DECISION JUDGMENT
BARBARA JAFFE, JSC:
By order to show cause dated August 24, 2010, petitioners move pursuant to General Municipal Law (GML) § 50-e for an order granting leave to serve respondent, nunc pro tunc, with a late notice of claim. City opposes. For the following reasons, the petition is denied.
I. ALLEGED FACTUAL BACKGROUND
Petitioners' claim arose on March 31, 2010 at approximately 11:45 a.m. when Scott Madsen fell off a steel beam while working as an ironworker for DCM Erectors, Inc. on the 21st floor of the Freedom Tower at 1 World Trade Center, New York, New York. (Affidavit of Scott Madsen, dated Aug. 23, 2010). Immediately after the accident, he felt severe physical pain in his neck, back, right arm, right knee, right ankle, and right leg, and he continues to experience swelling, stiffness, and instability in his right knee, as well as continued pain in his neck and back, and has difficulty walking, climbing and descending stairs, squatting and bending. (Id.).
II. PERTINENT PROCEDURAL BACKGROUND
On August 9, 2010, petitioners retained counsel who, on August 11, 2010, filed a notice of claim with respondent. (Affirmation of Camille A. Fortunato, Esq., dated Aug. 23, 2010 [Fortunato Aff.], Exh. A).
III. CONTENTIONS
Petitioners explain their delay in filing their notice of claim with respondent as resulting from Scott Madsen's lack of awareness of the requirements set forth in GML § 50-e(a) and of the seriousness of his injuries. They observe that, in any event, the delay was de minimis, and that given respondent's earlier, actual notice of the events giving rise to the claims by virtue of the presence at the scene of the accident of respondent's agents and employees and the preparation of an accident report, it will not be prejudiced in maintaining its defense on the merits. In support of the merits of their claim, they rely on Labor Law § 240(1) which posits a non-delegable duty on contractors and owners to furnish workers with necessary security devices to protect them from falling from elevated locations. (Fortunato Aff.).
In opposition, respondent denies that it had actual notice of petitioners' claim and asserts that its defense is thereby prejudiced by the late notice. It also maintains that the claim patently lacks merit as a search of title and ownership of the location reflects that at the time of the accident, record title for the block was held by the Port Authority of New York and New Jersey, and that respondent's interest in the location is "limited solely to Greenwich Street, Fulton Street, Dey Street and Cortlandt Street as they are to be located within Block 58, Lot. 1," explaining that the Port Authority owns the entire lot that is not a future street. (Affirmation in Opposition of Andrew Lucas, ACC, dated Sept. 17, 2010, Exh. A [Affidavit of David Schloss, Senior Title Examiner, New York City Law Dept., dated Sept. 14, 2010]). It also submits an online printout from the New York Times in which the Port Authority is identified as the owner. ( Id., Exh. B). In the alternative and to the extent the petition is granted, respondent argues that it should not be granted nunc pro tunc and that petitioner should be ordered to file its notice of claim through the Comptroller. ( Id.).
IV. ANALYSIS
Pursuant to General Municipal Law (GML) § 50-e(l)(a) and 50-i, a tort action against a municipality must be commenced by service of a notice of a claim upon the municipality within 90 days of the date on which the claim arose. The court may extend the time to file the notice, and in deciding whether to grant the extension, it must consider inter alia, whether the municipality acquired actual knowledge of the essential facts constituting the claim within the 90-day deadline or a reasonable time thereafter, whether the delay in serving the notice of claim substantially prejudiced the municipality in its ability to maintain a defense, and whether the claimant has a reasonable excuse for the delay. (GML § 50-e; Grant v County Indus. Dev. Agency, 60 AD3d 946, 947 [2d Dept 2009]). In considering these factors, none is dispositive. ( Barnes v County of Onondaga, 103 AD2d 624, 628 [4th Dept 1984], affd 65 NY2d 664, citing Bay Terrace Co-op. Section N v New York State Empls.' Retirement Sys. Policemen's Firemen's Retirement Sys., 55 NY2d 979). The standards are flexible, the court may consider all other relevant facts and circumstances ( Beary v City of Rye, 44 NY2d 398, 407), and given the remedial nature of the statute, it is liberally construed ( Porcaro v City of New York, 20 AD3d 357, 358 [1st Dept 2005]; Camacho v City of New York, 187 AD2d 262 [1st Dept 1992]).
A. Actual knowledge
A municipality receives actual knowledge of the essential facts constituting a claim when it acquires knowledge of the facts underlying the theory on which liability is predicated. ( Grande v City of New York, 48 AD3d 565 [2d Dept 2008]). Generally, facts constituting the claim are facts which demonstrate a connection between the accident and any negligence on the part of the municipality. ( Id.; Saafir v Metro-North Commuter R.R. Co., 260 AD2d 462 [2d Dept 1999], lv denied 93 NY2d 816). The municipality must have notice or knowledge of the specific claim and not merely some general knowledge that a wrong has been committed. ( Wright v City of New York, 66 AD3d 1037, 1039 [2d Dept 2009]; Arias v New York City Health and Hasps. Corp., 50 AD3d 830, 832-833 [2d Dept 2008], lv denied 12 NY3d 738; Pappalardo v City of New York, 2 AD3d 699, 700 [2d Dept 2003]; Chattergoon v New York City Hous. Auth., 161 AD2d 141 [1st Dept 1990], lv denied 76 NY2d 875).
