Maryland high court expands economic loss exception.

Owners of cars whose front seats tend to collapse backward in rear collisions can sue manufacturers for the cost of repairing the alleged defect, even when they have not been injured by it, Maryland's highest court has ruled unanimously. (Lloyd v. Gen. Motors Corp., 2007 WL 416367 (Md. Feb. 8, 2007).)

The economic loss doctrine bars recovery for economic damages in the absence of an injury. But the court of appeals held that this class of owners can sue four major automakers under an exception that allows plaintiffs to recover economic damages if an alleged defect creates an "unreasonable risk of death or serious injury" and the probability of either occurring is high.

The defect in question deals with a thinly engaged, nonelectric reclining mechanism in front seats that twists and breaks under a driver's weight in rear collisions at over 30 mph, causing the seat to collapse backward. When the seat collapses, front seat occupants slide up over the seat or are thrown backward, injuring themselves and any occupants in the back seat.

Across the country, attorneys have won individual suits against the defendants--General Motors, Ford, DaimlerChrysler, and Saturn--on behalf of plaintiffs who either died or suffered back injuries, paraplegia, or quadriplegia because of this alleged defect. This is the first time, however, that any court has given a class of owners who have not been injured the green light to sue, attorneys for the plaintiffs in the case said.

"[I]t is exactly the risk of serious bodily injury involved in this case that the exception to the economic loss rule was intended to remedy," Chief Judge Robert Bell wrote for the court, reversing the lower courts' decisions. Citing both public policy and the court's past decisions involving the rule, Bell noted that the exception "advances the practical goal of providing a remedy before the significant loss of life or limb."

"This is a landmark ruling, nationally," said Gaithersburg-based William Askinazi, one of three attorneys representing the plaintiffs. "The Lloyd court said that you don't have to wait to be killed or seriously injured in order to have a cause of action [for a defect] that in other cases is likely to cause significant injury or death," he said.

The plaintiffs have waited seven years to reach this point--a record in Maryland, according to Askinazi.

Stephen Ring of Germantown, Askinzi's cocounsel, countered the automakers' claim that the ruling will open the floodgates of litigation. "The key fact is that the right to sue is particular to those situations where [the possibility] of significant injury or death is limited to the same defect," Ring said.

The defendants argue that their seats were designed to collapse and that a rigid seat would be more dangerous to drivers and front seat passengers, particularly because it would increase the effect of whiplash in rear collisions.

"That's just not true. The original design did not call for this," Ring said, noting that some manufacturers have corrected the alleged defect and the modification has improved safety.

In addition to the negligence and strict liability claims under the exception, the court granted the class standing on six other claims: misrepresentation, fraud, fraudulent concealment, Consumer Protection Act violations, breach of implied warranty of merchantability, and civil conspiracy.

Ring and Askinazi said the National Highway Traffic Safety Administration (NHTSA) has turned a blind eye to the defendants' failure to remedy the alleged defect. Despite myriad complaints by consumers who have been injured when their car's front seat collapsed in a rear collision, and ignoring pressure from consumer advocacy groups to update its seat safety standard, the agency has kept in place a standard that is "woefully inadequate," Askinazi said.

In a January report about its New Car Assessment Program (NCAP), NHTSA acknowledged that "consumers are concerned about rear-impact crashes."

"In the long term, a dynamic test that addresses those injuries not covered by the agency's current standards could be investigated as a possible ratings program," according to the report.

Consumer advocates are not satisfied with that response. "This is not sufficient given the severity of potential injuries from rear-end crashes, especially fires and seat-back failure," said Public Citizen President Joan Claybrook in testimony in March before NHTSA and the Department of Transportation. She said NHTSA is moving too slowly to institute an NCAP rating for seat-back strength in rear-impact collisions.

"NHTSA has known, ever since fuel-integrity testing in rear-impact crashes above 30 miles per hour revealed widespread failure of front seat backs, that these seats have a dangerous tendency to collapse rearward," Claybrook said. "NHTSA does currently have a seat-strength standard, but it remains so pathetically inadequate that some believe vehicle seats are held to a weaker standard than lawn chairs."

"This is as significant a safety issue as defective seat belts and rollovers," Askinazi said. "It's the safety issue for this decade. We are proceeding in Maryland and other places to get this defect fixed before other people are harmed."