United States District Court,

D. New Jersey.

Jessica DURKIN, both Individually and as Administratrix of the Estate and as Administratrix Ad Prosequendum of the Estate of William R. Gangell, Jr., Plaintiffs,

v.

PACCAR, INC. and Peterbilt Motors Company and Wabash National Corporation and Spanset, Inc. and Ancra International, LLC. and Dura-Bond Industries, Inc. and Dura-Bond Coating, Inc. and Dura-Bond Development, Inc. and Dura-Bond Steel Corp. and Dura-Bond Pipe, LLC., Defendants.

Civil Action No. 10-2013.

 

Oct. 19, 2010.

 

OPINION

 

RODRIGUEZ, District Judge.

 

Presently before the Court is a motion filed by Defendants Dura-Bond Industries, Inc., Dura-Bond Coating, Inc., Dura-Bond Development, Inc., Dura-Bond Steel Corp., and Dura-Bond Pipe, LLC. (hereinafter referred to collectively as “the Dura-Bond Defendants” or “Dura-Bond”), to dismiss all claims pursuant to Fed.R.Civ.P. 12(b)(6). [Dkt. Entry No. 8]. This case was transferred to the District of New Jersey from the Eastern District of Pennsylvania on January 19, 2010. [Dkt. Entry No. 40]. The Court has considered the written submissions of the parties and heard oral argument on the motion on September 29, 2010. For the reasons set forth below, the Dura-Bond Defendants’ motion will be granted.

 

The parties have agreed that Plaintiff will withdraw without prejudice all punitive damages claims against all parties. Therefore, the motion filed by Defendants PACCAR, Inc. and Peterbilt Motors Company to dismiss punitive damages [Dkt. Entry No. 6] will be dismissed and the portion of the motion filed by the Dura-Bond Defendants to dismiss punitive damages will be dismissed in part.

 

I. BACKGROUND

 

The background facts underlying this action are straightforward. On November 12, 2008, William Gangell, a New Jersey citizen, was operating a tractor-trailer loaded with a steel load in Franklin Township, New Jersey. (Complaint at ¶ 6.) The steel load shifted forward during a braking maneuver, which collapsed the bulkhead of the truck, pinning Gangell inside. (Complaint at ¶¶ 7-8.) Gangell died later that day as a result of the injuries he suffered in the accident. (Id.)

 

For the purpose of deciding this Motion to Dismiss, the facts alleged in the complaint and all reasonable inferences are accepted as true. See Oshiver v. Levin, Fishbein, Sedran & Berman, 38 F.3d 1380, 1384 (3d Cir.1994).

 

The facts surrounding the subsequent litigation stemming from this incident are less than straightforward and the Court does not here recount in full the extensive, convoluted, and much disputed procedural history. A detailed procedural history is found in the Eastern District of Pennsylvania’s Memorandum Order, transferring the case from the Eastern District of Pennsylvania to this Court. Durkin v. Paccar, Inc., et al., No. 09-4892, 2010 WL 176851 (E.D.Pa. Jan.19, 2010). The following is a brief synopsis.

 

 

Following the incident, Plaintiff Jessica Durkin, Gangell’s fiancé and administratrix of his estate, filed a lawsuit in New Jersey Superior Court, Middlesex County, on July 21, 2009. The complaint named as defendants the purported manufacturers of the tractor (PACCAR, Inc. and Peterbilt Motors Company), the purported manufacturer of the trailer (Wabash National Corp.), the purported manufacturers of the straps used to secure the steel load (Spanset, Inc. and ACRA International, LLC), and the purported manufacturers of the steel (Skyline Steel and ArcelorMittal). Although Skyline Steel was a New Jersey citizen, Wabash removed the action to the United States District Court for the District of New Jersey under the theory that Skyline was either a nominal party or fraudulently joined. Wabash asserted that Skyline was merely a broker for the steel and that the steel was manufactured by Nucor-Yamato Steel and then transported to Dura-Bond in Pennsylvania, where it was coated and bundled for delivery to Gangell’s employer.

 

In response to the Notice of Removal, Durkin terminated the New Jersey lawsuit and filed a nearly identical suit in the Pennsylvania Court of Common Pleas, Philadelphia County on July 21, 2009, naming the Dura-Bond Defendants, along with the previously named purported manufacturers of the tractor, trailer, and securing straps. The complaint states that the subject steel load was coated, bundled in pairs with nylon cording and distributed by Dura-Bond, a Pennsylvania citizen, to Gangell’s employer. (Complaint at ¶ 5.) The complaint alleges that the manner in which DuraBond coated, bundled, and distributed the steel load was a proximate cause of Gangell’s death and asserts that Dura-Bond is liable pursuant to theories of strict product liability (Count IV, Complaint at ¶¶ 30-36,) negligence (Count VIII, Complaint at ¶¶ 55-60,) and breach of implied warranty (Count IX, Complaint at ¶¶ 61-64.) In addition, Durkin, as administratrix of Gangell’s estate, asserts a claim under the Wrongful Death Act (Count X, Complaint at ¶¶ 65-68) and a claim for Survival Action (Count XI, Complaint at ¶¶ 69-71) against all defendants.

 

On October 23, 2009, Wabash removed the case to the District Court for the Eastern District of Pennsylvania. [Dkt. Entry No. 1]. Wabash asserted that although Dura-Bond is a Pennsylvania citizen, it was either fraudulently joined or a nominal party brought into this case solely to prevent removal. The Dura-Bond Defendants also filed the present motion to dismiss all claims, Defendants PACCAR and Peterbilt filed a motion to dismiss Durkin’s punitive damages claims, and all Defendants filed a motion to transfer venue. Durkin filed a motion to remand the case to the Philadelphia Court of Common Pleas. On January 19, 2010, Judge Schiller of the Eastern District of Pennsylvania issued an Order denying Durkin’s motion and held that Dura-Bond was fraudulently joined and its citizenship could be disregarded for the purpose of removal. Judge Schiller also granted Defendants’ motion to transfer venue to the United States District Court for the District of New Jersey. Durkin has agreed to withdraw all punitive damages claims against all parties with leave to amend her complaint as discovery may dictate. Presently before this Court is the Dura-Bond Defendants’ Motion to Dismiss pursuant to Rule 12(b)(6).

 

A case cannot be removed to federal court if a properly joined defendant is a citizen of the State in which the action is pending. Joinder is fraudulent when “there is no reasonable basis in fact or colorable ground supporting the claim against the joined defendant, or no real intention in good faith to prosecute the action against the defendant or seek a joint judgment.” Batoff v. State Farm Ins. Co., 977 F.2d 848, 851 (3d Cir.1992) (emphasis added). The transferring Court stated in its opinion denying Durkin’s motion to remand that “[r]eliable evidence indicates that Plaintiff has no real intention in good faith to prosecute her claim against the Dura-Bond Defendants.” Durkin v. Paccar, 2010 WL 176851, at *4. The transferring Court did not address the validity of Durkin’s complaint and expressly reserved for this Court to resolve the outstanding motion to dismiss. Id. at *7.

 

II. STANDARD OF REVIEW

 

A complaint should be dismissed pursuant to Rule 12(b)(6) if the alleged facts, taken as true, fail to state a claim. Fed.R.Civ.P. 12(b)(6). When deciding a motion to dismiss pursuant to Rule 12(b)(6), ordinarily only the allegations in the complaint, matters of public record, orders, and exhibits attached to the complaint, are taken into consideration. See Chester County Intermediate Unit v. Pa. Blue Shield, 896 F.2d 808, 812 (3d Cir.1990). It is not necessary for the plaintiff to plead evidence. Bogosian v. Gulf Oil Corp., 561 F.2d 434, 446 (3d Cir.1977). The question before the Court is not whether the plaintiff will ultimately prevail. Watson v. Abington Twp., 478 F.3d 144, 150 (2007). Instead, the Court simply asks whether the plaintiff has articulated “enough facts to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007).

