COA upholds summary judgment for maker, seller of destroyed farm equipment

Summary judgment against the insurer of a farm that suffered more than $350,000 in damage after an equipment fire has been upheld, though a partially dissenting judge would not have addressed the merits of every issue raised on appeal.

In preparation for the 2015 harvest season, the owners of Tri L Farms — brothers Garry and Zak Lemler and their father, Chester — decided to trade in their combine and corn head attachment for updated models that could be used in their corn harvesting operations. Garry was also a salesman for Bane-Welker Equipment, and he arranged for the family farm to purchase a used combine and corn head, manufactured by CNH Industrial America, from Bane-Welker.

The farm executed purchase orders for the combine and corn head in January and August 2015, respectively. The terms of the documents held that neither piece of used equipment came with any warranties, and Garry and Zak signed the documents on behalf of Bane-Welker and the farm, respectively.

Later in October 2016, the farm was using the equipment when the combine caught fire, destroying both pieces of equipment and causing $357,699 in damage. The Lemlers’ insurer, Indiana Farm Bureau, paid for the property damage, then sought to recover the payment from CNH Industrial and Bane-Welker on product liability, breach of implied warranty and negligence grounds.

CNH Industrial and Bane-Welker sought summary judgment against the claims, which the Marshall Circuit Court granted summary. The Indiana Court of Appeals upheld that ruling Wednesday in Indiana Farm Bureau as Subrogee of Chester Lemler, Garry Lemler, and Zak Lemler v. CNH Industrial America, LLC and Bane-Welker Equipment, LLC, 18A-PL-2368.

Judge James Kirsch, writing for the unanimous appellate panel, first said the language of the purchase orders was sufficient to disclaim the implied warranty of merchantability. Kirsch rejected Farm Bureau’s argument that contractual language must include the word “merchantability” under Indiana Code section 26-1-2-316, which also holds that “unless the circumstances indicate otherwise, all implied warranties are excluded by expressions like ‘as is,’ ‘with all faults,’ or other language that in common understanding calls the buyer’s attention to the exclusion of warrantied and makes plain that there is no implied warranty.”

The language of the purchase order held that the equipment was sold “as-is, where is, with no representations or warranties… .”  That language was conspicuous as a matter of law, Kirsch said, because there was other language in the contract instructing the signatory to read the warranty provision, and much of the warranty language was written in capital and/or bold typeface.

Turning specifically to the corn head, the panel cited to Gunkel v. Renovations, Inc., 822 N.E.2d 150 (Ind. 2005), to determine the attachment was the “product” the farm had purchased, not “other property” under Indiana products liability and negligence law. Thus, tort liability against CNH Industrial was precluded by the economic loss doctrine, the majority said.

“Testimony established that without an attached Corn Head, the Combine cannot harvest corn, and although the Combine itself can be driven without a Corn Head, it is worthless for harvesting corn without a Corn Head,” Kirsch wrote. “The product purchased by the Farm was a functioning Combine and the Corn Head was intended to be part of that bargained-for product.”

Finally, the majority likewise determined the economic loss doctrine precluded Farm Bureau’s negligence claim against Bane-Welker for improper service of the combine.

“Here, Farm Bureau is contending that a service performed by Bane-Welker, the maintenance of the Combine, was performed negligently and did not live up to expectation. However, ‘a claim that a product or service did not perform as expected is best left to contract law remedies,’” Kirsch wrote, citing to Gunkel. “We, therefore, concluded that Farm Bureau’s claims of negligent servicing are barred by the economic loss doctrine.”

In a separate opinion, Judge Margret Robb concurred with the majority — which also included Judge Patricia Riley — on the issue of the implied warranty of merchantability. However, in a partial dissent, Robb said the implied warranty decision fully resolves the case, so she would not address the merits of the economic loss doctrine arguments.

Further, as to the tort liability against CNH Industrial, Robb that if that were a live issue, she would disagree with the finding that the corn head was not “other property,” opining that the combine and attachment were “independent implements.”

“In other words, although neither implement could effectively be used alone to harvest corn, they did not have to be used exclusively with each other,” she said.