While petitioners allege that respondent's employees were present at the scene, there is no indication as to the information they obtained which would connect the accident to any negligence on respondent's part, and there is no evidence that the accident report was filed with respondent. Consequently, there is an insufficient factual basis for inferring that respondent had knowledge of the facts constituting the claim.
B. Prejudice
Absent respondent's knowledge of the facts constituting the claim, petitioners have not demonstrated that respondent is not prejudiced.
C. Reasonable excuse
Ignorance of the filing requirement does not constitute a reasonable excuse for the failure to file a notice of claim, nor does any unawareness of the extent of injury. ( See Jensen v City of New York, 288 AD2d 346 [2d Dept 2001] [statute of limitations under GML § 50-i not tolled pending discovery of injuries or damages]). Moreover, only counsel asserts the latter argument.
D. Merit of claim
Where a claim "patently lacks merit," leave to file a late notice of claim should not be granted. ( West Seneca Cent. School Dist. v Hess, 15 NY3d 813, 814). Here, respondent has satisfactorily demonstrated that it does not own the location at which the accident occurred. Consequently, the claim against it is patently meritless.
V. CONCLUSION
While the notice of claim was served on respondent well within the statute of limitations and only six weeks beyond the 90-day deadline, the delay is not de minimis, petitioners offer an insufficient excuse for it, and do not demonstrate that respondent obtained actual knowledge of the facts constituting their claim. Given the prejudice necessarily resulting therefrom and the
lack of merit, it is hereby
ADJUDGED, that the petition is denied and the proceeding is dismissed.
Court made that choice by identifying factors that helped determine which theory, tort or contract, better addressed the claim being asserted, and by considering: (1) the relative bargaining power of the parties; (2) the risk-of-loss allocation implications; and (3) the availability of insurance.
Id. at 628-29,
695 A.2d 264.
In applying those factors, the Alloway Court found that the plaintiff had the resources to purchase a luxury item, was not at a disadvantage when bargaining for its purchase, and could insure himself against the risk of loss. Id. at 629, 695 A.2d 264. Further, the Court reasoned that a host of statutory contractual remedies adequately protect such consumers against economic losses. Id. at 639-41, 695 A.2d 264 (citing U.C.C., N.J.S.A. 12A:1-103; Consumer Fraud Act, N.J.S.A. 56:8-1 to -20; Truth-In-Consumer Contract, Warranty and Notice Act, N.J.S.A. 56:12-1 to -18; and Magnuson-Moss Warranty Act, 15 U.S.C.A. §§ 2301-2312). In those circumstances, we described a tort remedy as "superfluous and counterproductive." Id. at 641, 695 A.2d 264.
In enacting the Products Liability Act, and in codifying the economic loss rule within the definition of the "harm" found in the Act's general provision, N.J.S.A. 2A:58C-1(b)(2), the Legislature both recognized and agreed with its designation of the line that divides tort and contract remedies. The economic loss rule is therefore firmly established as a limitation on recovery through tort-based theories, not only because of this Court's longstanding common law precedents differentiating between remedies sounding in tort and contract, but also through the pronouncement of our Legislature as embodied in the Products Liability Act.
In recent years, federal courts, including the United States Court of Appeals for the Third Circuit, have begun to expand the economic loss rule through the adoption of an approach referred to as the integrated product doctrine. In short, federal courts have used this theory to extend the economic loss rule to preclude tort-based recovery when a defective product is incorporated into another product which the defective product then damages. See, e.g., King v. Hilton-Davis, 855 F.2d 1047, 1051 (3d Cir. 1988) (applying Pennsylvania law; concluding that potato starter fungicide was integrated into potato starters, precluding tort claim for crop failure), cert. denied, 488 U.S. 1030, 109 S.Ct. 839, 102 L.Ed.2d 971 (1989). By focusing on whether the defective product was integrated into a larger one, the federal courts have concluded that "harm to the product itself means harm to whatever else the defective product became integrated into. Ibid.
Although the Third Circuit originally used the integrated product doctrine in a case arising under Pennsylvania law, see ibid, more recently, federal courts have employed that theory when called upon to apply New Jersey law as well. See, e.g., Int'l Flavors Fragrances, Inc. v. McCormick Co., Inc., 575 F.Supp.2d 654, 662-63 (D.N.J. 2008) (explaining that "damage done to a final product by a defective component or ingredient does not constitute damage to property `other than to the product itself.'"); Travelers Indent. Co. v. Dammann Co., Inc., 592 F.Supp.2d 752, 762-63 (D.N.J. 2008) (barring Products Liability Act claim because defective vanilla beans were incorporated into vanilla extract and other flavorings); Easling v. Glen-Gery Corp., 804 F.Supp. 585, 590-91 (D.N.J. 1992) (rejecting apartment complex purchaser's Products Liability Act claim for damaged studs and interiors caused by defective brick facing because the product was not bricks, but the completed apartment complex); cf. In re Merritt Logan, Inc., 901 F.2d 349, 362 (3d Cir. 1990) (precluding tort claim against manufacturer of defective refrigeration system by concluding that damage to food that spoiled was damage of the kind bargained for in commercial transaction).
