Arizona high court upholds several-only liability in products cases.

The Arizona Supreme Court has held that a 1987 state law making joint-tortfeasor liability several only, instead of joint and several, extends to strict products liability actions and requires that fault be apportioned among tortfeasors, even if this means that the plaintiff cannot recover full damages because one or more of the defendants are insolvent.

The court affirmed a court of appeals ruling that the seller of a water filtration system and the manufacturer of defective components installed in the system could not be held jointly liable when the system caused water damage in a home. Although one defendant had gone out of business, the plaintiff could not recover full payment from the other because the law abolished joint liability. (St. Farm Ins. Cos. v. Premier Manufactured Sys., Inc., 172 P.3d 410 (Ariz. 2007).)

"Under this system of several-only liability, plaintiffs, not defendants, bear the risk of insolvent joint tortfeasors," the court said. It added that the state constitution "provides only that a statute cannot limit the 'amount recovered'; it is not a guarantee that the entire judgment will be collectible from a single defendant or indeed from any of the responsible parties."

A homeowner insured by State Farm Insurance Cos. discovered that a leak in his water filtration system had damaged his home and personal property. Premier Manufactured Systems, Inc., the seller of the system, had included in its assembly some components made by Worldwide Water Distributing, Ltd.

State Farm paid the homeowner $19,271 and then, as his subrogee, sued Premier and Worldwide. The insurer argued that each was strictly liable for distributing a defective product, and jointly and severally liable for the whole amount of the homeowner's damage.

The trial court rejected State Farm's motion for summary judgment, and State Farm and Premier entered into a stipulated judgment providing that Worldwide was 75 percent at fault and Premier 25 percent at fault. However, Worldwide, which did not answer the complaint, had gone out of business and had no insurance coverage. The stipulation allowed State Farm to appeal the trial court's rejection of its joint-and-several-liability argument, and it did so.

The court of appeals affirmed, holding that under a 1987 amendment to the state's Uniform Contribution among Tortfeasors Act, the defendants' liability was several only and fault must be allocated between them, and that applying comparative-fault principles to strict products liability actions did not violate the state constitution.

The state supreme court unanimously affirmed in an opinion by Justice Andrew Hurwitz. The 1987 amendment establishes a system of comparative fault, the court said, making each tortfeasor responsible for paying its percentage "and no more."

The court rejected State Farm's argument that the abolition of joint liability did not apply here by virtue of an amendment provision that imposes joint liability where another person was acting as "agent or servant" of the party.

"The mere purchase of a product from a supplier does not establish a master-servant or principal-agent relationship between the buyer and seller," the court said.

"[I]n a strict products liability action, the various participants in the chain of distribution are liable not for the actions of others, but rather for their own actions in distributing the defective product," the court explained.

The court also rejected the argument that precluding joint and several liability in a strict products liability action violates a provision of the state constitution that ensures an injured claimant the right to bring an action and bars statutory limitations on damages.

Several-only liability does not effectively abolish any causes of action, the court concluded, because a claimant may still sue all participants in a defective product's chain of distribution. Moreover, several-only liability does not limit the damages recoverable; instead, it serves only to limit each defendant's liability to the damages resulting from his or her conduct and is consistent with the state constitution, the court concluded.

Courts in other states, including California and Tennessee, have held that participants in the chain of distribution may be jointly and severally liable for an injury caused by a defective product. The Arizona court, however, declined to take guidance from these decisions.