Recall Reimbursement Is Not “Property Damage” Under a Product-Liability Indemnity Clause (South Carolina Contract Interpretation)

Introduction

In Metaldyne Powertrain Components Inc. v. Sansera Engineering Ltd. (4th Cir. Dec. 29, 2025) (unpublished), the Fourth Circuit vacated a South Carolina federal district court’s summary-judgment ruling that had disposed of Metaldyne’s six state-law claims against its supplier, Sansera. Metaldyne supplied transmission gearboxes for BMW motorcycles and purchased a component from Sansera. After reports of defects, BMW voluntarily recalled and replaced the parts, then settled with Metaldyne to recoup recall-related costs. Metaldyne sued Sansera seeking indemnification for amounts Metaldyne paid BMW.

The appeal presented a contract-interpretation question under South Carolina law: whether the purchase order’s “Product Liability” indemnity provision (Section 9) governed Metaldyne’s effort to shift BMW recall costs to Sansera. The district court held Section 9 controlled (and barred recovery because Metaldyne lacked Sansera’s “prior written consent” to settle). The Fourth Circuit disagreed on the threshold premise—Section 9 did not apply—so it vacated and remanded.

Summary of the Opinion

The Fourth Circuit held only that the district court erred by treating Section 9 as governing Metaldyne’s claims. Reading the agreement as a whole, the court concluded Section 9’s text fits product-liability style claims for “bodily injury, death, or property damage,” not economic reimbursement for recall and replacement costs incurred before any physical harm occurred. The court emphasized that South Carolina law distinguishes (i) costs to remove/repair defective work (not “property damage”) from (ii) costs to repair damage caused by defective work (which can be “property damage”). The court further relied on the agreement’s structure—especially Section 14, which separately mentions “recall campaigns or other corrective service actions”—to confirm that recall costs were not subsumed within “property damage” in Section 9.

Because Section 9 did not apply, the Fourth Circuit did not decide whether Section 14 or some other provision governs, nor whether Metaldyne’s claims fail on other grounds.

Analysis

Precedents Cited

Hall v. Sheppard Pratt Health Sys., 155 F.4th 747, 751 (4th Cir. 2025): cited for the standard of review—summary judgment is reviewed de novo. This framed the appeal as a fresh look at the contract-interpretation premise that drove the district court’s entire disposition.
Salve Regina Coll. v. Russell, 499 U.S. 225, 231 (1991): cited for the proposition that appellate courts review a district court’s determinations of state law de novo. That mattered because the decision turned on South Carolina’s treatment of “property damage” and contract interpretation.
Whitlock v. Stewart Title Guar. Co., 732 S.E.2d 626, 628 (S.C. 2012): supplied the “cardinal rule” of South Carolina contract interpretation—give effect to the parties’ intent as expressed in the contract’s language. The Fourth Circuit used this to privilege textual fit over broad, post hoc characterizations of the dispute.
Williams v. GEICO, 762 S.E.2d 705, 710 (S.C. 2014): reinforced that a court must examine the contract as a whole, not isolated phrases. This principle did substantial work: the panel read Section 9 in light of its caption (“Product Liability”), its insurance requirement, and Section 14’s explicit recall-cost language.
Crossmann Cmtys. of N.C., Inc. v. Harleysville Mut. Ins. Co., 717 S.E.2d 589, 593 (S.C. 2011): provided the critical South Carolina distinction between (a) costs of repairing or removing defective work (not “property damage”) and (b) costs of repairing damage caused by the defective work (property damage). The court treated BMW’s recall-and-replace costs as the former—preventive remediation—so Section 9’s “property damage” trigger did not match.
Penn Nat'l Sec. Ins. Co. v. LinkOne SRC, LLC, 542 F. Supp. 3d 355, 363 (E.D.N.C. 2021) and Thruway Produce, Inc. v. Massachusetts Bay Ins. Co., 114 F. Supp. 3d 81, 94 (W.D.N.Y. 2015): invoked by Sansera for the idea that recall scenarios can constitute “property damage.” The Fourth Circuit found them unpersuasive because they did not apply South Carolina law, were nonbinding, and—factually—concerned “faulty inputs” that irreparably damaged broader products under contracts that defined “property damage.”
S.C. Code § 15-73-10(1): cited to underscore that South Carolina “product liability” is oriented toward “physical harm” to users/consumers or their property, not purely economic claims by downstream commercial entities. This supported reading Section 9 (captioned “Product Liability”) as targeting bodily injury/property damage—not recall reimbursement.

