Product liability litigation commonly involves multiple defendants, namely the
product’s manufacturer and the
seller, and possibly others in the
chain of distribution. Out of all the
defendants, the manufacturer is
generally the party with the ulti-
mate responsibility in producing a
reasonably safe product.
Recognizing this, Arizona has an
“indemnification” statute that shifts
the cost of the defense of the law-
suit and the burden of paying the
judgment away from the seller and
to the manufacturer.1
At first blush, this indemnifica-
tion statute appears straightforward
in its application. Under most cir-
cumstances, the manufacturer has
to pay for the defense of a product
and any judgment. The exception
would be when the seller has some
blame—for instance, if it modified
the product or knew about a defect
but sold the product anyway.
Unfortunately, when applied to
real-life litigation, the indemnifica-
tion statute isn’t always so straight-
forward. These ambiguities greatly
complicate litigation and create
uncertainty as to who will pay the
costs and judgment. If the manu-
facturer does not accept the tender
but the court ultimately decides it
should have, the financial conse-
quences can be devastating.
This article analyzes a specific
recurring problem with modified
products and offers an interpreta-
tion of the statute to eliminate it.
The Modified Product
One deeply confusing situation occurs when someone modifies the product or adds
Craig Logsdon is an a component after it leaves the original manufacturer but before the ultimate seller
associate in the Phoenix receives it. This can easily happen when a seller deals in used products.
office of Snell & Wilmer, Assume the first owner of a car had new brakes installed, and then traded the car
LLP. His practice in to a dealership. The dealership then resold the used car with the modified brakes.
includes product liability If the modified brakes become an issue in litigation involving the used-car dealer,
defense. there’s a problem. Because the used-car dealer did not modify the brakes, or even
know about it, the dealership gets to invoke the indemnification statute and wash its
22 A R I Z O N A AT T O R N E Y O C T O B E R 2 0 0 7 w w w . m y a z b a r. o r g
BY CRAIG LOGSDON
hands of costs associated with the lawsuit. ate a logical, comprehensible method to sat- in product liability actions, and everything is
But to whom can it tender its defense? isfy that satisfies everyone. now comparative fault.4 Under the State
The original car manufacturer? The Likewise, the indemnification statute and Farm v. Premier Manufactured Systems case,
mechanic who installed the defective the case law interpreting it do not provide the defendants in the chain of distribution
brakes? for a logical, comprehensible solution as to may allocate fault among themselves.
The indemnification statute does not which “manufacturer” should indemnify the But from the perspective of the seller
address this type of wrinkle. Although the seller of a modified product. You can make a who has been sued, the indemnification
statute does reference instances in which compelling case for several different manu- statute gives it a more attractive option than
products have undergone modification, it facturers in the chain of distribution. relying on “comparative fault.” The indem-
only contemplates the modifier being the The seller of a used product will probably nification statute allows the seller complete
seller. There is no instruction for what to do try to tender all the way back to the original indemnification from the upstream manu-
when someone other than the seller creates manufacturer. In the case of a modified car, facturer for all costs in defending the case
the modification at issue: it will be much easier to get the big auto plus the entire amount of any judgment.
In any product liability action where the company to pick up the defense rather than So, regardless of Arizona’s comparative
manufacturer refuses to accept a tender figuring out who modified the vehicle and fault principles, the used-car dealer will
of defense from the seller, the manufac- getting them to defend the case. However, choose the indemnification statute to extin-
turer shall indemnify the seller for any fairness dictates that whomever is responsi- guish its liability as soon as possible.
judgment rendered against the seller and ble for the modification or component at
shall also reimburse the seller for reason- issue should pay to defend its work. POSSIBILITY 2:
able attorneys’ fees and costs incurred by Furthermore, the party that modified the The seller cannot invoke the
the seller in defending such action, product is in the best position to defend the indemnification statute because a
unless either paragraph 1 or 2 applies: part of the product at issue. Other manufac- modification caused the incident.
1. The seller had knowledge of the turers involved in the product should not be WHY THIS POSSIBILITY FAILS:
defect in the product. unnecessarily drawn into the litigation. The seller is still entitled to
2. The seller altered, modified or Therefore, a just, logical and comprehen- indemnification because it did not
installed the product, and such alter- sible solution is to limit its reach to the man- make the modification.
ation, modification or installation ufacturer of the specific component or mod-
was a substantial cause of the inci- ification at issue. The other variations of how The “modification exception” to a seller’s
dent giving rise to the action, was the indemnification statute could play out right to indemnification only comes into
not authorized or requested by the contain too many problems. play when the seller actually is responsible
manufacturer and was not per- However, there is no shortage of possi- for the modification.5 And that is the way it
formed in compliance with the direc- bilities in the application of the statute. should be, because the seller should be
tions or specifications of the manu- Below is a list of potential interpretations. responsible if it caused the defect—but not if
facturer.2 someone else is to blame.