Our appellate courts have also begun to consider whether to recognize and apply the integrated product doctrine here in New Jersey. Although the decision now before us represents one analysis of the theory, it is not the first. Another appellate panel previously considered and applied the integrated product doctrine to bar a homeowner's claim for recovery arising from an EIFS exterior that had damaged portions of the home. See Marrone v. Greer Polman Constr, Inc., 405 N.J.Super. 288, 302-03, 964 A.2d 330 (App.Div. 2009). Considering facts nearly identical to the ones that are now before us, that earlier panel rejected the Products Liability Act claims for consequential damages involved in replacing the EIFS. Id. at 304, 964 A.2d 330. That panel, applying the integrated product doctrine, reasoned that "the house is the `product,' and it cannot be subdivided into its component parts for purposes of supporting a [Products Liability Act] cause of action." Id. at 297, 964 A.2d 330.
The Marrone court concluded that the EIFS was not separate from the house, but was integrated into it, therefore making the EIFS and the house one "product" for purposes of the Act's definition of harm. Ibid. That led the court to conclude that any damage the EIFS caused to the structure of the house was damage to the "product" itself, with the result that plaintiff was barred from recovery by the economic loss rule. Ibid. Moreover, the Marrone panel reasoned that even if the plaintiff had bought the EIFS separately, the costs of removing and replacing the EIPS could not be recovered pursuant to the Products Liability Act. Ibid. In those circumstances, the claim would be barred because "defects in the [EIFS] cladding constitute `damage . . . to the product itself.'" Ibid, (quoting N.J.S.A. 2A:58C-1(b)(2)).
Although an earlier decision appeared to reach a contrary conclusion, see Dilorio v. Structural Stone Brick Co., 368 N.J.Super. 134, 845 A.2d 658 (App.Div. 2004) (affirming denial of summary judgment on tort claim against remote supplier of defective stone fagade), the Marrone court distinguished that precedent by interpreting it to have been a dispute alleging builder malpractice rather than one about defective goods. Marrone, supra, 405 N.J.Super. at 303, 964 A.2d 330. That analysis finds support in the Dilorio decision, which arose out of the agreement of the parties for the construction of residential premises. Dilorio, supra, 368 N.J.Super. at 136, 845 A.2d 658. In Dilorio, the court concluded that the transaction fell outside of the U.C.C. because it involved the sale of real property or of services rather than goods. Id. at 141-42, 845 A.2d 658. But in addressing the buyer's claim that a stone facade was defective and had damaged other parts of the home as it flaked off, the Dilorio court declined to apply either the integrated product doctrine or the economic loss rule. Instead, the panel reasoned that the purchaser could proceed against the builder on a professional negligence theory, thus taking the claim outside of both the U.C.C. and the Products Liability Act. Ibid.
It is against this historical and analytical background that we consider the questions presented by plaintiffs in their petition for certification.
IV.
This appeal presents us with challenges on two levels. On its surface, the dispute is about whether we will adopt the integrated product doctrine and, if so, whether the EIFS was sufficiently integrated into the home plaintiffs purchased that any recovery for damages to it or to the home is barred by the economic loss rule. Deciding that question, however, calls upon this Court to consider fundamental issues about the roles played by contract and tort in addressing defective products and in affording a remedy for the losses that are caused by or flow from them.
The three questions presented in plaintiffs' petition for certification are sufficiently intertwined that we need not address them separately. We begin with the argument about whether a house qualifies as a "product" for purposes of relief available under the Products Liability Act, N.J.S.A. 2A:58C-1 to -11. Plaintiffs argue that because the Act specifically excludes a seller of real estate from its definition of a "product seller," N.J.S.A. 2A:58C-8 (providing that "product seller" does not include a seller of real property), then all claims relating to houses fall outside of the Act. Plaintiffs further reason that, if a house is not a product within the meaning of the Act, then the Appellate Division's use of the integrated product doctrine to deny them a recovery conflicts with the Act and cannot be sustained.
Although plaintiffs present the argument as part of their attack on the Appellate Division's application of the integrated product doctrine, in actuality it rests on a flawed reading of the Act's definition of harm. Regardless of whether the Legislature considered a home to be a product when it excluded sellers of real estate from the definition of product sellers, one can easily conceive of circumstances in which a house would not only qualify as a product, but would also create a compensable cause of action in tort. A prefabricated home that gave off fumes and sickened its residents, for example, would certainly qualify. See, e.g., Schipper v. Levitt Sons, Inc., 44 N.J. 70, 92-93, 207 A.2d 314 (1965) (explaining certain tort remedies available against builder of home with defective water distribution system that scalded child inhabitant); see also McDonald v. Mianecki, 79 N.J. 275, 291-93, 398 A.2d 1283 (1979) (explaining Schipper and permitting warranty remedy against builder-vendors of home with defective well and water system). In this appeal, however, plaintiffs purchased the home from its prior owners, not from a product seller or manufacturer, thus making plaintiffs' argument about whether a house might be a product misplaced. The issue is not whether a home is a product, but whether this Court will adopt the integrated product doctrine to address whether a product, like EIFS, which causes damages to the house, falls within the economic loss rule, thus barring recovery.