 

“Although a district court may not consider matters extraneous to the pleadings, a document integral to or explicitly relied upon in the complaint may be considered without converting the motion to dismiss into one for summary judgment.” U.S. Express Lines, Ltd. v. Higgins, 281 F.3d 383, 388 (3d Cir.2002) (internal quotation marks and citations omitted) (emphasis deleted).

 

“A claim has facial plausibility  when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. —-, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009) (citing Twombly, 550 U.S. at 556). “Where there are well-pleaded factual allegations, a court should assume their veracity and then determine whether they plausibly give rise to an entitlement to relief.” Iqbal, 129 S.Ct. at 1950.

 

This plausibility standard requires more than a mere possibility that unlawful conduct has occurred. “When a complaint pleads facts that are ‘merely consistent with’ a defendant’s liability, it ‘stops short of the line between possibility and plausibility of ‘entitlement to relief.’ ‘ ” Id.

 

The Court need not accept “ ‘unsupported conclusions and unwarranted inferences,’ “ Baraka v. McGreevey, 481 F.3d 187, 195 (3d Cir.2007) (citation omitted), however, and “[l]egal conclusions made in the guise of factual allegations … are given no presumption of truthfulness.”   Wyeth v. Ranbaxy Labs., Ltd., 448 F.Supp.2d 607, 609 (D.N.J.2006) (citing Papasan v. Allain, 478 U.S. 265, 286, 106 S.Ct. 2932, 92 L.Ed.2d 209 (1986)); see also Kanter v. Barella, 489 F.3d 170, 177 (3d Cir.2007) (quoting Evancho v. Fisher, 423 F.3d 347, 351 (3d Cir.2005) (“[A] court need not credit either ‘bald assertions’ or ‘legal conclusions’ in a complaint when deciding a motion to dismiss.”)). Accord Iqbal, 129 S.Ct. at 1950 (finding that pleadings that are no more than conclusions are not entitled to the assumption of truth).

 

Further, although “detailed factual allegations” are not necessary, “a plaintiff’s obligation to provide the ‘grounds’ of his ‘entitlement to relief’ requires more than labels and conclusions, and a formulaic recitation of a cause of action’s elements will not do.” Twombly, 550 U.S. at 555 (internal citations omitted). See also Iqbal, 129 S.Ct. at 1949 (“Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.”).

 

Thus, a motion to dismiss should be granted unless the plaintiff’s factual allegations are “enough to raise a right to relief above the speculative level on the assumption that all of the complaint’s allegations are true (even if doubtful in fact).” Twombly, 550 U.S. at 556 (internal citations omitted). “[W]here the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged-but it has not ‘shown’-‘that the pleader is entitled to relief.’ ” Iqbal, 129 S.Ct. at 1950 (quoting Fed.R.Civ.P. 8(a)(2)).

 

III. CHOICE OF LAW

 

Before turning to the merits of Dura-Bond’s Motion to Dismiss, a choice-of-law analysis is required. This matter was transferred to the District of New Jersey from the Eastern District of Pennsylvania pursuant to 28 U.S.C. § 1404(a).  Therefore, this Court must follow the choice-of-law rules that would have been followed in the transferor court. See Van Dusen v. Barrack, 376 U.S. 612, 639, 84 S.Ct. 805, 11 L.Ed.2d 945 (1964); Lafferty v. St. Riel, 495 F.3d 72, 76-77 (3d Cir.2007). A district court sitting in diversity jurisdiction over state law claims applies the choice-of-law rules of the forum in which it sits, therefore, this Court must look to Pennsylvania’s choice-of-law rules. See Warner v. Auberge Gray Rocks Inn, Ltee., 827 F.2d 938, 939-40 (3d Cir.1987) (quoting Klaxon v. Stentor Elec. Mfg. Co., 313 U.S. 487, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941)).

 

“For the convenience of parties and witnesses, in the interest of justice, a district court may transfer any civil action to any other district where it might have been brought.” 28 U.S.C. § 1404(a). The decision whether to transfer an action pursuant to section 1404(a) rests in the Court’s discretion. Lony v. E.I. DuPont de Nemours & Co., 886 F.2d 628, 631-32 (3d Cir.1989).

 

Pennsylvania applies a “flexible rule which permits analysis of the policies and interests underlying the particular issue before the court” and directs courts to apply the law of the State with the “most interest in the problem.”   Griffith v. United Air Lines, Inc., 416 Pa. 1, 203 A.2d 796, 805 (Pa.1964). Under this governmental interest approach, this Court must first determine whether there is a conflict between the relevant laws of competing jurisdictions and, in the event of a “true conflict,” engage in a contacts-and-interests analysis to determine which State’s law should apply. See Specialty Surfaces Intern., Inc. v. Continental Cas. Co., 609 F.3d 223, 230 (3d Cir.2010).

 

Here, it is possible that both New Jersey and Pennsylvania may have an interest in the disposition of the present action. Durkin is a New Jersey citizen. The incident giving rise to this action took place in New Jersey and resulted in the death of a New Jersey citizen. However, Dura-Bond is a Pennsylvania citizen who allegedly coated and bundled the subject steel load in Pennsylvania. Durkin alleges various product liability causes of action against Dura-Bond sounding in strict liability, negligence and breach of implied warranty that are governed by state laws.

 

The Eastern District of Pennsylvania considered the interests of both States when ruling on the motion to transfer venue and intimated that New Jersey law will likely apply to this case; however, Judge Schiller expressly declined to make a determination as to the applicable substantive law. See Durkin v. Paccar, 2010 WL 176851, at& n. 4.

 

There is clearly a conflict between the product liability laws of New Jersey and Pennsylvania. Pennsylvania recognizes separate causes of action for negligence, strict liability, and breach of implied warranty when a plaintiff is injured by a product. See Soufflas v. Zimmer, 474 F.Supp.2d 734, 751-54 (E.D.Pa.2007); 13 Pa. Cons.Stat. §§ 2314, 2315. But in New Jersey, “the causes of action for negligence, strict liability and implied warranty have been consolidated into a single product liability cause of action, the essence of which is strict liability.” Torres v. Lucca’s Bakery, 487 F.Supp.2d 507, 513 (D.N.J.2007) (quoting Green v. General Motors Corp., 310 N.J.Super. 507, 709 A.2d 205, 209 (N.J.Super.Ct.App.Div.1998)); N.J. Stat. Ann. § 2A: 58C-2. This distinction in the product liability laws of New Jersey and Pennsylvania represents a genuine conflict and requires the Court to examine the policies underlying these laws and the quality of the contacts with each state. See Torres, 487 F.Supp.2d at 513 & n. 11.

 

The policies underlying the product liability laws of both states are essentially the same. Both states “seek to compensate people injured by defective products and regulate conduct of manufacturers and distributors … within the state.” Id. at 513. Here, New Jersey’s policy of compensating people who are injured by defective products in the State would be furthered by the application of New Jersey law. Likewise, Pennsylvania’s policy of regulating the conduct of its manufacturers would be advanced by applying Pennsylvania law. Because these factors are in equipoise, the quality of each States’ contacts to the underlying action is determinative.