Neither of the two enumerated exceptions POSSIBILITY 1: So indemnification should be available,
applies when the seller does not modify the The seller cannot invoke the but against whom?
product and does not know about the defec- indemnification statute because
tive modification. Therefore, the only rele- comparative fault removes the need POSSIBILITY 3:
vant part of the statute is the first paragraph. for indemnification. The indemnification statute always
Specifically, who is the “manufacturer” that WHY THIS POSSIBILITY FAILS: reaches the original manufacturer
faces the choice of accepting the tender of The indemnification statute gives regardless of the nature of the
defense or later paying the bills and judg- the seller an even better deal than alleged defect.
ment? comparative fault. WHY THIS POSSIBILITY FAILS:
Trying to figure out who is this “manu- The original manufacturer’s work
facturer” resembles determining which of Although the Arizona Supreme Court has may not be at issue.
three undefeated college football teams yet to weight in, the First Division of the
belongs in the National Championship bowl Court of Appeals recently held that the The indemnifications statute says, “The man-
game. You can make a compelling case for Uniform Contribution Among Tortfeasors ufacturer shall indemnify the seller for any
several different teams. It is difficult to cre- Act3 did away with joint and several liability judgment rendered against the seller … .”
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Indemnifying Modified Products
The statute does not specify which manufac- manufacturer even if the original manufac- enough already. There’s a tidier way to
turer must indemnify the seller. And it does turer was going to claim a downstream sell- clean all of this up and make the person
not exclude manufacturers whose involve- er was partially or fully at fault.8 Although responsible for the accident pay the judg-
ment is not at issue, such as, in the case of a unclear under this holding, the defendant ment without standing the indemnification
modified car, the automaker. manufacturer presumably would be respon- statute on its head.
To help it reach the original manufactur- sible for defending any allegation against
er, the seller will rely on a series of Arizona the original product, but not for allegations POSSIBILITY 5:
cases that one could interpret to require the based on subsequent modifications. In any The indemnification statute only
original manufacturer to fund the litiga- event, the decision does not say (at least reaches the manufacturer of the
tion.6 These cases hold that despite the fact explicitly) that the original manufacturer has modification or component alleged
that an element of a product liability claim is to pay for the defense of a claim against a to have caused the incident.
that a defect must exist when a product downstream manufacturer or seller that WHY THIS POSSIBILITY ACTUALLY WORKS:
leaves the hands of a manufacturer, a seller modified the product. It is the most just result, and is
still has a right to indemnification even if the Even though case law does not plainly consistent with the text of the
original product is ultimately found not to give the seller permission to pursue an statute and case law.
be defective. Therefore, it seems that the indemnification claim against the original
original manufacturer has to indemnify and manufacturer, case law also does not rule it The indemnification statute should put the
reimburse the seller regardless of whether out. And, because the seller should be enti- burden of defending the lawsuit on the
the original manufacturer’s work is at issue. tled to indemnification, shouldn’t the seller manufacturer of the modification or com-
But that’s not exactly what these cases receive indemnity from the original manu- ponent that is at issue. The easiest and most
say. They only say that a manufacturer has facturer, and let the various manufacturers direct way to get the modifier is to read a
to pay for defending allegations made work out who is ultimately responsible for more precise definition of “manufacturer”
against that manufacturer’s product, the defense of the case and any judgment? into the statute than the text actually pro-
regardless of whether the jury ultimately vides. Instead of simply reading the word
determines that the product is defective. POSSIBILITY 4: “manufacturer” in the first sentence of the
These cases do not say a manufacturer is The indemnification statute reaches statute, we should read something to the
financially responsible for defending a all manufacturers, who may then effect of “the manufacturer of the product or
modification or a component. seek indemnification from each other component at issue shall indemnify the seller
For example, in Desert Golf Cars v. depending on whose component for any judgment rendered against the sell-
Yamaha, which involved a modified golf actually caused the accident. er and shall also reimburse the seller for rea-
cart, the jury found that the cart, as origi- WHY THIS POSSIBILITY FAILS: sonable attorneys’ fees and costs incurred by
nally designed and manufactured, was not It needlessly adds parties the seller in defending such action.”