Legal Reasoning

Textual mismatch: Section 9’s triggers did not fit the alleged loss. Section 9 required Sansera to “indemnify and defend” against “third-party claims” for “bodily injury, death, or property damage.” Metaldyne, however, sought reimbursement for money paid to BMW for recall and replacement costs “before those parts broke.” Applying Crossmann, the court treated such costs as removal/repair of defective work (not “property damage”).
“Third-party claims” in context meant product-liability claims, not BMW’s economic recoupment. While BMW was a “third-party” to the Metaldyne–Sansera contract in the colloquial sense, the court focused on the phrase as used in Section 9’s product-liability setting: defects causing bodily injury, death, or property damage. The court linked this to South Carolina’s product-liability conception in § 15-73-10(1), which centers on physical harm rather than downstream economic loss.
Insurance requirement confirmed Section 9’s limited scope. Section 9 required “product liability insurance” with minimum coverage “for personal injury and property damage.” The panel reasoned that if Sansera’s reading were adopted, the contractual risk-allocation scheme would contain a “serious gap” because product-liability coverage would not necessarily respond to purely economic recall reimbursement.
Whole-contract reading: Section 14’s separate recall language was decisive contextual evidence. Section 14 separately enumerated costs for “recall campaigns or other corrective service actions,” and also separately addressed “claims for personal injury (including death) or property damage.” The court inferred that if “property damage” already encompassed recall costs, there would be no need to list recall costs distinctly—confirming that “property damage” was being used in its narrower, physical-harm sense.
The panel refused to expand the dispute based on the breadth of the Metaldyne–BMW settlement release. Sansera argued the settlement was broad enough to include conceivable tort claims. The court held the relevant question was what Metaldyne sought to recover from Sansera (recall reimbursement) and noted Sansera did not dispute Metaldyne’s assertion that the amount sought matched the recall costs paid to BMW.

Impact

Contract drafting and risk allocation: The opinion reinforces that “product liability” indemnities keyed to “bodily injury, death, or property damage” may not capture recall-and-replacement economic losses unless the contract says so expressly. Parties who intend supplier-funded recall reimbursement should draft separate recall indemnity language (as Section 14 did) and align it with payment/consent procedures.
Litigation framing under South Carolina law: The decision spotlights Crossmann as a key boundary for “property damage” arguments—especially when plaintiffs characterize preventive remediation as damage.
Insurance program alignment: The court’s attention to the “product liability insurance” requirement signals that courts may test a proposed contract interpretation against the practical coherence of the contract’s insurance-and-indemnity architecture.
Procedural consequence: Because the ruling is unpublished, it is not binding precedent in the Fourth Circuit, but it may be persuasive—particularly in supplier disputes involving recall costs and “property damage” language under South Carolina law.

Complex Concepts Simplified

Indemnify and defend: “Indemnify” generally means reimburse for covered losses; “defend” means provide or pay for a legal defense against covered claims. Section 9 was framed as both.
Third-party claim: A demand or lawsuit brought by someone not party to the contract. Here, the court treated “third-party claims” in Section 9 as a term of art tied to product-liability style claims for physical harm, not a downstream buyer’s commercial claim for recall reimbursement.
Property damage vs. economic loss: “Property damage” typically involves physical injury to tangible property. “Economic loss” is financial harm (like replacement costs) unaccompanied by physical injury. Under Crossmann, costs to remove/repair defective work (without resulting damage) are not “property damage.”
Recall costs: Expenses to retrieve, replace, repair, or service products to prevent failure or address a defect. The court treated BMW’s recall-and-replace expenses as distinct from “property damage.”
Summary judgment & de novo review: Summary judgment ends a case without trial when there is no genuine dispute of material fact and a party is entitled to judgment as a matter of law. “De novo” review means the appellate court gives no deference to the district court’s legal conclusions.

Conclusion

The Fourth Circuit’s central holding is narrow but consequential: under South Carolina interpretive principles and the contract’s structure, a “Product Liability” indemnity provision limited to “bodily injury, death, or property damage” did not govern a dispute seeking reimbursement of downstream recall-and-replacement costs incurred before any physical harm. By anchoring its analysis in Crossmann and the agreement’s explicit separation of “property damage” from “recall campaigns,” the court reinforced a practical drafting lesson—recall reimbursement should be addressed expressly and coherently (including insurance and consent mechanics), not assumed to fall within generic “property damage” language.