Our response to that question is a limited one. Whether we adopt the integrated product doctrine or not, it would not alter the outcome here, because our analysis turns on whether the EIFS was sufficiently integrated into the home to become a part of the structure for purposes of broadly applying the economic loss rule. Deciding whether one product is sufficiently integrated into another for purposes of applying the doctrine is a significant undertaking. The doctrine is referred to in the Restatement (Third) of Torts: Product Liability § 21, in a comment relating to the economic loss rule generally. Restatement supra, § 21 commente (observing generally that if component part causes damage to product and if the product "is deemed to be an integrated whole, courts treat such damage as harm to the product itself). Particularly in the case of houses, a product that is merely attached to or included as part of the structure is not necessarily considered to be an integrated part thereof.
The Restatement points out, for example, that asbestos has not been deemed to be an integrated product, but instead that "most courts have taken the position that contamination constitutes harm to the building as other property." Ibid.; see, e.g., Tioga Pub. Sch. Dist. # 15 v. United States Gypsum Co., 984 F.2d 915, 918 (8th Cir. 1993) (permitting recovery through tort for costs of asbestos abatement); Northridge Co. v. W.R. Grace Co., 162 Wis.2d 918, 471 N.W.26. 179, 185-86 (1991) (same); Kershaw County Bd. of E'duc. v. United States Gypsum Co., 302 S.C. 390, 396 S.E.2d 369, 371 n. 1 (1990) (holding school to be other property so as to allow recovery for costs of asbestos abatement).
Similarly, the courts in California have declined to apply the integrated product doctrine to products used in building houses. The California Supreme Court has held that "the economic loss rule does not necessarily bar recovery in tort for damage that a defective product . . . causes to other portions of a larger product . . . into which the former has been incorporated." Jimenez v. Superior Court, 29 Cat.4th 473, 127 Cal.Rptr.2d 614, 58 P.3d 450, 457 (2002). Applying that view, the court permitted plaintiff home buyers to recover in strict liability for damage that the windows caused to other parts of the home, rejecting the argument that the windows were integrated into the home for purposes of the rule. Id. at 483-84, 127 CaLRptr.2d 614, 58 P.3d 450. An intermediate appellate court in California, rejecting arguments similar to the ones advanced before this Court as "intellectual nit-picking," Stearman v. Centex Homes, 92 Cal.Rptr.2d 761, 769, 78 Cal.App. 4th 611, 623 (Cal.Ct.App. 2000), concluded that the integrated product doctrine did not preclude plaintiffs from recovery for damages to their house caused by a faulty foundation. Ibid.
We reach the same conclusion in this appeal. As we understand it, the EIFS was affixed to the exterior walls to create a moisture barrier, much like exterior vinyl siding. As such, it did not become an integral part of the structure itself, but was at all times distinct from the house. It remained, therefore, a separate product for purposes of our analysis. That conclusion, however, would not alter the operation of the economic loss rule. Although the EIFS is a separate product, the economic loss rule precludes plaintiffs from recovery on a strict liability theory, meaning that plaintiffs cannot recover under the Products Liability Act for damage to the EIFS itself. Instead, their recovery must be limited to such damages as the EIFS caused to the house's structure or to its environs.
Plaintiffs argue that the economic loss rule should not have been applied to them at all. They assert that they are purchasers in a non-commercial setting and that they do not have a contract remedy, contending that these are distinguishing factors that make it inappropriate to apply the economic loss rule to this dispute. As part of that analysis, plaintiffs ask us to consider whether the goals of risk and loss allocation as between tort and contract that the economic loss rule was intended to achieve are fairly served by applying that rule to them. They argue that, in the absence of a legislatively-created remedial framework sounding in contract that affords them an avenue for relief, this Court should use the existing tort-based remedy expressed in the Products Liability Act, so as to create one.
The approach urged by plaintiffs, which asks us to find within the Products Liability Act a tort-based cause of action that would permit them to recover all of the costs of removal of the EIFS and repair of the home, is grounded on a fundamental misconception about the Products Liability Act itself. Clarity about what the Act is designed to do, and what it is most certainly not designed to do, will make clear the reasons for the result we reach.
As comprehensive as the Products Liability Act is and appears to be, its essential focus is creating a cause of action for harm caused by defective products. The Act's definition of harm so as to exclude damage a defective product does to itself is not merely the Legislature's embrace of the economic loss rule, but a recognition that the Act's goal is to serve as a vehicle for tort recoveries. Simply put, the Act is not concerned with providing a consumer with a remedy for a defective product per se; it is concerned with providing a remedy for the harm or the damage that a defective product causes to people or to property.
Plaintiffs' suggestion that we interpret the Act to create a remedy for them because they perceive that they have no available contract remedy completely misses the point of the statute by failing to appreciate what it is that the Products Liability Act is designed to do. Indeed, whether or not plaintiffs now have a contract remedy is irrelevant to whether they have a cause of action under the Products Liability Act. In enacting the Products Liability Act, our Legislature did not intend it to be a catch-all remedy that would fill the gap created when ordinary contract remedies, including breach of contract, statutory causes of action, or express and implied warranty claims, were lost or unavailable. Nor was it designed to transform a contract-like claim, that is, a claim that the product itself in some fashion fails to operate as it should, into a tort claim.
