In Hernandezcueva v. E.F. Brady Company, Inc. (2015) 243 Cal.App.4th 249, the California Second District Court reversed a jury finding that a drywall subcontractor was not negligent, and held for the first time that under the “stream-of-commerce theory,” a contractor who uses, installs or furnishes defective products is subject to “strict products liability” even if the product is merely incidental to its work. E.F. Brady was a drywall subcontractor who bid to install drywall. Only 25% of its bid was allocated to materials and 75% was allocated to labor. Unknown to the subcontractor, the joint compound contained asbestos. The subcontractor was held liable under “strict products liability” law based on exposure occurring in 1995 for a mesothelioma diagnosis in 2011, since it had a “participatory connection” to the stream of commerce.
Almost all major manufacturers of asbestos containing products have filed for bankruptcy and established “trusts” to compensate persons suffering from mesothelioma, but under California law, partial payment by a manufacturer’s trust as a joint tortfeasor does not relieve the subcontractor from strict products liability for the unpaid balance of plaintiff’s total personal injury claim. Under strict products liability, joint and several liability still applies.
The 25% allocation to material costs is not a bright line which will cutoff potential strict products liability. The Hernandezcueva decision is not limited to asbestos litigation, and the decision is a reminder that contractors and subcontractors should carry increased liability limits with policies that afford completed operations and products coverage. The increased risk exposure can be expected to increase insurance costs and the costs of construction, and may put small subcontractors at risk of insolvency since the average mesothelioma case can be in multiples of a million dollars.
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