defective. Nevertheless, the court held that and litigation costs.
the original manufacturer of the golf cart,
and not the seller who modified it, had to Under the indemnification statute, you can This limited definition is the only way for
pay the costs of defending the original use this approach of allowing the manufac- the indemnification statute to do what it is
product. The Court of Appeals did not say turers to sort it out amongst themselves. supposed to do. The reason behind
that the original manufacturer had to pay Manufacturers are also generally “sellers” of Arizona’s indemnification law is “to place
for the defense of the modifications to the the products they make, and as “sellers” the burden and costs of defending products
golf cart. Although the original manufac- they may qualify for indemnification if there on their manufacturers” because the manu-
turer has to pay for the defense of the orig- is another “manufacturer” out there that facturer “is best situated to detect, control,
inal product regardless of whether the jury made the product defective. or prevent the putative defect.”10
determines it to be defective, there is no So you can plug all of these manufactur- When a modification is at issue, the
authority that says the original manufactur- ers and sellers into the indemnification “burden and costs” of defending the lawsuit
er has to pay for the defense of after-market statute, and fix it so ultimately the party should fall on the manufacturer of the mod-
components or modifications. that caused the accident is the party that ification, not any other manufacturer associ-
Another case also skirted this issue.7 In has to pay. ated with the overall product. It is not fair
Bridgestone/Firestone v. A.P.S. Rent-a-Car, But, in operation, this approach would to ask one manufacturer to pay to defend
the tire manufacturer did not accept the waste an enormous amount of resources the work of another. Likewise, a manufac-
tender of defense of the seller for several and probably isn’t the way the legislature turer other than the modifier is not in the
reasons. One reason is the manufacturer intended for the statute to work. The Court best position to “detect, control, or prevent
thought it did not have to accept the ten- of Appeals has stated “the intended opera- the putative defect.”
der of a seller if the manufacturer would tion of section 684” is that it “entitles the Desert Golf Cars also recognized that
end up apportioning fault to a downstream downstream seller/modifier to compensa- when a seller modifies a product, it “steps
seller for its own negligence. Bridgestone/ tion from the upstream manufacturer.”9 The into the shoes of the manufacturer as being
Firestone thought this created a conflict of indemnification statute, therefore, does not the one best situated to detect, control or
interest. exist so that a seller can tender to a down- prevent the putative defect.”11 Here, the
The Court of Appeals held that the stream manufacturer. “seller” that is taking over responsibility for
indemnification statute reached the original Indemnification law is confusing the product is not the ultimate seller, but
24 A R I Z O N A AT T O R N E Y O C T O B E R 2 0 0 7 w w w . m y a z b a r. o r g
Indemnifying Modified Products
the seller of the modification. tured. However, the original manufacturer ufacturer no matter how many times
Without a narrow definition of “manu- did not have to pay the percentage of fault the product was modified.
facturer,” the used-car dealer could bring that the jury allocated to the downstream • If the plaintiff alleges that the defect in
in dozens of manufacturers that, although seller for failing to inspect the tires before the product is a modification, then the
involved in the manufacture of the auto- selling them. Likewise, in a case involving a product liability statute reaches the
mobile, had nothing to do with the por- modified product, the original manufactur- manufacturer of the modification or
tion of the product at issue in the lawsuit. er should not have to pay for the defense of post-factory component, but not the
Nobody would argue with a straight face the modification, because the modification original manufacturer.
that the manufacturer of the nuts and occurred downstream after the product left • If the plaintiff alleges defects in both the
bolts, paint, seatbelts, or stereo that went the manufacturer’s control. original product and the modification,
into the original car should have to indem- In other words, if the product at issue— then both manufacturers are responsible
nify the seller. But without limiting the defective or not—is the original product, under the indemnification statute for
definition of the word “manufacturer,” then the original manufacturer is obligated their own role.
anyone who had anything to do with mak- to indemnify and reimburse the seller. If the The question is what part of the final
ing any part of the car, regardless of how product at issue is a component or modifi- product the plaintiffs allege to be defec-
minor its role, could be on the hook for cation, then the manufacturer of the com- tive—not whether it is actually defective.
someone else’s defective modification. ponent or modification is the proper target
of the indemnification statute.
