East River Steamship Corp. v. Transamerica Delaval, Inc.

Supreme Court of the United States · 1986 · Torts

TortsAdmiraltyProducts LiabilityEconomic Lossadmiralty jurisdictiongeneral maritime lawstrict products liabilitynegligence

Facts

Seatrain's shipbuilding subsidiary contracted with Delaval to design, manufacture, and supervise installation of turbines that served as the main propulsion units for four supertankers. After the ships entered service, defective turbine components in three ships deteriorated and damaged the turbines, and a valve on the Bay Ridge was installed backwards during supervised installation, damaging the low-pressure turbine; the plaintiffs sought repair costs and lost income while the ships were out of service. The complaint alleged strict liability for design defects in the turbines and negligence in supervision of the valve installation. The claimed harm was only to the turbines or propulsion system itself, not to persons or other property.

Issue

Whether, in admiralty, a commercial purchaser or charterer may recover in tort under negligence or strict products-liability theories when a defective product malfunctions and injures only itself, causing purely economic loss. The case also presented whether products liability, including strict liability, is part of the general maritime law.

Rule

Products liability, including strict liability, is part of the general maritime law. But when a manufacturer is in a commercial relationship with the plaintiff, the manufacturer has no duty under either negligence or strict products-liability theories to prevent a product from injuring only itself; where the only injury claimed is to the product itself and the loss is purely economic, the claim lies in warranty or contract, not tort.

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Harbor Meridian Shipping, a commercial vessel operator in Houston, bareboat-chartered a cargo ship from Gulf Lantern Leasing. The ship’s main engine, sold as a complete unit by Pelican Forge Marine Systems, suffered an internal defect that destroyed the engine block at sea and caused only repair costs and three weeks of lost charter revenue; no crew member was hurt and nothing else on the vessel was damaged.

Under the governing admiralty rule, which is the best result on Harbor Meridian’s tort claims against Pelican Forge?

Explanation. General maritime law recognizes products liability, including strict liability. But when a manufacturer is in a commercial relationship with the plaintiff and the product injures only itself, causing purely economic loss such as repair costs and lost profits, no tort claim lies in admiralty under either negligence or strict products-liability theories. The loss is treated as a matter for warranty or contract, not tort. (Derived from East River Steamship Corp. v. Transamerica Delaval, Inc. (1986).)