Instead, the Legislature did quite the opposite, broadly defining tort remedies, creating a comprehensive framework for causes of action available to injured plaintiffs, and identifying defenses available to product sellers or manufacturers, but doing so with precise focus on the particular harm, namely a tort-based harm, that is permitted to be remedied through the statute. That being so, the answer to plaintiffs' request that we create a tort-like remedy to fill what they perceive to be a gap in otherwise available contract remedies is an obvious one. The Legislature's intent in enacting the Products Liability Act, as evidenced by its definition of harm, was to serve the same purposes addressed by the well-established common law economic loss rule of drawing a clear line between remedies available in tort and contract. Simply put, the Legislature did not regard the Act as a means to create an expansive tort remedy that would become available in the event that a plaintiff had no contract remedy or failed to pursue an available contract remedy; instead, it defined the role of tort remedies with care and precision.
There is no room, in light of the clear purposes of the Products Liability Act, to expand it so as to create a new remedy for plaintiffs' assertions that the product, EIFS, failed to perform as expected. Rather, we conclude that the economic loss rule, as embodied in the Act's definition of harm, precludes plaintiffs from recovering any damages for harm that the EIFS caused to itself. Notwithstanding that, because we also conclude that the EIFS was not so fully integrated into the structure of the house that the house effectively became the product for purposes of the economic loss rule, to the extent that the EIFS caused damage to the structure of the house or its immediate environs, plaintiffs retain a cause of action pursuant to which they may proceed against the product's manufacturer.
V.
We therefore reverse the judgment of the Appellate Division to the extent that it concluded that plaintiffs were precluded from pursuing any remedy under the Products Liability Act and we remand this matter for further proceedings consistent with this opinion.
Justice RIVERA-SOTO, concurring in part and dissenting in part.
To the extent the majority concludes that the economic loss doctrine bars recovery in this case, I concur. In respect of the remainder of the majority's opinion, however, I dissent substantially for the reasons so ably set forth in Judge Carchman's majority opinion. Dean v. Barrett Homes, Inc., 406 N.J.Super. 453, 455-73, 968 A.2d 192 (App.Div. 2009). I add only the following two points.
First, the Appellate Division's decision consists of both a majority opinion and an opinion concurring in the judgment only. That concurring-in-the-judgment opinion gratuitously addresses a question that, simply put, is not present in this case. As the concurring judge explained,
The conflict generated by the Appellate Division's majority and concurring-in-the-judgment opinions also raises a quarrelsome procedural point not discussed either by the parties or the courts. The appellate panel consisted of three judges: Judges Carchman, Sabatino and Simonelli. The "majority" opinion is signed by Judge Carchman, while the concurring opinion — which concurs only in the judgment — is signed by Judge Sabatino and is joined in by Judge Simonelli. If that is the tally, then how does the "majority" opinion command a majority of that three-member panel? Simple arithmetic would require a result different from that embodied in the Appellate Division's dueling opinions, and no satisfactory answer has been provided to that procedural conundrum.
I write separately to express concerns about the scope and application of the "economic loss" doctrine in circumstances involving a homeowner who,
unlike
the instant plaintiffs, is unaware of the latent risks of a defective component product that was used in the construction of his or her home. In my view, such an innocent home purchaser should be able to recover, under the Product Liability Act,
N.J.S.A. 2A:58C-1 to -11 ("PLA"), reasonable compensation from the manufacturer
of that defective component for the physical harm the component caused to other portions of the home and to any other property owned by the plaintiff. [at 473,
968 A.2d 192 (emphasis supplied).]
Thus, to the extent the concurring opinion deals solely with circumstances other than those presented in this case, that concurrence in its entirety is dicta, that is, "something that `is unnecessary to the decision in the case and therefore not precedential[.]'" Lucent Techs., Inc. v. Twp. of Berkeley Heights, 201 N.J. 237, 252, 989 A.2d 844 (2010) (Rivera-Soto, J., concurring) (quoting Black's Law Dictionary 1100 (7th ed. 1999)); see also State ex rel. J. A., 195 N.J. 324, 355-56, 949 A.2d 790 (2008) (Rivera-Soto, J., dissenting) (describing indifference to faithful and disciplined appellate review as "relegat[ing] its entire . . . analysis to the chiaroscuro of dicta" and noting that "`dicta cannot be res adjudicata from the very definition of the terms.'" (quoting J.J. Hockenjos Co. v. Lurie, 12 N.J. Misc. 545, 548, 173 A 913 (Sup.Ct. 1934))).