 

New Jersey has the most substantial contact with this action. Although the allegedly defective steel was manufactured in Pennsylvania, the majority of events essential to this litigation occurred in New Jersey. Gangell was a New Jersey citizen at the time of his death. The steel load was delivered to Gangell’s employer in New Jersey, loaded on Gangell’s truck in New Jersey, and was being transported on New Jersey roads at the time of the accident. New Jersey clearly has a stronger interest in the application of its laws than Pennsylvania. See id. at 514 (holding that New Jersey law applied for essentially the same reasons as presented here). Therefore, New Jersey substantive law applies. As a federal court sitting in diversity, this Court relies on federal precedent to determine the propriety of a motion to dismiss but looks to New Jersey state law to determine if the complaint states a valid cause of action. See Gasperini v. Ctr. for Humanities, Inc., 518 U.S. 415, 427, 116 S.Ct. 2211, 135 L.Ed.2d 659 (1996) (noting that “federal courts sitting in diversity apply state substantive law and federal procedural law”); Erie R. Co. v. Tompkins, 304 U.S. 64, 78, 58 S.Ct. 817, 82 L.Ed. 1188 (1938).

 

“A federal court under Erie is bound to follow state law as announced by the highest state court.” Edwards v. HOVENSA, LLC, 497 F.3d 355, 361 (3d Cir.2007). “Where an intermediate appellate state court rests its considered judgment upon the rule of law which it announces, that is a datum for ascertaining state law which is not to be disregarded by a federal court unless it is convinced by other persuasive data that the highest court of the state would decide otherwise.” Budget Rent-A-Car Sys., Inc. v. Chappell, 407 F.3d 166, 174 (3d Cir.2005) (quoting West v. Am. Tel. & Tel. Co., 311 U.S. 223, 237, 61 S.Ct. 179, 85 L.Ed. 139 (1940)).

 

III. DISCUSSION

 

Durkin alleges that Dura-Bond is liable as the manufacturer of the subject steel load under theories of strict liability (Count IV), negligence (Count VIII), and breach of implied warranty (Count IX). The central focus of each claim is that the subject steel load was either coated, refined, modified, altered, produced, bundled, delivered, marketed, or distributed in a manner that made the product defective or unreasonably dangerous to load and transport.0 Dura-Bond does not dispute that it manufactured, bundled, and delivered the subject steel load to Gangell’s employer. However, DuraBond asserts that the complaint fails to state a claim for relief because it does not sufficiently allege facts necessary to establish that the Dura-Bond product was defective or the proximate cause of Gangell’s injury.1

 

In addition, Durkin asserts derivative claims under the Wrongful Death Act (Count X) and the Survival Statute (Count XI) for the same alleged conduct. Because these causes of action, as they apply to the Dura-Bond Defendants, are dependent upon the validity of counts IV, VIII, and IX, they are not addressed individually herein.

 

0. A comparison between the nearly identical language of Durkin’s strict liability cause of action, (Complaint at ¶ ¶ 32(a)-(h)) and negligence cause of action, (Complaint at ¶ ¶ 58(a)-(h)) reveals that both counts attempt to predicate liability on the same alleged conduct by Dura-Bond.

 

1. A major thrust of Dura-Bond’s argument in support of its motion to dismiss is that Durkin was merely seeking to prevent removal to a federal court by adding Dura-Bond as a defendant to this action. (Motion to Dismiss at pp. 5, 7.) At oral argument, Dura-Bond also argued that the factors that informed the District Court for the Eastern District of Pennsylvania’s fraudulent joinder analysis should be considered by this Court when analyzing the merits of Durkin’s claim. The law of the case doctrine precludes courts from deciding issues that were resolved earlier in the litigation. Pub. Interest Research Group of N.J., Inc. v. Magnesium Elektron, Inc., 123 F.3d 111, 116 (3d Cir.1997). Thus, Dura-Bond seems to contend that Judge Schiller’s finding of fraudulent joinder warrants dismissal under the present Rule 12(b) (6) motion. However, “the inquiry into the validity of a complaint triggered by a motion to dismiss under Rule 12(b)(6) is more searching than that permissible when a party makes a claim of fraudulent joinder.” Batoff, 977 F.2d at 852. For this reason, Judge Schiller expressly declined to rule on Dura-Bond’s Motion to Dismiss. Durkin v. Paccar, 2010 WL 176851, at(“This Court will leave it to the judge in the District of New Jersey to assess the outstanding motions, all of which are substantive.”). Therefore, Dura-Bond’s Rule 12(b)(6) motion to dismiss for failure to state a claim cannot be supported by the previous determination of fraudulent joinder.

 

A. STRICT LIABILITY CLAIM

 

Durkin first asserts that Dura-Bond is strictly liable as the manufacturer of the subject steel load (Count IV, Complaint at ¶ ¶ 32(a)-(h).) “A manufacturer has a duty to make sure that its manufactured products placed into the stream of commerce are suitably safe when used for their intended or reasonably foreseeable purposes.” Brown v. U.S. Stove Co., 98 N.J. 155, 484 A.2d 1234, 1239 (N.J.1984) (citing Soler v. Castermaster, Div. Of H.P.M. Corp., 98 N.J. 137, 484 A.2d 1225, 1229 (N.J.1984)). New Jersey courts recognize “normal handling” as a foreseeable use of a product. Jurado, 619 A.2d at 1318. As a result, a manufacturer who places into the stream of commerce a defective product which causes injury to people who routinely handle and transport the product may be held strictly liable for that harm.

 

In New Jersey, “any claim or action brought by a claimant for harm caused by a product, irrespective of the theory underlying the claim, except actions for harm caused by breach of an express warranty” are subsumed by the Products Liability Act, N.J. Stat. Ann. § 2A: 58C-1 et seq. (“PLA”). See In re Lead Paint Litigation, 191 N.J. 405, 924 A.2d 484, 503 (N.J.2007) (noting that “the PLA is both expansive and inclusive, encompassing virtually all possible causes of action in relating to harms caused by consumer or other products”). The New Jersey Legislature enacted the PLA to establish clear rules with respect to certain matters relating to actions for damages for harm caused by products. N.J. Stat. Ann. § 2A:58C-1. Therefore, if a claim falls within the scope of the PLA, the sole method to prosecute the claim is under the Act. See Green v. Gen. Motors Corp., 310 N.J.Super. 507, 709 A.2d 205, 209 (N.J.Super.Ct.App.Div.1998) (“Under the [PLA] … the causes of action for negligence, strict liability and implied warranty have been consolidated into a single product liability cause of action, the essence of which is strict liability.”) The PLA provides:

 

A manufacturer or seller of a product shall be liable in a product liability action only if the claimant proves by a preponderance of the evidence that the product causing the harm was not reasonably fit, suitable or safe for its intended purpose because it: (a.) deviated from the design specifications, formulae, or performance standards of the manufacturer or from otherwise identical units manufactured to the same manufacturing specifications or formulae, or (b.) failed to contain adequate warnings or instructions, or (c.) was designed in a defective manner.

 

N.J. Stat. Ann. § 2A: 58C-2. Therefore, a plaintiff may assert a strict liability cause of action against a product manufacturer based on an unsafe design defect, manufacturing defect, or failure to warn theory of liability. Durkin’s strict liability count contains claims based on theories of design defect (Complaint at ¶ 32(a)-(e),) manufacturing defect (Complaint at ¶ 32(f),) and failure to warn (Complaint at ¶ 32(g)-(h); all cognizable under New Jersey’s statutory scheme.

