Florida Power & Light Co. v. Westinghouse Elec. Corp

In Florida Power & Light Co. v. Westinghouse Elec. Corp., 510 So. 2d 899 (Fla. 1987), Florida Power & Light (FPL) entered into contracts with Westinghouse in which Westinghouse agreed to design, manufacture, and furnish two nuclear steam supply systems, including six steam generators. FPL discovered leaks in all six generators. FPL brought suit, alleging that Westinghouse was liable for breach of express warranties in the contracts and for negligence, and sought damages for the cost of repair, revision, and inspection of the steam generators. Id. at 900. In determining whether Florida law permitted FPL to recover the economic losses in tort without a claim for personal injury or separate property damage, this Court considered the policy issues supporting the application of a rule that limits tort recovery for economic losses when a product damages itself. Id. Concluding that warranty law was more appropriate than tort law for resolving economic losses in this context, the Court adopted the holding in East River Steamship Corp. v. Transamerica Delaval, Inc., 476 U.S. 858, 871, 106 S. Ct. 2295, 90 L. Ed. 2d 865 (1986) that "a manufacturer in a commercial relationship has no duty under either a negligence or strict products liability theory to prevent a product from injuring itself." Florida Power, 510 So. 2d at 901 (quoting East River, 476 U.S. at 871). Florida Power & Light Co. v. Westinghouse Elec. Corp., was the seminal case on the applicability of the economic loss rule, Florida Power & Light (FPL) sued Westinghouse for breach of express warranties in the contract and for negligence, all arising from leaks discovered in six steam generators manufactured by Westinghouse for sale to FPL. In its analysis and conclusion that the negligence claim was barred, the Court relied on the reasoning in two cases, both of which involved damages to defective products. See East River Steamship Corp. v. Transamerica Delaval, Inc., 476 U.S. 858 (1986) (holding that a manufacturer of a defective steam turbine is not liable under a theory of negligence or strict liability where the only injury is to the product itself); Seely v. White Motor Co., 63 Cal. 2d 9, 403 P.2d 145, 151, 45 Cal. Rptr. 17 (Cal. 1965) (holding that a manufacturer of a defective product is not subject to strict liability where the damages are purely economic). The Court agreed with the economic loss rule discussed in those cases and held that the rule barred FPL's negligence claim where there was no physical injury or property damage other than to the generators themselves, and that contract principles rather than tort principles would be adequate and fair to resolve any claims for the purely economic losses to the products provided by Westinghouse. 510 So. 2d at 902. The Court reasoned that the contracting parties were in the best position to have anticipated potential problems with the items provided and could have adequately protected their respective interests through measures such as the applicable warranty law, "negotiation and contractual bargaining," or insurance. Id. In sum, in Florida Power & Light, a contract between Florida Power and Light (FP&L) and Eastern Utility Construction, Inc. (Eastern), an independent contractor, for renovations to FP&L's substation required the contractor to purchase general liability insurance. The policy procured by the contractor defined "Persons or Entities Insured" as "any person, organization, trustee, or estate . . . but only with respect to operations by or on behalf of the Named Insured or to facilities used by the Named Insured." Florida Power & Light, 654 So. 2d at 278. Thereafter, an employee of the contractor who was injured at the substation sued FP&L for its negligence related to his injury. The issue before the court was whether the personal injury claim came within the ambit of the definitional provision "but only with respect to operations by or on behalf of the Named Insured." In concluding that FP&L was an additional insured under the policy, the court stated: "In the instant case, the pertinent policy language merely reads "but only with respect to operations by or on behalf on the Named Insured," Eastern. No language in the provision requires fault on behalf of Eastern before FPL can be considered an additional insured. Thus, the language, similar to the language utilized in the cases discussed above, can only be considered ambiguous at best. The language that was employed by Penn America required only that FPL's liability arise out of the operations of Eastern. Obviously, Haywood's injuries and subsequent lawsuit arose out of some type of "operations" of Eastern as Haywood was an employee of Eastern working at the FPL substation. Therefore, because Penn America did not utilize specific language limiting coverage to the vicarious liability situation and because the language actually utilized is ambiguous at best, the "additional insured" provision must be construed against Eastern and in favor of FPL, the insured. Consequently, the trial court erred in entering a summary judgment in favor of Penn America determining that FPL was not an additional insured under the policy." (Florida Power & Light, 654 So. 2d at 279.)