Second, the majority's conclusion that "the integrated product doctrine does not apply to the facts before this Court," ante at 289, 8 A.3d at 768, defies basic common sense. As the majority must concede, the "product" at issue here is an Exterior Insulation Finishing System (EIFS), that is, an exterior finish that is applied permanently to a home. Ante at 289-90, 8 A.3d at 767-68. See Simmermon v. Dryvit Sys., Inc., 196 N.J. 316, 321, 953 A.2d 478 (2008) (describing "Dryvit" — a brand of EIFS — as "synthetic stucco"); DKM Residential Props. Corp. v. Twp. of Montgomery, 363 N.J.Super. 80, 83, 831 A.2d 110 (App.Div. 2003) (describing EIFS as "an exterior, synthetic, stucco-like finish" applied to a home). As noted in David L. Grenier and William J. Jorgensen, Exterior Insulation and Finish System (EIFS): An Overview, available at http://www.c-risk.com/Articles/dlg_EIFS_overview.htm:
EIFS was first introduced in post-World War II Germany to resurface buildings, which had damaged masonry. It was subsequently introduced in the United States in the late 1960's and its use has become widespread over the past thirty years. Sometimes called "synthetic stucco," EIFS is a multi-layered exterior barrier-type system designed to prevent moisture intrusion into exterior walls. The system consists of four main components:
1) Panels of expanded polystyrene foam insulation installed with adhesive or mechanically fastened to the substrate, usually plywood or oriented strand board (OSB),
2) A base coat that is troweled over the foam insulation panels,
3) A glass fiber reinforcing mesh is laid over the polystyrene insulation panels and fully imbedded in the base coat,
4) A finishing coat is then troweled over the base coat and the reinforcing mesh. The base coat, mesh, and finishing coat is usually approximately 1/8 to 1/4 inches thick.
To claim that any system so designed and installed is anything other than permanently integrated into the structure to which it is applied simply makes no sense.
As the facts in this case pointedly describe, the EIFS exterior finish permanently was installed when the home was first built; that permanent exterior finish was part and parcel of the home when the original owners of this home purchased it; and that permanent exterior finish obviously remained an integrated part of this home when plaintiffs purchased it from the original owners. In those circumstances, the majority's conclusion that the exterior finish to this home had not "been sufficiently integrated into the home to become a part of the structure for purposes of broadly applying the economic loss rule[,]" ante at 302, 8 A.3d at 775, runs contrary to stark reality. According to the majority,
the EIFS was affixed to the exterior walls to create a moisture barrier, much like exterior vinyl siding. That is, it did not become an integral part of the structure itself, but was at all times distinct from the house. It remained, therefore, a separate product for purposes of our analysis. [
Ibid.]
The notion that an exterior finish that can only be removed by extensive demolition work is not "integrated" into the structure to which it is attached is so fanciful, so nonsensical, that it beggars the imagination. It is a conclusion that can germinate only in the minds of lawyers and can find root only in the rarified environment of this Court's decisions; it cannot, however, long survive in the atmosphere of the real world. EIFS is in many relevant respects no different than roofing shingles. Yet, applying the majority's reasoning, the roof of a home is not integrated into that home. See, e.g., Lee Wholesale Supply, Inc. v. Yacos (In re Yacos), 370 B.R. 131, 135 (Bankr.E.D.Mich. 2007) ("Existing residential homes, like other buildings, have roofs. Repairing and replacing roofs requires one to put the parts together to form the complete integrated object (i.e., the building). That the roof being repaired or replaced happens to be constructed on an existing home rather than a new home does not make it any less an act of construction of a building.") There is no kind way to put it: the majority's reasoning simply makes no sense.
Until today, New Jersey courts had embraced the reasonable and logical conclusion that the integrated product/component part rule of the economic loss doctrine forbade the kind of hairsplitting that would permit the result the majority reaches. In Marrone v. Greer Polman Construction, Inc., 405 N.J.Super. 288, 964 A.2d 330 (App.Div. 2009), the Appellate Division recently confronted and readily resolved the very issue that is so vexing to the majority. In that case, a homeowner — like plaintiffs here — purchased from the then-owners an existing home that originally had been constructed using an EIFS exterior finish. Id. at 291, 964 A.2d 330. After buying the home, the homeowner received notice from his homeowner's insurance carrier "threatening to cancel their coverage because of the EIFS cladding on the house." Ibid. The homeowner sued and the trial court dismissed the complaint, explaining that "[w]here a component of an integrated product causes injury solely to the integrated product, the damage to the integrated product is not considered separate property damage that would remove the claim from the realm of contract law into the field of tort law. Such is the case here[.]" Id. at 293, 964 A.2d 330. The Appellate Division concurred, concluding that, in the circumstances presented, "the house is the `product,' and it cannot be subdivided into its component parts for purposes of supporting a [Products Liability Act] cause of action." Id. at 297, 964 A.2d 330. See generally Alloway v. General Marine Indus., 149 N.J. 620, 695 A.2d 264, 267-68 (1997) (explaining that "tort principles are better suited to resolve claims for personal injuries or damage to other property[,] . . . [c]ontract principles more readily respond to claims for economic loss caused by damage to the product itself (citations omitted)).
One cannot help but ponder whether — in the absence of a lawyer's logical whimsy — everyday homeowners who have exterior finish systems attached to their homes would ever think that those systems are not "integrated" as part of their homes. Because I cannot join in that unexplained, unexplainable and unnecessary departure from reality, I dissent. For reversal and remandment — Chief Justice RABNER and Justices LONG, LaVECCHIA, ALBIN, WALLACE and HOENS — 6.