 

To plead a prima facie cause of action under the PLA, a plaintiff must show that the defendant manufactured the product, that a reasonably foreseeable user was injured, that the product was defective, that the defect existed when it left the defendant’s control, and that the defect was the factual and proximate cause of the plaintiff’s injury. Myrlak v. Port Auth. of N.Y. and N.J., 157 N.J. 84, 723 A.2d 45, 52 (N.J.1999); Zaza v. Marquess & Nell, Inc., 144 N.J. 34, 675 A.2d 620, 627 (N.J.1996); Jurado v. W. Gear Works, 131 N.J. 375, 619 A.2d 1312, 1317 (N.J.1993). In New Jersey, a plaintiff must establish the same elements to state a claim under a theory of design defect, manufacturing defect, or failure to warn; the only difference is the nature of the alleged defect. Zaza, 675 A.2d at 629; Matthews v. University Loft Co., 387 N.J.Super. 349, 903 A.2d 1120, 1128 (N.J.Super.Ct.App.Div.2006).

 

To state a claim upon which relief may be granted the complaint must allege facts to reasonably infer that the Dura-Bond steel load was defective. Defectiveness may not be inferred from the fact that someone was injured by the product. Zaza, 675 A.2d at 627. Rather, the plaintiff must demonstrate that the product was defective because it “was not reasonably fit, suitable or safe for its intended purpose.” N.J. Stat. Ann. § 2A: 58C-2; Myrlak, 723 A.2d at 52 (“Although a plaintiff is relieved from proving fault [under the PLA,] that plaintiff must nonetheless prove that the product was defective under the common law jurisprudence that was incorporated into the Act.”). The term “defect” is not self-defining, however, and has no accepted meaning that is applicable in all strict liability cases. O’Brien v. Muskin Corp., 94 N.J. 169, 463 A.2d 298, 303-04 (N.J.1983). Ultimately, whether a product is defective requires a policy judgment about the specific product in question. See Indian Brand Farms, Inc. v. Novartis Crop Protection Inc., 617 F.3d 207, 2010 WL 3122815, at (3d Cir.2010).

 

1. Design Defect

 

In design defect claims, ordinarily a product is regarded as defective if the risk of harm created by the product outweighs its usefulness. Id.; Lewis v. Am. Cyanamid Co., 155 N.J. 544, 715 A.2d 967, 980 (N.J.1998); Jurado, 619 A.2d at 1317. First, the fact-finder must “determine whether the plaintiff used the product in an objectively foreseeable manner.” Indian Brand, 2010 WL 3122815, at 15. Next, the fact-finder must balance various factors relevant to the safety and utility of the product and determine where the product falls on the risk-utility continuum. O’Brien, 463 A.2d at 304-05. The seven factors articulated by the New Jersey Supreme Court are:

 

1. The usefulness and desirability of the product-its utility to the user and to the public as a whole.

 

2. The safety aspects of the product-the likelihood that it will cause injury, and the probable seriousness of the injury.

 

3. The availability of a substitute product [that] would meet the need and not be as unsafe.

 

4. The manufacturer’s ability to eliminate the unsafe character of the product without impairing its usefulness or making it too expensive to maintain its utility.

 

5. The user’s ability to avoid danger by the exercise of care in the use of the product.

 

6. The user’s anticipated awareness of the dangers inherent in the product and their avoidability, because of general public knowledge of the obvious condition of the product or of the existence of suitable warnings or instructions.

 

7. The feasibility, on the part of the manufacturer, of spreading the loss by setting the price of the product or carrying liability insurance.

 

Truchan v. Nissan Motor Corp.. In U.S.A., 316 N.J.Super. 554, 720 A.2d 981, 985 (N.J.Super.Ct.App.Div.1998) (citing O’Brien ). In most cases the analysis will turn on “whether the reasonably foreseeable risk of harm posed by the reasonably foreseeable use of the product could have been reduced or avoided by a reasonable alternative design.” Indian Brand, 2010 WL 3122815, at 15 (citing Lewis, 715 A.2d at 980). However, the PLA has drastically changed the method of analyzing design defects by converting some factors of the risk-utility analysis into absolute bars to liability. See Roberts v. Rich Foods, Inc., 139 N.J. 365, 654 A.2d 1365, 1371 (N.J.1995). The PLA provides:

In any product liability action against a manufacturer or seller for harm allegedly caused by a product that was designed in a defective manner, the manufacturer or seller shall not be liable if … The characteristics of the product are known to the ordinary consumer or user, and the harm was caused by an unsafe aspect of the product that is an inherent characteristic of the product and that would be recognized by the ordinary person who uses or consumes the product with the ordinary knowledge common to the class of persons for whom the product is intended …

 

N.J. Stat. Ann. § 2A: 58C-3(a)(2). In the wake of the PLA, a plaintiff may not avoid the obvious-danger/consumer-expectations aspect of the risk-utility. Roberts, 654 A.2d at 1371 (noting that “a product that satisfies the 3a(2) standard is, by statutory definition, not defectively designed”). Therefore, a plaintiff will rarely be able to present a valid design defect cause of action without addressing why the dangerous characteristics of the product would not be recognized by the ordinary person who uses it.

 

Durkin alleges that the coated and bundled Dura-Bond steel product constituted a defective design because:

 

… it was neither coated, refined, modified, altered, produced, bundled, delivered, marketed, nor distributed….

 

(a) … in a manner that would adequately protect tractor trailer operators during an accident and/or braking maneuver …;

 

(b) … in a manner that would prevent or limit the likelihood of a subject load shifting during an accident and/or braking maneuver …;

 

(c) … in a manner that would prevent or limit the risk of the load shifting forwards during an accident and/or braking maneuver …;

 

(d) … with adequate measures to ensure that proper friction existed in the load, including but not limited to proper and adequate placement of nylon cording, so as to prevent and/or limit the risk of the load shifting during an accident and/or braking maneuver …;

 

(e) … in a way that allowed cargo straps to be appropriately utilized to secure the subject steel load during transport;

 

(Complaint at ¶¶ 32(a)-(e).) Durkin further alleges that “[f]or the reasons set forth above, the subject steel load was unreasonably dangerous to foreseeable tractor trailer operators … transporting the subject steel load in an ordinary and foreseeable manner.” (Complaint at ¶ 34.) The center of gravity of Durkin’s design defect claim is that the manner in which the Dura-Bond steel is coated, bundled and distributed creates a product with a low coefficient of friction that is difficult for truck drivers to secure for transportation.

 

These allegations are no more than conclusory statements that the bundled and coated Dura-Bond steel is unreasonably dangerous because it has a friction profile that may cause it to shift during transportation. Durkin does not allege facts to support why this characteristic of the Dura-Bond product makes it unreasonably unfit, unsuitable, or unsafe. It is well known that heavy objects, like fifty foot units of steel, may shift or slide during handling and transportation. For this reason, the federal government and the State of New Jersey have promulgated extensive rules and regulations for motor carriers to prevent against the shifting and falling of loads being transported on public roads. See, e.g. 49 C.F.R. §§ 390.1 (Federal Motor Carrier Safety Regulations, generally), 393.100-.114 (discussing regulations for protection against shifting and falling cargo), 393.116-.136 (discussing requirements for securing specific commodity types); N.J. Admin. Code 13:60-2.1 (adopting and incorporating by reference the Federal Motor Carrier Safety Regulations). Durkin does not assert why Dura-Bond, as the manufacturer, is required to “limit the likelihood” or “limit the risk” of the obvious potential that the Dura-Bond product may shift during transportation. As a result, Durkin’s complaint does not allege sufficient facts to plead a plausible design defect claim under New Jersey law.

