Minnesota Supreme Court Defines “Machines” under Statute of Repose and Sets Rule Regarding Manufacturer’s Post-Sale Duty to Warn

Minnesota Supreme Court determines what is “machines” under statute of limitations for improvements to Real Property and sets rule regarding manufacturer’s post-sale Duty to Warn. The Minnesota Supreme Court recently applied the exception in Minn. Stat. § 541.051 (1)(e) for “machinery installed upon real property,” and established the rule for a product manufacturer’s post-sale duty to warn. The case, Great Northern Ins. Co. v. Honeywell International, Inc., et. al., — N.W.2d –, 2018 WL 2123255 (Minn. May 9, 2018), involved a home’s heat-recovery ventilator failure which caused a fire which resulted in substantial property damage. The ventilator motor was manufactured by McMillan Electric Company, the ventilators were designed and manufactured by Nutech R. Holdings, Inc. and distributed under Honeywell’s name. The ventilators came with a warranty and had to comply with industry performance standards. Two Honeywell ventilators were installed into the homes heating, ventilation, and air conditioning (HVAC) system resulting in a fire sixteen (16) years after construction. Great Northern Insurance Co., the homeowner’s insurer, paid the homeowners’ claim and then sought subrogation against McMillan, Nutech, and Honeywell.

The district court granted McMillan’s motion for summary judgment, determining that the 10-year time statute of repose barred Great Northern’s claims of negligence, product liability, and breach of warranty, but not its claim of a post-sale duty to warn. The Court ruled that the claim did not relate to the construction of an improvement to real property. The district court next concluded, as a matter of law, that McMillan did not have a post-sale duty to warn. The Minnesota Court of Appeals reversed. The Minnesota Supreme Court granted McMillan’s petition for review.

The Supreme Court held that the heat recovery ventilator was “equipment or machinery installed upon real property” and therefore outside the statute of limitations. Because the ventilator was “machinery,” the Court did not determine whether it is also “equipment.” The Supreme Court read the statute as unambiguous, and a ventilator is “machinery” because a “machine” is a “device consisting of fixed and moving parts that modify mechanical energy and transmits it in a more useful form” or “[a] system or device for doing work . . . together with its power source and auxiliary equipment. The American Heritage Dictionary of the English Language 1050-1051 (5th ed. 2011).

The Court also established Minnesota’s rule regarding a product manufacturers’ post-sale duty to warn. The Court adopted the Restatement (Third) of Torts, and held McMillan’s actions only satisfied two of the four requirements. McMillan had knowledge that the product posed a substantial risk of harm (because Nutech informed them of the fires in the ventilators sometime after 2003), and of the risk of harm due to the substantial property damage caused by the fires. But because McMillan could not identify “those to whom a warning might be provided,” nor could it effectively communicate a warning to consumers using the ventilators due to lack of records regarding distribution or consumers. It could not reasonably predict where and by whom the ventilators containing its motors would be purchased or used. As such, McMillan had no post-sale duty to warn.