Despite direct authority in our own State to the contrary, the majority nevertheless discards the application of the integrated product rule of the economic loss doctrine in this case based on two California cases that — incredibly — hold that neither the windows of a home nor its foundation are "integrated" into the home. Ante at 302-03, 8 A.3d at 775-76. In so doing, the majority relies on two outlier decisions and ignores the far better reasoned, almost universal weight of authority nationwide that bars plaintiffs' action under the integrated product rule of the economic loss doctrine.
The cases either directly or impliedly supporting the rather unremarkable proposition that an EIFS system is integrated into a building and, hence, is subject to the economic loss rule are legion; the following is not exhaustive, but merely illustrative.
Federal: Saratoga Fishing Co. v. J.M. Martinac Co., 520 U.S. 875, 117 S.Ct. 1783, 138 L.Ed.2d 76 (1997) (holding that extra fishing equipment and spare parts, added to ship by user after initial sale, were not part of original ship with a defective hydraulic system that itself caused harm at issue); E. River S.S. Corp. v. Transamerica Delaval, 476 U.S. 858, 106 S.Ct. 2295, 90 L.Ed.2d 865 (1986) (barring recovery in tort for damages caused by defective turbine engines installed by manufacturer in four ships); HDM Flugservice GmbH v. Parker Hannifin Corp., 332 F.3d 1025, 1030 (6th Cir. 2003) (barring recovery for damage to helicopter from allegedly defective landing gear under a species of integrated product rule); All Alaskan Seafoods, Inc. v. Raychem Corp., 197 F.3d 992, 995 (9th Cir. 1999) (referring to integrated product rule as "component part rule" and describing it as "[a] corollary to the economic loss rule"); In re GMC, 383 F.Supp.2d 1340, 1343-44 (W.D.Okla. 2005) (noting that "[Resolution of the issue requires the court to define the relevant product — does it consist of the defective component or the finished product into which the component is integrated!!,]" and explaining that "[w]hen addressing claims based on defective components, most courts have held that the relevant `product' is the finished product into which the component is integrated").
Alabama: Keck v. Dryvit Sys., 830 So.2d 1, 6, 7 (Ala. 2002) (explaining, in context of EIFS system, that "[w]hether an item that is incorporated into real property may be considered [integrated] is determined by whether the item is a part of the structural integrity of the house or building that is reasonably expected to last for the useful life of the house or building[,]" describing EIFS as "a multilayered wall system that actually composes the exterior walls of a building. By virtue of the very function of the EIFS as an exterior wall system, the EIFS could not be a structural component of a building that one might expect to replace after normal wear and tear. A stucco exterior wall is the equivalent of a brick wall; it is a part of the structural integrity of a house — a homeowner expects it to be weather resistant and to endure for the entire useful life of the house' and ultimately holding that, for purposes of the economic loss doctrine, an EIFS system is part of the structural integrity of a house).
Alaska: N. Power Eng'g Corp. v. Caterpillar Tractor Co., 623 P.2d 324, 330 (Alaska 1981) (applying integrated product rule where component parts "are provided by one supplier as part of a complete and integrated package").
California: Jimenez v. Superior Court, 29 Cal.4th 473, 127 Cal.Rptr.2d 614, 58 Ibid 450 (2002) (barring product liability claim absent proof of economic loss arising from property damage other than damage to the defective product).
Florida: Casa Clara Condo. Ass'n v. Charley Toppino Sons, 620 So.2d 1244, 1245 (Fla. 1993) (economic loss doctrine bars claim against concrete provider for building where there was no damage to anything other than building itself); Turbomeca, S.A. v. French Aircraft Agency, Inc., 913 So.2d 714, 717 (Fla.Dist.Ct.App. 2005) (explaining that "[t]he airframe and engine are not two separate pieces of property-they are one product" and that "[c]ourts have refused to bifurcate products into parts where a component part harms or destroys the finished product'); Jarmco, Inc. v. Polygard, Inc., 668 So.2d 300 (Fla.Dist.Ct. App. 1996) (economic loss doctrine bars claim against distributor of boat resin where only damage was to boat itself); Am. Universal Ins. Group v. Gen. Motors Corp., 578 So.2d 451 (Fla.Dist.Ct.App. 1991) (economic loss doctrine bars claim for loss of engine when damaged by replacement oil pump that was integral component of engine).
Hawaii: Va. Sur. Co. v. Am. Eurocopter Corp., 955 F.Supp. 1213, 1216 (D.Haw. 1996) (holding that "helicopter and engine, along with the fitting, constitute a single product for purposes of the economic loss doctrine").
Idaho: Tusch Enters, v. Coffin, 740 P.2d 1022, 1035-36 (Idaho 1987) (holding that "subsequent purchasers of residential dwellings, who suffer purely economic losses from latent defects manifesting themselves within a reasonable time, may maintain an action against the builder (or builder-developer, as the case may be,) of the dwelling based upon the implied warranty of habitability" but not in tort).
Illinois: Trans States Airlines v. Pratt Whitney Canada, Inc., 177 Ill.2d 21, 224 Ill.Dec. 484, 682 N.E.2d 45 (1997) (airplane hull not separate property from engine).