 

2. Manufacturing Defect

 

A product may also be defectively manufactured under the PLA if it “deviated from the design specifications, formulae, or performance standards of the manufacturer or from otherwise identical units manufactured to the same manufacturing specifications or formulae.” N.J. Stat. Ann. § 2A: 58C-2. “Common examples of manufacturing defects are products that are physically flawed, damaged, or incorrectly assembled.” Ebenhoech v. Koppers Industries, Inc., 239 F.Supp.2d 455, 473 (D.N.J.2002) (citing Restatement (Third) of Torts § 2 (comment)). To establish the presence of a manufacturing defect, a plaintiff is required to demonstrate, “in a general sense and as understood by a layman, that something was wrong with the product.” Id. (citing Scanlon v. Gen’l Motors Corp., 65 N.J. 582, 326 A.2d 673, 677 (N.J.1974) (internal quotation omitted)).

 

Durkin alleges that the Dura-Bond product “was defective and unreasonably dangerous because it failed to meet all applicable and reasonable safety standards including but not limited to internal standards and federal safety standards and other reasonable standards.” (Complaint at ¶ 32(f).) However, Durkin provides no factual support for how the subject steel load deviated from the Dura-Bond standard. The complaint alleges that something was wrong with the Dura-Bond product but it fails to identify what was wrong. This threadbare recital of an element of a cause of action and conclusory statement are insufficient to state a claim under Iqbal, — U.S. —-, 129 S.Ct. 1937, 173 L.Ed.2d 868. Therefore, to the extent that this claim seeks to allege that the subject steel load was defective because it deviated from Dura-Bond’s internal standards and suffered from a manufacturing defect, it fails to state a claim.

 

3. Failure to Warn

 

Even if a product is properly designed and manufactured, it may still be defective if it fails “to contain adequate warnings or instructions.” N.J. Stat. Ann. 2A: 58C-2. In a failure to warn case, the alleged defect is not in the design or the manufacturing of the product. Rather, “the defect is in the failure to warn unsuspecting users that the product can potentially cause injury.” Zaza, 675 A.2d at 632. The manufacturer has a duty to warn of “dangers” that it “should have known on the basis of reasonably obtainable or available knowledge.” Feldman v. Lederle Labs., 97 N.J. 429, 479 A.2d 374, 376 (N.J.1984). The PLA defines what constitutes an adequate warning as follows:

 

An adequate product warning or instruction is one that a reasonably prudent person in the same or similar circumstances would have provided with respect to the danger and that communicates adequate information on the dangers and safe use of the product, taking into account the characteristics of, and the ordinary knowledge common to the persons by whom the product is intended to be used …

 

N.J. Stat. Ann. 2A: 58C-4. Thus, “when the foreseeable risks of harm posed by the product could have been reduced or avoided by the provision of reasonable … warnings … and the omissions of the … warnings renders the product not reasonably safe.” Indian Brand, 617 F.3d 207, 2010 WL 3122815, at * 13.

 

The essence of Durkin’s failure to warn claim is that the Dura-Bond product was defective and unreasonably dangerous “due to the inadequacy or absence of warning stickers, placards, or any proper documentation, or notice to alert tractor trailer operators transporting the subject steel load” to the potential for the coated and bundled steel to shift during transportation. (Complaint at ¶¶ 32(g)-(h).) Durkin merely alleges that the Dura-Bond product may shift during transportation and that no warning was provided to tractor trailer drivers who transport the load. Durkin does not allege that a reasonably prudent manufacturer would have provided such a warning. The Dura-Bond Defendants argue that it “has never once had an issue with the coating of the steel relative to the shifting of cargo during transport.” (Motion to Dismiss at p. 6.) In fact, Dura-Bond notes that “the same coated steel was transported to [Gangell’s employer] in several shipments without incident. (Id. at p. 7.) Durkin does not allege facts tending to show that Dura-Bond knew or should have known that the coated steel would be dangerous to transport. Further, Durkin does not allege why an ordinary tractor trailer operator transporting steel loads, without a warning, would not appreciate the potential for the Dura-Bond product to shift during transportation. As a result, the complaint does not allege sufficient facts to support a plausible strict liability claim predicated on a failure to warn.

 

Because the Dura-Bond product was not alleged to be defective, there is no need to address whether or not the complaint sufficiently pleads the other elements of a prima facie cause of action under the PLA. The law does not impose absolute liability upon a manufacturer simply because a plaintiff was injured by the manufacturer’s product. Myrlak, 723 A.2d at 52. The Dura-Bond Defendant’s motion to dismiss is granted as to the strict product liability claims.

 

B. NEGLIGENCE & BREACH OF WARRANTY CLAIMS

 

Durkin also alleges that Dura-Bond is liable as the manufacturer of the subject steel load under theories of negligence (Count VIII, Complaint at ¶¶ 55-60,) and breach of warranty. (Count IX, Complaint at ¶¶ 61-64.) These claims fall under the definition of a “product liability action,” as defined by the PLA and are, therefore subsumed by the strict liability cause of action. See N.J. Stat. Ann. 2A: 58C-1,-2; Sinclair v. Merck & Co., Inc., 195 N.J. 51, 948 A.2d 587, 595 (N.J.2008); see also Fellner v. Tri-Union Seafoods, LLC, 2010 WL 1490927, at(D.N.J.2010) (noting that “if the facts of a case suggest that the claim is about defective manufacture, flawed product design, or failure to give an adequate warning, then the PLA governs and the other claims are subsumed”). “To determine whether the PLA subsumes a particular claim, courts examine the essential nature of the claim presented and decide whether the claim would traditionally be considered a products claim .” Rodnite v. Hovnanian Enterprises, Inc., No. 08-3787, 2010 WL 3079576, at(D.N.J. Aug.5, 2010). This is not to say that the PLA subsumes all causes of action involving a “harm” caused by a “product.” New Hope Pipe Liners, LLC v. Composites One, LCC, No. 09-3222, 2009 WL 4282644, at(D.N.J. Nov.30, 2009). A negligence claim predicating liability on a breach of duty arising independent of the manufacturer’s duty to provide a non-defective product would not be considered a product liability action even if the harm was caused by the product. Likewise, a claim sounding in breach of an express warranty is excluded from the ambit of the PLA, as this cause of action sounds in misrepresentation rather than product liability.

 

Since the passage of the PLA, New Jersey courts have repeatedly held that claims of negligent manufacture and breach of implied warranty are no longer viable as separate causes of action for harm caused by a product. See, e.g. Port Auth. of N.Y. & N.J. v. Arcadian Corp., 189 F.3d 305, 313 (3d Cir.1999) (“Under New Jersey law negligence is no longer viable as a separate claim for harm caused by a product.”); Brown ex rel. Estate of Brown v. Philip Morris Inc., 228 F.Supp.2d 506, 516 (D.N.J.2002) (“Because the [PLA] generally subsumes common-law product liability claims, the Third Circuit, the New Jersey District Court, and New Jersey State courts consistently have dismissed product liability claims based on common-law theories when those theories allege harm caused by a product…. In light of the [PLA] and that uniform decisional law interpreting that statutory provision, the Court determines that the [PLA] clearly subsumes plaintiff’s common-law claims …”); Green, 709 A.2d at 209 (“Under the [PLA] … the causes of action for negligence, strict liability and implied warranty have been consolidated into a single product liability cause of action, the essence of which is strict liability.”); Tirrell v. Navistar Intern., Inc., 248 N.J.Super. 390, 591 A.2d 643, 647 (N.J.Super.Ct.App.Div.1991) (noting that “common-law actions for negligence or breach of warranty are subsumed within the new statutory cause of action”).

