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May 4, 1994


Appeal from the Circuit Court of the 12th Judicial Circuit, Will County, Illinois. No. 91-L-1236. Honorable Herman S. Haase, Judge Presiding

Rehearing Denied and Released for Publication June 2, 1994.

Present - Honorable Allan L. Stouder, Justice, Honorable Peg Breslin, Justice, Honorable Tobias Barry, Justice

The opinion of the court was delivered by: Stouder

JUSTICE STOUDER delivered the opinion of the court:

This is a suit for damage to plaintiff's property resulting from a fire that occurred at the plaintiff's plant. The plaintiff, Tyler Enterprises of Elwood, Inc. (Tyler), filed a three count complaint against defendants Jack Skiver, d/b/a Ohmtemp; Robertshaw Controls Company, and Eli Lilly and Company (Lilly). The counts against Skiver and Robertshaw Controls are not involved in this appeal. Count III sought relief against Lilly on a strict liability theory. Tyler later amended the complaint to add a Count IV against Lilly, alleging wilful and wanton misconduct. The trial court granted summary judgment in favor of Lilly on Counts III and IV, and plaintiff now appeals to this court.

On appeal, Tyler raises two issues for our consideration: (1) whether an exculpation clause or a damage limitation clause bars an action for property damage under the doctrine of strict liability in tort where the parties are commercial entities, and (2) whether the record raises a genuine issue of material fact as to whether Lilly was guilty of wilful and wanton misconduct. Defendant Skiver has filed a cross-appeal, arguing that it was improper for the trial court to enter a finding as to proximate cause in its ruling on the summary judgment motion. We reverse in part and affirm in part.

Tyler is a small fertilizer manufacturer located in Elwood, Illinois. In 1985, Tyler entered into an agreement with Elanco Products Company, a division of defendant Lilly, to purchase a herbicide known as Balan Technical (Balan). The Balan was to be incorporated by Tyler into a combination fertilizer-herbicide formulation that Tyler would then sell. Balan was available from Lilly in three formulations: solid, liquid concentrate, and milled concentrate. Tyler chose to receive solid Balan.

Lilly required Tyler to execute a two-page sales agreement prior to the shipment of any Balan. The agreement contained clauses at the bottom of the first page under "Other terms" that purported to exculpate Lilly from liability for consequential damages and limit any recovery against Lilly to the purchase price of the chemicals. The agreement was originally signed in 1985 and was thereafter renewed annually.

Tyler liquified the solid Balan at its plant before incorporating it into its own product. Tyler initially liquified the Balan by chiseling pieces of it out of the barrels in which it was shipped and then heating the pieces overnight in large vats at approximately 180 degrees fahrenheit. They then switched to a different method, using drum heaters, in 1988. The heating equipment was ordered from Jack Skiver, d/b/a Ohmtemp. Tyler supplemented the drum heaters with flexible tubing that ran underneath them. A heated mixture of ethylene glycol and water was pumped through the tubes.

A fire occurred at Tyler's plant on February 1, 1989, while Tyler was heating two barrels of Balan and one barrel of Trifluralin using the drum heaters. That morning, at approximately 8:00 a.m., Tyler employee Timothy Quigley set the thermostat on the heaters somewhere between 450 and 500 degrees fahrenheit and then left the room. According to Warren Shafer, Tyler's general business manager at the time, the normal procedure was to set the heaters at around 450 or 500 degrees and then check the heating process every hour. When the Balan started to liquify, the heaters were supposed to be turned down to 160 or 180 degrees. Quigley was in the room again briefly at approximately 9:30 or 10:00 a.m., but did not check the melting process. He noticed nothing unusual. At approximately 12:30 p.m., Quigley opened the door to the room and found it filled with yellowish smoke. He deactivated electrical power to the heaters and turned on an exhaust fan in the wall.

Shafer, and another employee, Scott Couch, went outside to try and determine what was going on inside the room by looking in a window. They could not see anything, so Couch broke the window. Smoke started to pour out, and Shafer yelled for someone to call the fire department. Couch went back inside and looked into the room that the smoke was coming from. Couch saw a puddle of liquid on the floor that extended under one of the drum heaters. The entire top of the puddle was in flames. Couch remembered the flames being a dark red-orange color. Couch emptied a fire extinguisher into the room and shut the door. The Tyler plant was eventually destroyed by the fire.

The deposition testimony is conflicting as to Tyler's knowledge of whether Balan was flammable. Lilly had supplied Tyler with Material Safety Data Sheets (MSDS) for Balan. The first section of the MSDS for Balan includes the following provisions:

F. Auto-Ignition Temperature Sublimes without ignition

G. Flashpoint Not applicable

H. Explosive Limit 0.375 ounce per cubic foot

The second section is entitled "Stability and Storage" and states: "Avoid extreme heat or cold. Do not store near heat or open flame. Store in original container only. Do not contaminate water, food, or feed by storage or disposal." Section III, "Unusual Fire and Explosion Hazards," merely states "None known." Finally, Section VI is entitled "Fire Fighting Information" and states the following:

"Use water, CO or dry chemicals to extinguish. Will emit toxic fumes as it burns. Wear full protective clothing and use self-contained breathing apparatus. Non-essential personnel should be restricted from area of intense smoke. Do not allow water run-off from fire site to enter nearby streams, ponds or lakes. Keep containers cooled with water spray."

Warren Shafer's understanding was that Balan was not flammable. He reached this Conclusion by reading the MSDS. He also remembered talking with someone at Elanco who told him that Balan incinerates but does not flame. According to Shafer, the Tyler procedure was to keep the Balan below either 180 or 190 degrees because at higher temperatures it would crystallize.

Timothy Quigley also read the MSDS and gained the impression that Balan would not ignite. He concluded this because of the statement that Balan did not have a flashpoint. He also remembered the MSDS stating that Balan was not flammable. (It contains no such statement.) He believed the statement "Not applicable" under "Flashpoint" meant that Balan would not burn no matter how hot it got. The statement, "Will emit toxic fumes as it burns" did not suggest to him that Balan would burn.

According to an expert witness retained by the plaintiff, Robert Bambenek, Balan burns, autoignites, and has a flashpoint. He also stated that it is probably flammable. Bambenek found the MSDS to be misleading because it tended to indicate that Balan would not burn. He stated that the statements in the MSDS that Balan sublimed without ignition and did not have a flashpoint were inaccurate. Bambenek believed the MSDS should ...

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