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Commonwealth Insurance Co. v. Titan Tire Corp.

August 11, 2006

COMMONWEALTH INSURANCE COMPANY, PLAINTIFF,
v.
TITAN TIRE CORPORATION, ET AL., DEFENDANTS.



The opinion of the court was delivered by: Michael M. Mihm United States District Judge

ORDER

This matter was before the Court on July 20, 2006, for a bench trial on remaining claims. Upon consideration of the record, the Court's findings of fact and conclusions of law follow.

Findings of Fact

1. Titan entered into a written contract with Pirelli dated July 16, 1994, whereby Titan purchased certain assets of Pirelli, primarily consisting of Pirelli's tire manufacturing facility located in Des Moines, Iowa ("the Des Moines Facility"). The scope of this agreement did not include the sale or purchase of certain machinery and equipment located at the Des Moines Facility used by Pirelli in the manufacture and production of light truck tires ("LT Tires").

2. In a separate written contract dated July 16, 1994, entitled "Manufacturing Agreement," Titan and Pirelli agreed that Titan would manufacture and produce for Pirelli at the Des Moines Facility LT Tires ordered by Pirelli, using Pirelli's LT tire machinery and equipment until such time as Pirelli removed the equipment.

3. Section 6 of the July 16, 1994, Manufacturing Agreement provided: Section 6. Product Warranty; Product Claims. Titan Tire warrants that the LT Tires manufactured and produced hereunder shall (a) conform strictly to the Specifications; (b) be new, unused and free from defects in material and workmanship. Titan Tire shall mark all LT Tires manufactured and produced by Titan Tire hereunder so as to distinguish the same from any other products which Pirelli Armstrong has hereto fore or after the date hereof manufactured, produced or sold. Titan Tire shall indemnify and reimburse Pirelli Armstrong for any and all costs and expenses which it shall incur due to defects in the LT Tires due to failure of the LT Tires to conform to the Specifications and/or due to defects in material or workmanship. These costs and expenses shall include but not be limited to the costs of replacing or repairing the defective LT Tires, and any other costs (including closts of recalls due to defect in LT Tires and all costs and expenses including, without limitation, defense costs and reasonable attorneys fees and expenses) arising out of claims for product liability on the basis fo the defective products, including settlement of any such claims) and expenses, if any, associated with such defects. Notice with respect to any claims made pursuant to this Section shall be sent in writing to Titan Tire promptly after the defect in the LT Tires or any claims arising from such defect become known to Pirelli Armstrong. Pirelli Armstrong shall not settle any such claims without the consent of Titan Tire, which shall not be unreasonably withheld or delayed. Notwithstanding the above, in no event shall Titan Tire be liable for any incidental, special or consequential damages or any other relief not expressly provided for herein.

4. Section 4 of the Manufacturing Agreement provided that "[t]he LT Tires shall be labeled and identified by Titan Tire as specified from time to time by Pirelli Armstrong."

5. In early September 1994, Titan began manufacturing LT Tires and did so until early 1998, with the exception of a short period of approximately six (6) weeks in November and December, 1994. The size and model of the tire involved here, an LT 235/85 R16, was manufactured by Pirelli beginning in December 1993 through July 16, 1994, when Pirelli turned over the Des Moines plant to Titan. Titan then manufactured the LT 235/85 R16 through the end of 1997.

6. On January 16, 1996, Titan and Pirelli entered into another contract entitled "Titan/P.A.T.C. Agreement," which contained the following provision:

15. PRODUCT INDEMNITY - Titan agrees to defend, hold harmless and indemnify PATC, its subsidiaries and affiliates, their officers, directors, employees, and agents from and against any and all claims for death, personal injury, property damage and all other damages, losses, claims, or suits, including costs and attorneys' fees, arising from any act or omission of Titan relating to defective material or workmanship except for any defective material supplied by PATC to Titan. PATC agrees to defend, hold harmless and indemnify, Titan, its subsidiaries and affiliates, their officers, directors, employees, and agents from and against any and all claims for death, personal injury, property damage and all other damages, losses, claims, or suits, including costs and attorneys' fees, arising from any act or omission of PATC relating to defective material supplied by PATC and for any defective design and/or specifications requirements of PATC.

7. On or about August 20, 1998, a tragic automobile accident occurred in Duval County, Texas, in which eight people were killed. As a result of that accident ("Accident"), numerous plaintiffs brought suit against Titan and Pirelli, among others (hereinafter referred to as "the Ramirez Action.")

8. The plaintiffs in the Ramirez Action sought damages against Pirelli and Titan on theories including common law negligence based on the negligent design, manufacture, marketing and sale of a certain LT Tire, and strict liability theories based upon an alleged unreasonably dangerous condition of a certain LT Tire.

9. On February 19, 1999, Pirelli requested that Titan defend, indemnify, and hold Pirelli harmless from the claims brought in the Ramirez Action.

10. On February 22, 1999, and at all times thereafter, Titan refused to indemnify and hold Pirelli harmless for any defense costs and fees incurred in the Ramirez Action.

11. Originally, the plaintiffs in the Ramirez Action contended that the LT Tire was manufactured by Pirelli. Subsequently, the plaintiffs in the Ramirez Action contended that the LT Tire was manufactured by Titan at the Des Moines Facility, and Pirelli was dismissed from the litigation. However, Titan then brought a counter-claim against Pirelli, and Pirelli continued to defend on the counter-claim.

12. By no later than October 1, 1999, all theories of recovery related to negligent design were dismissed by all of the Ramirez Action plaintiffs against all the defendants.

13. By April 2000, Commonwealth Insurance Company had paid its $30,000,000.00 total limit of liability under Titan's policies as part of the overall settlement of the Ramirez Action.

14. As of April 2000, Pirelli had incurred $423,483.83 in defense fees and costs in the Ramirez Action.

15. The LT Tire involved in the Ramirez Action was an LT 235/85 R16 tire, manufactured by Titan at the Des Moines Facility, as previously admitted by Titan ...


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