 

The “essential nature” of Durkin’s allegations are premised in design defect and failure to warn; traditional products liability actions. Durkin does not assert that DuraBond owed Gangell a duty of care in addition to its duty as a product manufacturer. Durkin also fails to allege that Dura-Bond made any affirmative representation giving rise to a potential breach of express warranty action. Therefore, Durkin’s negligence and breach of implied warranty claims are subsumed by the strict liability action under the PLA. Sinclair, 948 A.2d at 595. Dura-Bond’s motion to dismiss is granted as to the negligence claim and the breach of warranty claim.

 

CONCLUSION

 

Durkin fails to allege facts sufficient to establish a plausible cause of action under a theory of strict product liability. Durkin’s claims predicated on negligence and breach of warranty sound in product liability and are subsumed by the strict liability cause of action. Durkin’s remaining claims under the Wrongful Death Act and Survival Statute are dependant upon the viability of the products liability causes of action. Therefore, the present Motion to Dismiss all claims as to the Dura-Bond Defendants will be granted. An appropriate Order shall follow.

Court of Appeals of Wisconsin.

Paul A. ZARNSTORFF and Nadine B. Zarnstorff, Plaintiffs-Appellants,

v.

NEENAH CREEK CUSTOM TRUCKING, Defendant,

Acuity, a mutual insurance company, Defendant-Respondent.

No. 2009AP1321.

 

Oct. 14, 2010.

 

Appeal from an order of the circuit court for Adams County: Charles A. pollex, Judge. Affirmed.

 

Before VERGERONT, P.J., LUNDSTEN and HIGGINBOTHAM, JJ.

 

¶ 1 VERGERONT, P.J.

 

The primary issue on this appeal is whether the auto exclusion in the commercial general liability (CGL) policy issued by Acuity, a mutual insurance company, to Neenah Creek Custom Trucking applies to exclude coverage for injuries sustained by Paul and Nadine Zarnstorff. They were injured in an accident that occurred when a Neenah Trucking employee ran across the highway after checking to see whether a tractor and the trailer it pulled (semi) could fit under the underpass. The semi was being operated by another employee. The circuit court concluded the exclusion applies. The Zarnstorffs appeal. We agree with the circuit court. We conclude that the conduct of the person in crossing the highway to assess the height of the underpass for the purpose of assisting the driver of the semi arises out of the use of the semi. Therefore, the conduct of that person, like that of the driver, comes within the auto exclusion of the CGL policy. For the reasons we explain in this opinion, this conclusion means that the conduct of the person crossing the highway is not an independent concurrent cause of the Zarnstorffs’ injuries.

 

¶ 2 The Zarnstorffs also appeal the circuit court’s denial of their post-verdict motion to preclude Acuity from contesting coverage under the CGL policy because it did not produce this policy in response to discovery requests or during the trial. Acuity did produce pre-trial the commercial auto policy it had issued Neenah Trucking, did not contest coverage under this policy, and paid the Zarnstorffs the available policy limit under the auto policy after a verdict was returned in the Zarnstorffs’ favor. We conclude, based on the facts of this case and the arguments presented, that the circuit court did not erroneously exercise its discretion in declining to impose the requested sanction.

 

¶ 3 Accordingly, we affirm the circuit court’s decision on motions after verdict and its final order dismissing the action upon a finding that Acuity has satisfied the Zarnstorffs’ judgment against it by paying $995,000 under the auto policy.

 

BACKGROUND

 

¶ 4 The following facts are not disputed for the purposes of this appeal. Two employees of Neenah Trucking, Robert Korb and Joe Houle, loaded a log skidder onto a trailer for transport. Korb was to drive the tractor pulling the trailer on Interstate Highway I-39, a four-lane divided highway. Korb and Houle were unsure whether the semi would clear the two highway overpasses on their route, so Houle accompanied the semi in his own car to check for clearance.

 

¶ 5 As Korb approached one of the overpasses, heading south, he came to a near stop, blocking the right lane of highway traffic. Houle pulled off the highway beyond the overpass. He ran across two lanes of the highway to the center median to gauge whether the trailer and its load would fit under the overpass.

 

¶ 6 At this time the Zarnstorffs were driving southbound on the highway in the left lane, with another driver, William Wegert, in front of them in the same lane. When Wegert was approximately 300 or 400 feet from the overpass, Wegert saw Houle run across the highway to the center median. When Wegert was about 20 feet from Houle, Houle dashed back across the highway in front of Wegert. Wegert braked rapidly to avoid hitting Houle. Unaware of Houle’s actions, Paul Zarnstorff braked when he saw Wegert brake, but was unable to stop fast enough to avoid rear-ending Wegert. Paul Zarnstorff sustained major injuries as a result of the collision, and Nadine Zarnstorff sustained minor injuries.

 

¶ 7 The Zarnstorffs filed this action against Neenah Creek and its insurer, Acuity. The first amended complaint alleged that the negligent acts of Neenah Creek, committed by its employees Korb and Houle, caused injuries to the Zarnstorffs. Korb, the complaint alleged, was negligent in stopping the vehicle where he did and in the operation of the vehicle. Houle, the complaint alleged, was negligent in failing to maintain a proper lookout, failing to yield the right of way to approaching vehicles, and impeding traffic. The Zarnstorffs sought recovery from Acuity under the commercial auto policy it had issued Neenah Trucking. Neenah Trucking did not dispute coverage. This policy has a limit of $1,000,000, of which $995,000 was available to the Zarnstorffs. The jury returned a verdict of $1,947,675.24 in damages, which was reduced to $1,558,140 .19 due to Paul Zarnstorff’s contributory negligence.

 

¶ 8 After the verdict was rendered, the Zarnstorffs learned that Acuity had also issued Neenah Creek a commercial general liability (CGL) policy. We discuss more details on this occurrence later in the opinion. For the present, it suffices to say that the Zarnstorffs and Acuity disagreed whether this policy provided coverage. Acuity, Neenah Creek, and the Zarnstorffs stipulated to the entry of an order for partial judgment and partial satisfaction of judgment pursuant to which Acuity paid the full $995,000 available under the auto policy in exchange for the Zarnstorffs’ agreement not to collect the judgment balance of $563,140.19 from Neenah Creek or its employees. The stipulated order further provided that the dispute over coverage under the CGL policy for the judgment balance would be resolved in the post-trial phase of the litigation.

 

¶ 9 In the circuit court briefing on the CGL policy, Acuity contended the CGL policy did not provide coverage because of the exclusion for “[b]odily injury or property damage arising out of the … use … of any … auto … owned or operated by … any insured. Use includes operation and loading or unloading.”  The Zarnstorffs acknowledged that this exclusion applied to Korb’s conduct in operating the semi. However, they contended this exclusion did not apply to Houle’s conduct in crossing the highway in front of the Wegert vehicle because that conduct was not a “use” of the semi.

 

Acuity also contended that the mobile equipment exclusion was applicable. This provision excludes coverage for “[b]odily injury or property damage arising out of: [t]he transportation of mobile equipment by an auto owned or operated by … any insured.” The circuit court concluded this was applicable, and the Zarnstorffs challenge this ruling on appeal. Because we conclude coverage for Houle’s negligence in running across the highway is excluded under the auto exclusion, it is unnecessary to address the mobile equipment exclusion.

 

¶ 10 The Zarnstorffs also argued that, whether or not the exclusion in the CGL policy applied, Acuity should be estopped from denying coverage because it failed to produce the CGL policy before or during trial in response to discovery requests.

 

¶ 11 The circuit court concluded that Houle’s conduct arose out of the use of the semi, and thus the auto exclusion applied. The circuit court declined to preclude Acuity from contesting coverage as a sanction. The court therefore granted Acuity’s motion to limit the Zarnstorffs’ recovery on the verdict to the auto policy limits.