Indiana: Gunke v. Renovations, Inc., 822 N.E.2d 150, 156 (Ind. 2005) (distinguishing between damage caused by "parts of a finished product damaged by components supplied to the seller by other manufacturers and imported into the seller's product" as barred by economic loss doctrine, and damage caused by "property acquired by the plaintiff separately from the defective goods or services" as recoverable "even if the defective product is to be incorporated into a completed product for use or resale").
Kansas: Nw. Ark. Masonry, Inc. v. Summit Specialty Prods., 31 id 982, 988 (Kan.Ct.App. 2001) (holding that "`damage by a defective component of an integrated system to either the system as a whole or other system components is not damage to `other property' which precludes the application of the economic loss doctrine' "(quoting Wausau Tile, Inc. v. County Concrete Corp., 226 Wis.2d 235, 593 N.J.2d 445, 452 (1999))).
Maryland: Puke Home Corp. v. Parex, Inc., 174 Md.App. 681, 923 A.2d 971, 1003 (Md.Ct.Spec.App. 2007) (concluding, in defective exterior finish case, that "the economic loss [doctrine] prevents recovery for damage to property that consists only of the product itself").
Massachusetts: Pro Con, Inc. v. J B Drywall, Inc., 20 Mass.L.Rptr. 466 (Mass.Super.Ct. 2006) (concluding that EIFS system, once installed on hotel, became an integral component of hotel's wall system barring tort recovery under economic loss doctrine).
Michigan: Sullivan Indus., Inc. v. Double Seal Glass Co., 192 Mich.App. 333, 480 N.W.2d 623 (1991) (concluding that sealant used in assembly of insulated glass units was part of integrated product and, thus, tort claim was barred under economic loss doctrine).
Minnesota: S.J. Groves Sons Co. v. Aerospatiale Helicopter Corp., 374 N.W.2d 431, 432 (Minn. 1985) (claim of failed part of helicopter causing crash barred by integrated product rule of economic loss doctrine); Minneapolis Soc'y of Fine Arts v. Parker-Klein Assoc. Architects, 354 N.W.2d 816, 817 (Minn. 1984) (materialman providing bricks for non-load bearing facade not liable for failure as facade integrated into building).
Nevada: Nat'l Union Fire Ins. Co. v. Pratt Whitney Can., Inc., 107 Nev. 535, 815 P.2d 601 (1991) (economic loss doctrine bars recovery for loss of aircraft that harmed itself).
North Carolina: Wilson v. Dryvit Sys., 206 F.Supp.2d 749, 753, 754 (E.D.N.C. 2002) (explaining that "North Carolina courts have indicated that when a component part of a product or a system injures the rest of the product or the system, only economic Joss has occurred" and determining that EIFS system "is an integral component of plaintiff's house").
North Dakota: Cooperative Power Ass'n v. Westinghouse Elec. Corp., 493 Af.W.2d 661, 667 (N.D. 1992) (holding that product manufacturer "may not be held liable in negligence or strict liability for economic loss caused by a failure of a component part of the [product] which causes damage to the [product] only").
South Dakota: City of Lennox v. Mitek Indus., 519 N.W.2d 330, 333 (S.D. 1994) ("When a defect in a component part damages the product into which that component was incorporated, economic losses to the product as a whole are not losses . . . and are therefore not recoverable in tort.").
Texas: Pugh v. Gen. Terrazzo Supplies, Inc., 243 S.W.3d 84, 92 (Tex.App. 2007) (noting that "Texas courts have rejected the argument that damage to a finished product caused by a defective component part constitutes damage to other property,' so as to permit tort recovery for damage to the finished product" and applying integrated product rule of economic loss doctrine to bar tort claim in respect of EIFS system installed on home).
Washington: Stieneke v. Russi, 190 P.3d 60, 66 (Wash.Ct.App. 2008) (barring tort liability for defective roof under integrated product rule of economic loss doctrine, and explaining that "a building constitutes a single `product' or `property,' not a series of component parts, for purposes of the economic loss [doctrine]").
Wisconsin: Linden v. Cascade Stone Co., 276 Wis.2d 267, 687 N.W.2d 823, 824 (Wis.Ct.App. 2004) (holding that "[t]he integrated system rule holds that once a part becomes integrated into a completed product or system, the entire product or system ceased to be `other property' for purposes of the economic loss doctrine" and concluding that exterior stone stucco and roof systems were integrated into home); Mequon Med. Assocs. v. S.T.O. Indus., 671 N.W.2d 717 (Wis.Ct.App. 2003) (holding that EIFS system is integral part of building subject to economic loss doctrine); Selzerv. Brunsell Bros., 257 Ws.2d 809, 652 N.W.2d 806, 818 (Wis.Ct.App. 2002) (holding that "[t]he integrated system rule holds that once a part becomes integrated into a completed product or system, the entire product or system ceases to be `other property' for purposes of the economic loss doctrine" and concluding that "windows and siding [a]re components of an `integrated system' "); Bay Breeze Condo. Ass'n v. Norco Windows, Inc., 257 Wi'i.2d 511, 651 N.W.2d 738 (Wis.Ct.App. 2002) (holding that "[t]he economic loss doctrine applies to building construction defects when . . . the defective product is a component part of an integrated structure or finished product" and concluding that windows are an integral part of a house subject to economic loss rule).
For concurrence in part/dissent in part — Justice RIVERA-SOTO — 1.