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06/01/88 Board of Education of City v. A

June 1, 1988

BOARD OF EDUCATION OF CITY OF CHICAGO ET AL., PLAINTIFFS-APPELLANTS

v.

A, C AND S, INC., ET AL., DEFENDANTS-APPELLEES. -- BOARD OF EDUCATION OF TOWNSHIP HIGH SCHOOL DISTRICT NO. 211 ET

AL., PLAINTIFFS-APPELLANTS

v.

ABITIBI ASBESTOS MINING COMPANY ET AL., DEFENDANTS-APPELLEES



APPELLATE COURT OF ILLINOIS, FIRST DISTRICT, THIRD DIVISION

525 N.E.2d 950, 171 Ill. App. 3d 737, 121 Ill. Dec. 643 1988.IL.854

Appeal from the Circuit Court of Cook County; the Hon. Richard L. Curry, Judge, presiding.

APPELLATE Judges:

JUSTICE McNAMARA delivered the opinion of the court. WHITE, P.J., and FREEMAN, J., concur.

DECISION OF THE COURT DELIVERED BY THE HONORABLE JUDGE MCNAMARA

Plaintiffs, 34 Illinois public school districts are required by the Asbestos Abatement Act (Act) (Ill. Rev. Stat. 1985, ch. 122, par. 1401 et seq.) to replace all asbestos-containing products in their buildings, for which they may receive some reimbursement from the State. Plaintiffs seek full reimbursement and additional damages from the 78 named defendants, which either mined, manufactured, installed or sold the product.

In a consolidated action, the trial court dismissed plaintiffs' complaints with prejudice and without leave to amend. Plaintiffs appeal from the dismissal of the complaints which, with some duplication, stated numerous causes of action, including various allegations regarding strict liability, negligence, restitution, a private right of action under the Asbestos Abatement Act, consumer fraud, breach of warranty, negligent misrepresentation, fraudulent misrepresentation, and concert of action. Plaintiffs also contend that the trial court erred in finding the action was barred by the statute of limitations and erred in denying their motion to amend the pleadings.

When reviewing a motion to dismiss, all well-pleaded facts must be taken as true and all reasonable inferences are drawn in favor of the opponent. (United Air Lines, Inc. v. CEI Industries of Illinois, Inc. (1986), 148 Ill. App. 3d 332, 499 N.E.2d 558.) A complaint should not be dismissed for failure to state a cause of action unless it clearly appears that no set of facts could be proved which would entitle plaintiffs to relief. Bagel v. American Honda Motor Co. (1985), 132 Ill. App. 3d 82, 477 N.E.2d 54.

We believe that the trial court misconceived the nature of the action. The error reveals itself most clearly in the strict liability and negligence counts, but also undermines the other dismissal of the actions. Plaintiffs allege both strict liability and negligence in tort. In Moorman Manufacturing Co. v. National Tank Co. (1982), 91 Ill. 2d 69, 435 N.E.2d 443, the court held that the policy considerations addressed in strict liability cases also apply to negligence actions. Thus, we treat these two counts together.

The trial court dismissed these causes of action on the basis that plaintiffs failed to allege any actual property damage or personal injury, and thus alleged only economic loss, which is not recoverable in tort, and that the buildings in question were not considered "products" under a products liability theory.

In Moorman, the court held that under a strict liability in tort theory recovery must be denied for solely economic losses. (Accord East River Steamship Corp. v. Transamerican Delavel Inc. (1986), 476 U.S. 858, 90 L. Ed. 2d 865, 106 S. Ct. 2295.) The remedy for economic loss lies in contract, and not in tort law.

Economic loss is defined as damages for inadequate value, costs of repair and replacement of the product, or consequent loss of profits. The diminution in value occurs because the product is inferior in quality and does not work for the general purpose for which it was manufactured and sold. Moorman, 91 Ill. 2d at 82, quoting Note, Economic Loss in Products Liability Jurisprudence, 66 Colum. L. Rev. 917, 918 (1966).

Generally, economic losses alone, with no allegation of other damage, cannot support a tort cause of action. A safety-insurance policy underlines tort law. (Pennsylvania Glass Sand Corp. v. Caterpillar Tractor Co. (3d Cir. 1981), 652 F.2d 1165, cited in Moorman, 91 Ill. 2d 69, 435 N.E.2d 443.) Tort law traditionally protects individuals and property from physical harm. The strict liability in tort theory focuses on the unreasonably dangerous nature of the product. (Moorman, 91 Ill. 2d 69, 435 N.E.2d 443; Suvada v. White Motor Co. (1965), 32 Ill. 2d 612, 210 N.E.2d 182.) "[The] essence of a product liability tort case is not that the plaintiff failed to receive the quality of product he expected, but that the plaintiff has been exposed, through a hazardous product, to an unreasonable risk of injury to his person or property." (Moorman, 91 Ill. 2d at 81.) In contrast, the dangerous nature of a product has no particular relevance to economic loss. (Redarowicz v. Ohlendorf (1982), 92 Ill. 2d 171, 441 N.E.2d 324; Moorman, 91 Ill. 2d 69, 435 N.E.2d 443.) The manufacturer bears the responsibility of producing goods which match a standard of safety defined in terms of conditions that create unreasonable risks of harm. Moorman, 91 Ill. 2d 69, 435 N.E.2d 443.