 

DISCUSSION

 

¶ 12 On appeal the Zarnstorffs contend the circuit court erred in deciding there was no coverage under the CGL policy for Houle’s conduct in crossing the highway. They assert that this policy plainly makes an initial grant of coverage and the auto exclusion does not apply because, under Lawver v. Boling, 71 Wis.2d 408, 238 N.W.2d 514 (1976), Houle’s negligent conduct was an independent concurrent cause of their injuries. They acknowledge that Korb’s negligent conduct in operating the vehicle is excluded.

 

¶ 13 Acuity responds that Houle’s conduct is not an independent concurrent cause because it arose out of use of the vehicle and therefore comes within the exclusion. Acuity does not dispute that Houle’s conduct comes within the CGL policy’s initial grant of coverage and therefore it is covered unless an exclusion is applicable. Acuity also does not contend that Houle’s conduct was not negligent or that it was not a contributing cause of the Zarnstorffs’ injuries.

 

The verdict questions did not differentiate between the negligence of Houle and Korb but asked whether Neenah Creek was negligent, whether its negligence caused the Zarnstorffs injuries, and what its percentage of negligence was, “taking [its] negligence … to be the total negligence” of Korb, if any, Houle, if any, and another employee.

 

¶ 14 The Zarnstorffs also challenge the court’s decision not to estop Acuity from disputing coverage as a sanction for not producing the CGL policy before or during the trial. We discuss the parties’ positions on this issue in Section II of this opinion.

 

I. Auto Exclusion

 

¶ 15 Resolution of the parties’ dispute over the applicability of the auto exclusion requires that we apply insurance policy language to undisputed facts. This presents a question of law, which we review de novo. Smith v. Atlantic Mut. Ins. Co., 155 Wis.2d 808, 810, 456 N.W.2d 597 (1990).

 

¶ 16 We begin with a discussion of Lawver, on which the Zarnstorffs rely. In Lawver, 71 Wis.2d at 410, as in this case, there was both an auto policy and a general liability policy. The accident occurred when the insured was operating a truck on his farm. Id. at 411. A rope that was tied to the back of the truck was attached to cables that were connected to a platform on which his son-in-law was working on barn repairs. Id. The rope broke and his son-in-law fell to the ground and was injured. Id. The auto policy provided coverage for damages because of “ ‘bodily injury … arising out of the ownership, maintenance or use’ of an automobile.” Id. at 412. The general liability policy provided coverage for all amounts the insured was “ ‘legally obligated to pay as damages because of bodily injury,’ “ but did not apply “to the ownership, maintenance, operation, use, loading or unloading of … automobiles.” Id.

 

We note that the auto exclusion in Lawver v. Boling, 71 Wis.2d 408, 238 N.W.2d 514 (1976), did not contain the phrase “arising out of,” which appears in Acuity’s auto exclusion.

 

¶ 17 The auto insurer in Lawver argued that the auto policy did not provide coverage because the injury arose out of negligence in selecting materials and making the rigging and did not arise out of use of the truck. Id. at 415. The supreme court rejected this argument, concluding the truck was an “integral part of the apparatus employed in repairing the barn” and was in operation at the time of the accident. Id. In arriving at this conclusion, the court stated: “[a]s used in a liability insurance policy, the words ‘arising out of’ are very, broad, general and comprehensive. They are commonly understood to mean originating from, growing out of, or flowing from, and require only that there be some causal relationship between the injury and the risk for which coverage is provided.” Id. (citation omitted).

 

¶ 18 The court then turned to the issue of the exclusion in the general liability policy. The court stated the issue here to be “whether a conclusion that the injuries arose out of the use of the truck for purposes of establishing coverage under the [auto policy] is determinative of whether the truck was ‘used’ so as to exclude coverage under the [general liability] policy.” Id. at 417. The court answered this question by adopting the rationale of a California case: if an accident is caused jointly by an excluded risk and an insured risk, the exclusion in the policy for the one does not exclude the other. Id. at 421-23. Applying this rationale to the facts before it, the court concluded that there was a question of fact whether the injuries to the son-in-law resulted from an excluded risk (operation of the truck), or from a covered risk (negligence in choice of materials and manner of building the rigging), or both. Id. at 422. Accordingly, the court determined there was a question of fact on coverage under the general liability policy that required a trial. Id. at 422-23.

 

¶ 19 The Lawver court described the approach it adopted as giving to the “exclusionary clause in the [general liability] policy … a different, stricter construction than the similar coverage clause in the [auto policy].” Id. at 423. What the court meant by this is that, while there is coverage under the auto policy as long as there is a covered risk (despite the existence of an independent concurrent cause that is not covered), the auto exclusion in the general liability policy is construed narrowly to apply only to the excluded risk. See id. The result is coverage for an independent concurrent cause that does not come within the terms of the exclusion.

 

¶ 20 In arriving at this conclusion, the Lawver court explained that this type of stricter construction of the exclusionary clause is consistent with the rule that precludes a strict construction in the absence of an ambiguity. Id. at 423. This latter rule, the court pointed out, had been consistently adhered to in its cases, and the court was unwilling to deviate from it. Id. at 421-23.

 

¶ 21 Important to this appeal is the Lawver court’s further discussion of the rule that precludes a strict construction in the absence of an ambiguity. Referring to the then-recent case, Garriguenc v. Love, 67 Wis.2d 130, 226 N.W.2d 414 (1975), the court stated:

 

In Garriguenc … the court recently rejected the contention that the phrase “arising out of,” when used in a similar exclusionary clause, was ambiguous because it was not clear whether the exclusion applies only to injury caused by the conduct of the driver or to injury caused by any condition, whether directly or indirectly related to the use of an automobile. Instead, the court gave a broad construction to the phrase, citing the [California case] as authority. Moreover, an otherwise unambiguous provision is not rendered ambiguous simply because it is difficult to apply to the facts of a particular case.

 

Lawver, 71 Wis.2d at 421-22 (citation omitted).

 

¶ 22 With this background on Lawver, we turn to the Zarnstorffs’ arguments. They contend that, when “the issue is whether a loss is excluded by an auto exclusion, the inquiry is whether there was an independent concurrent cause.” In their view, the circuit court erred because it did not make this inquiry. Instead, according to the Zarnstorffs, the court incorrectly gave a broad construction to the language “arising out of the … use … of any … auto” rather than the strict construction required for exclusions.

 

¶ 23 These arguments are based on a misreading of Lawver in two respects. First, it appears the Zarnstorffs are contending that the independent concurrent cause analysis is a substitute for determining whether the conduct at issue comes within the language of the exclusion. However, the independent concurrent cause analysis does not apply unless some injury-causing conduct does come within the language of the exclusion while other injury-causing conduct does not. In Lawver evidently no party argued that the negligence in choosing materials and constructing the rig constituted use of the truck, and the court assumed without discussion it did not constitute use of the truck. See Lawver, 71 Wis.2d at 422 (describing any negligence in the operation of the truck as “an excluded risk” and any negligence in the choice of materials or manner of constructing the rigging as “a covered risk”). The dispute in Lawver was whether the exclusion should be interpreted to exclude coverage for the latter conduct as well as for the conduct that did constitute use of the truck, and it was resolved by the adoption of the independent concurrent cause doctrine. Id. at 417, 422-23. Nothing in Lawver suggests that the adoption of the independent cause doctrine makes it unnecessary to determine whether the conduct at issue comes within the language of the exclusionary clause.