The indemnification statute and case law are
Although statutory and case law do not pro- sufficiently ambiguous for any defendant in
vide us with this narrow definition of “man- Remember that once this issue makes sense the chain of distribution of a modified prod-
ufacturer,” the narrow definition is never- in our minds, we’re probably just overlook- uct to be a target, but also argue the statute
theless consistent with authority. ing something? The Bridgestone/Firestone reaches someone else. Despite this ambigu-
The statutes do define “manufacturer” decision provides ammunition to shoot ity, limiting the reach of the indemnification
as a “person or entity who designs, assem- down the argument that the indemnifica- statute to the manufacturers whose work is
bles, fabricates, produces, constructs or oth- tion statute only reaches the manufacturer actually at issue is the most equitable appli-
erwise prepares a product or component of the component actually at issue. cation of the statute. In the case of a modi-
part.”12 But this definition does not say to One of the issues in Bridgestone/ fied product, the party responsible for pay-
whom of all of the manufacturers in the Firestone was whether the indemnification ing the defense of the lawsuit and any judg-
world the indemnification statute applies. statute applied to a tire manufacturer that ment should be limited to the party that
To find authority for limiting which was going to apportion fault to the seller of made the modification or component at
“manufacturers” a seller can reach, we can the product. In addressing that issue, the issue. AZ
turn to a footnote tucked away in one of the opinion seems to assume that a seller could
Arizona cases interpreting the indemnifica- always tender to the product’s original man- endnotes
tion statute. In McIntyre Refrigeration v. ufacturer unless one of the two explicit
Mepco Electra, the Court of Appeals stated exceptions written into the statute applied. 1. A.R.S. § 12-684(A).
2. Id. § 12-684(A)(1)-(2).
in dictum that “a single component manu- The court rejected the tire manufacturer’s
3. Id. § 12-2506 et. seq.
facturer which presents unopposed evidence contention that in order to have the benefits 4. State Farm Ins. Co. v. Premier
that its component was either not defective of the indemnification statute, the seller had Manufactured Systems, Inc., 142 P.3d
or not a cause of the plaintiff’s injury is enti- to show that the alleged defect existed at the 1232 (2006); See also Ann Larimer
Robertson, When Worlds Collide: Strict
tled to a final partial summary judgment.”13 time the product left the manufacturer’s Liability and Comparative Fault, ARIZ.
This footnote supports the proposition control. ATT’Y, April 2002, at 38.
that when there are multiple manufacturers Even though common law product lia- 5. A.R.S. § 12-684.
of a product, the ultimate seller has no right bility principles require that a defect exists 6. Desert Golf Cars v. Yamaha Motor Co., 7
P.3d 112 (Ariz. Ct. App. 2000);
to indemnification from a manufacturer when it leaves the manufacturer’s custody McIntyre Refrigeration, Inc. v. Mepco
whose involvement in the product is not at and control, the indemnification statute has Electra, 799 P.2d 901 (Ariz. Ct. App.
issue. Accordingly, if the original product is no such requirement. Thus, the opinion 1990); Hellebrant v. Kelley Co., 737
not at issue because the alleged defect is in a suggests that the original manufacturer is P.2d 405 (Ariz. Ct. App. 1987).
7. Bridgestone/Firestone North American
modification, the indemnification statute responsible under the indemnification Tire, LLC, v. A.P.S. Rent-A-Car
should not be used to bring the original statute when the issue is a modification or Leasing, Inc., 88 P. 3d 572 (Ariz. Ct.
manufacturer into the lawsuit. post factory component. App. 2004).
8. Id. at 580-81.
In addition, part of the Bridgestone/ Nevertheless, this Bridgestone/
9. Desert Golf Cars, 7 P.3d at 116 (empha-
Firestone holding supports this narrow defi- Firestone language can still be harmonized sis original).
nition of “manufacturer.”14 In that case, the with the narrow definition of “manufactur- 10. Id. at 115, citing 13 American Law of
Court of Appeals ruled that the original er” set forth in this article. The plaintiff con- Products Liability 3d § 52:98, at 52-137
manufacturer—which had refused the ten- trols the allegation of defect:
der of defense and sat out the case—had to • If the plaintiff alleges that the original 12. A.R.S. § 12-681(3).
pay for the percentage of fault that the jury product is defective, then the indemnifi- 13. 799 P.2d at 905 n.1.
apportioned the tire as originally manufac- cation statute reaches the original man- 14. 88 P.3d at 582-93.
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