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State Farm Mutual Automobile Insurance Co. v. Norcold, Inc.

United States District Court, E.D. Kentucky, Northern Division

March 4, 2015

STATE FARM MUTUAL AUTOMOBILE INSURANCE CO., ET AL., PLAINTIFFS
v.
NORCOLD, INC., ET AL., DEFENDANTS

For State Farm Mutual Automobile Insurance Company, Larry Swerdloff, Plaintiffs: Kenneth E. Dunn, Robert E. Barnett, LEAD ATTORNEYS, Barnett, Porter & Dunn, Louisville, KY.

For Norcold, Inc., Thetford Corporation, Defendants: David T. Schaefer, Ryan Ashley Morrison, LEAD ATTORNEYS, Dinsmore & Shohl, LLP - Louisville KY, Louisville, KY.

Page 923

OPINION AND ORDER

William O. Bertelsman, United States District Judge.

I. INTRODUCTION

This case presents the Court with an issue of first impression: would the Kentucky Supreme Court apply the economic-loss doctrine to consumer transactions? For purposes of this motion, the Court must assume that a used recreational vehicle (" RV" ) was destroyed by fire when a refrigerator included with the RV at the time of its original purchase ignited, destroying itself, the RV, and the RV's contents.

Plaintiff State Farm insured the RV and is subrogated to the rights of the insured owner, Plaintiff Larry Swerdloff. Plaintiffs brought suit in Pendleton Circuit Court against Defendant Norcold and its parent company, Thetford, on June 11, 2014. Norcold removed the action to this Court on July 15, 2014, and subsequently filed a motion for partial summary judgment on October 9, 2014.

II. FACTS

The parties conveniently have filed a joint stipulation of facts for the purposes of this motion. Defendants reserve the right to contest these facts if the Court denies the motion.

The following facts are stipulated as true:

1. A model year 2007 Tiffin Phaeton [RV] owned by Larry Swerdloff and insured by State Farm was destroyed by fire on September 20, 2013 in Pendleton County, Kentucky. Plaintiffs allege that the fire was caused by a defective condition in the RV's refrigerator.
2. The refrigerator in question was a model 1210IM Norcold gas absorption refrigerator. It was manufactured by Norcold on or about March 1, 2007. It was installed into the RV by Tiffin, the RV manufacturer. The RV was bought by the original purchaser on or about June 20, 2007. The refrigerator originally came with a three-year written express limited warranty. . . .
3. Mr. Swerdloff bought the RV used in 2012. The refrigerator came with the RV when Mr. Swerdloff purchased the RV. The original three year [sic] warranty on the refrigerator expired by its terms prior to Mr. Swerdloff's purchase of the RV. Mr. Swerdloff had no contact with Norcold when he bought the RV in 2012.
4. The refrigerator was subject to one Norcold recall, NHTSA recall 10E-049 announced in October of 2010. . . . The recall repairs were performed at a facility in Florida on or about February 14, 2011. . . . The RV was owned by the original purchaser at the time . . . .

Page 924

5. Plaintiffs allege that the design of the refrigerator was defective and unreasonably dangerous at the time the refrigerator was initially sold, in that the design of the refrigerator presented an unreasonable risk of fire. Plaintiffs also allege that Norcold's recall activities were negligently conducted, in that its recall campaign did not fully or adequately address the allegedly defective and unreasonably dangerous condition in the refrigerator and did not prevent the fire in question.
6. As a result of the fire, the RV and its contents were a total loss. The fire did not cause any personal injuries. There is no claim for damage to other property outside of the RV. The damages claimed in this action are $145,193.20 in payments made by State Farm, including Mr. Swerdloff's $250.00 deductible. Additionally, Mr. Swerdloff seeks recovery for damage to other personal property owned by him in the RV at the time of the fire, and consequential damages claimed by Mr. Swerdloff.
7. The substantive law of Kentucky applies . . . .

( Doc. 11, Stipulation, at 2-3).

III. ANALYSIS

The Erie doctrine requires federal courts to follow the substantive law of the forum state in substantive matters. See Erie R.R. Co. v. Tompkins, 304 U.S. 64, 78, 58 S.Ct. 817, 82 L.Ed. 1188 (1938). If the law of the state is not clear, federal courts must determine to the best of their ability what the state's appellate courts would hold if confronted with the same issue. 17A James Wm. Moore et al., Moore's Federal Practice ΒΆ 124.22[3] ...


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