actions relating to the defective construction of improvements to real property that accrue more than 10 years after a construction project achieves substantial completion. However, as an exception to this bar, the statute provides that “[t]he limitations prescribed in this section do not apply to the manufacturer or supplier of any equipment or machinery installed upon real property.” Minn. Stat. § 541.051, subd. 1(e). Here, the parties stipulated that the ventilators incorporated into a home’s HVAC system constitute an improvement to real property. Therefore, the Court reasoned that the statue of repose barred Great Northern’s claims unless McMillan’s motor constituted “equipment or machinery installed upon real property.”
In arguing that the statute of repose applied, McMillan argued that the ventilator (and its motor) was akin to “ordinary building materials” rather than “equipment or machinery” because it was part of a home’s systems and structure. According to McMillan, the machinery exception should apply only where the machinery assists “in some operation, activity or particular use of the building[.]” The Court rejected this argument, however, concluding that the statute’s plain language requires consideration of the material’s nature and function, rather than its integration into a structure.
Ultimately, the Court held that the motor fell within the machinery exception to the statute of repose. The Court reasoned that the ventilator containing McMillan’s motor constituted “machinery” because it consisted of a motor, fans, air filters and a heat-exchange core that modified and transmitted mechanical energy to efficiently regulate a home’s climate. The motor therefore was excepted from the time bar in Minnesota’s statute of repose and Great Northern’s claims for breach of warranty, negligence, and product liability could proceed.