No single test has been developed to easily identify in any given tort case the demarcation between nonrecoverable economic loss and recoverable personal injury or property damages. (See Kishwaukee Community Health Services Center v. Hospital Building & Equipment Co. (N.D. Ill. 1986), 638 F. Supp. 1492.) The court in Moorman noted that the demarcation usually depends on several factors, including the nature of the defect, the type of risk, and the manner in which the injury arose. Moorman Manufacturing Co. v. National Tank Co., 91 Ill. 2d at 82, citing Pennsylvania Glass Sand Corp. v. Caterpillar Tractor Co., (3d Cir. 1981), 652 F.2d 1165; see also Redarowicz v. Ohlendorf, 92 Ill. 2d 171, 441 N.E.2d 324.

The nature of the defect focuses on the product's condition before the actual injury occurred. The defect alleged here concerns the dangerous nature of the product. It is not alleged that the asbestos products failed to perform their function, but rather that they posed a grave risk of personal injury. (City of Manchester v. National Gypsum Co. (D.R.I. 1986), 637 F. Supp. 646 (nature of defect concerns replacement of product because of grave personal safety risk, not because of a defect in its performance; complaint in asbestos product liability case contains sufficient allegation of property damage so as to state tort claim and withstand motion to dismiss).) Tort law generally provides a sounder analytical basis for dealing with hazardous, as opposed to qualitative, defects. (Pennsylvania Glass Sand Corp. v. Caterpillar Tractor Co. (3d Cir. 1981), 652 F.2d 1165.) The legislative history of the Asbestos Abatement Act contains numerous descriptions of the nature of the risk as a health hazard, but not one reference to the quality or performance of the asbestos products. See, e.g., 83d Ill. Gen. Assem., House Proceedings, June 22, 1984, at 129-30 (statements of Representative Satterwaite) ("The Bill as it now stands shows concern for school children throughout the State of Illinois in regard to the health and safety of those children").

The complaints in the present case allege that the school buildings contain asbestos products manufactured, mined, installed, or sold by defendants. In regard to the nature of the defect, they allege further:

"Asbestos in the school buildings has become, is becoming and/or will become separated from some or all of the asbestos products and also airborne; and has been, is and/or will be inhaled or absorbed by and remain in human beings and thereby cause serious disease and/or illness.

As a direct result of the presence of asbestos materials in plaintiff's educational facilities, students, school personnel and other persons have been or may in the future be exposed to asbestos and asbestos fibers."

Plaintiffs here never claimed they received poor asbestos products for their money, or that their contractual expectations were disappointed. Plaintiffs never claimed the asbestos products failed to perform satisfactorily as fireproofing or insulation material. The asbestos products may have adequately insulated, resisted fire, and muffled sound. The asbestos products might have been perfectly suitable for the purpose for which they were bought and installed within school buildings, but only if the children and teachers wore protective equipment to prevent the asbestos fibers from entering their bodies. See Schooshanian v. Wagner (Alaska 1983), 672 P.2d 455 (where plaintiffs did not allege they received poor insulation for their money; rather, they maintained that the incorporation of an allegedly toxic substance in their building had physically altered the building to make it harmful to them).

We conclude that the complaint contains allegations which adequately demonstrate that the first factor, the nature of the defect, is not a qualitative risk, but is a health hazard which is compensable in tort law. Cf. Morrow v. L. A. Goldschmidt Associates, Inc. (1986), 112 Ill. 2d 87, 492 N.E.2d 181 (losses were solely economic as a result of construction defects); Chicago Heights Venture v. Dynamit Nobel of America, Inc. (7th Cir. 1986), 782 F.2d 723, 729 (losses solely economic where court held that the "gravamen of the complaint -- simply stated -- is that the roof did not work," which was "a matter of economic loss, the result of a qualitative defect"); Jones & Laughlin Steel Corp. v. Johns-Manville Sales Corp. (3d Cir. 1980), 626 F.2d 280 (applying Illinois law) (losses solely economic where roofing material performed unsatisfactorily when it failed to withstand high wind velocities); Dixie-Portland Flour Mills, Inc. v. Nation Enterprises, Inc. (N.D. Ill. 1985), 613 F. Supp. 985 (losses solely economic where flour contaminated with sand results in product unfit for intended use); Redarowicz v. Ohlendorf, 92 Ill. 2d 171, 441 N.E.2d 324 (losses economic where chimney, wall and patio are defective); Moorman, 91 Ill. 2d 69, 435 N.E.2d 443 (losses economic where crack in storage tank violates expectation interests); Wheeling Trust & Savings Bank v. Tremco Inc. (1987), 153 Ill. App. 3d 136, 505 N.E.2d 1045 (losses solely economic where materials defective and product did not work as well as plaintiff had expected); Washington Courte Condominium Association-Four v. Washington-Gold Corp. (1986), 150 Ill. App. 3d 681, 501 N.E.2d 1290 (losses economic where court finds gravamen of complaint is that the window and sliding doors did not work); Unarco Industries, Inc. v. Frederick Manufacturing Co. (1982), 109 Ill. App. 3d 189, 440 N.E.2d 360 (losses economic where faulty part is installed in radio towers).

We believe that the nature of the defect here indicates the loss is not solely economic, but instead extends to cover ...


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