 

Similarly, neither Bankert v. Threshermen’s Mutual Insurance Co., 110 Wis.2d 469, 480, 329 N.W.2d 150 (1983), nor Smith v. State Farm Fire & Casualty Co., 192 Wis.2d 322, 531 N.W.2d 376 (Ct.App.1995), which the Zarnstorffs also cite in this context, suggest that the independent concurrent cause doctrine makes it unnecessary to determine whether the conduct at issue comes within the exclusion. In Bankert the court concluded that the independent concurrent cause doctrine did not apply because there was no cause that did not come within the language of that exclusion. Bankert, 110 Wis.2d at 483-84. In Smith we determined that the independent concurrent cause doctrine did not apply because the asserted cause, though not within the language of the policy exclusion, was not actionable without the excluded risk. Smith, 192 Wis.2d at 332-33.

 

¶ 24 The Zarnstorffs also misunderstand the Lawver court’s statement that its analysis requires “a different, stricter construction [of the exclusion in the general liability policy] than the similar coverage clause in the [auto] policy.” Lawver, 71 Wis.2d at 423. The Lawver court means that it is construing the exclusion so that it does not preclude coverage for allegedly negligent conduct that does not constitute use of the truck. Id. at 422-23. Lawver cannot be read to mean that, apart from the independent cause doctrine, the language of an exclusion is strictly or narrowly construed regardless whether there is an ambiguity in the language. Lawver expressly rejected this approach and reaffirmed its adherence to the rule that, if there is no ambiguity in the language of an insurance contract, a court is precluded from applying a strict construction. Id. at 420-22. The Lawver court clearly meant that this rule applies to exclusions, as evidenced by its discussion of Garriguenc, 67 Wis.2d 130, which addresses language in an exclusion.  Lawver, 71 Wis.2d at 421-22.

 

It is true that the rule of construing ambiguities in insurance policies against the insurer will result in different constructions of the same language depending on whether it is contained in a coverage clause or an exclusion: the more expansive of two reasonable constructions is given the language in a coverage clause and the narrower is given the language in an exclusion. Smith v. Atlantic Mut. Ins. Co., 155 Wis.2d 808, 811, 456 N.W.2d 597 (1990). However, we emphasize that this rule does not come into play unless a court first determines that the language is ambiguous.

 

¶ 25 The Lawver court’s discussion of Allstate Insurance Co. v. Truck Insurance Exchange, 63 Wis.2d 148, 216 N.W.2d 205 (1974), does not, as the Zarnstorffs contend, support a contrary reading. In Allstate the court concluded that it was a “use” of the vehicle to unload a hunting rifle from the vehicle and therefore there was coverage under the auto policy for the accidental shooting of one member of a hunting party during that unloading. Id. at 153, 159. The court also concluded that the homeowner policy auto exclusion applied because the loss arose out of the “ ‘loading or unloading’ … of any automobile.” Id. at 153, 157. In reaching its conclusion on the exclusion, the court noted that case law had given the term “loading” a broad definition in the context of a coverage clause stating: “While most loading and unloading cases in Wisconsin are construing those terms as they are found in automobile policies, nonetheless, those cases are persuasive in defining the general meaning of those terms.” Id. at 156. The Allstate court rejected the argument that the exclusion did not apply because a cause of the injury was the shooter’s negligence in maintaining his rifle. Id. at 154.

 

¶ 26 The Lawver court discussed Allstate and contrasted it with the different rationale used in the California case “on almost identical facts.”   Lawver, 71 Wis.2d at 418-20. Because the Lawver court adopted the approach of the California court, the Lawver court effectively overruled Allstate to the extent that the Allstate court did not apply the independent concurrent cause analysis to the negligent maintenance of the rifle-conduct that plainly did not come within the language of the exclusion. However, Lawver did not criticize or overrule the Allstate court’s reliance on coverage-clause cases in deciding the meaning of the same terms used in an exclusion.

 

¶ 27 In summary, the independent concurrent cause doctrine comes into play after it is determined that there is injury-causing conduct that does not come within the exclusion. In determining whether particular conduct comes within the exclusion, we do not give the language a strict construction unless we first determine there is an ambiguity. If there is an ambiguity, then we interpret the language narrowly, against the insurer. Smith, 155 Wis.2d at 811. On the other hand, if the language is not ambiguous, we may look to case law applying the same language in the context of a coverage clause. See Allstate, 63 Wis.2d at 156.

 

¶ 28 With this clarification of Lawver, we take up the inquiry whether Houle’s conduct in negligently crossing the highway “aris[es] out of the … use … of any … auto.” The Zarnstorffs do not contend there is an ambiguity and we conclude this language is not ambiguous. As we have already noted, the Lawver court cited with approval the conclusion in Garriguenc, 67 Wis.2d at 137, that the “arising out of” language in an exclusion is broad but not ambiguous. To the extent that the term “use of any auto” is difficult to apply on the facts of a particular case, this does not render the phrase ambiguous.   Lawver, 71 Wis.2d at 422.

 

¶ 29 There is no dispute that the semi here was being used for a purpose that is reasonably consistent with the inherent nature of such vehicles: to transport a load on the highway. There is also no dispute that Houle was crossing the highway for the purpose of assisting in the semi’s travel on the highway by assessing the height of the underpass. The specific question is whether his conduct in crossing the highway “arises out of” the use of the semi. We conclude that it does.

 

¶ 30 As already noted, the term “arises out of” has a broad meaning and is commonly understood to mean “originating from, growing out of, or flowing from.” Garriguenc, 67 Wis.2d at 137. This broad meaning is bounded by the principle that we interpret and apply policy language to further the reasonable expectations of the contracting parties. See Lawver, 71 Wis.2d at 416. It is to be reasonably expected that in operating a vehicle on the highway it may be necessary to assess a potential obstacle in order to determine whether or how to navigate it. It is also to be reasonably expected that this assessment may at times best be done by being outside the vehicle. Accordingly, the activity of assessing a potential obstacle to a vehicle traveling on the highway from a vantage point outside the vehicle is an activity that flows from or arises out of the use of the vehicle. Whether it is the driver who gets out to look, or a passenger, or, as here, someone driving in tandem in another vehicle, the assessment of the potential obstacle has the same purpose: to facilitate the use of the vehicle in question as a means of transportation on the highway. Similarly, whether the assessment of the potential obstacle is made by standing on the side of the highway or crossing the highway to get a better view, the purpose and its connection to the vehicle remains the same.

 

¶ 31 The Zarnstorffs contend that Houle’s negligence here was that of a pedestrian and therefore does not “arise out of the use of” the semi. However, the negligence need not be in the operation of the vehicle in order to come within this language. See Garcia v. Regent Ins. Co., 167 Wis.2d 287, 296, 481 N.W.2d 660 (Ct.App.1992). By way of example, leaving a child in a vehicle is a use of the vehicle under the coverage clause of an automobile policy, see Tasker v. Larson, 149 Wis.2d 756, 761, 439 N.W.2d 159 (Ct.App.1989), and is excluded under an auto exclusion in a CGL policy with language identical to the language in Acuity’s CGL policy. See Estate of Jones v. Smith, 2009 WI App 88, ¶¶ 2, 9, 320 Wis.2d 470, 768 N.W.2d 245 (the van driver for a daycare center failed to remove a child from the van after arriving at the daycare center). The negligence in both Tasker and Estate of Jones is that of a person responsible for a small child who fails to exercise ordinary care; the negligence does not involve the operation of the vehicle.

 

¶ 32 The Zarnstorffs rely on the analysis in Estate of Jones of the risk that was not excluded under the CGL policy and was determined to be an independent concurrent cause. Estate of Jones, 320 Wis.2d 470, ¶ 9. This was the negligence of the daycare staff who did not look for the child or inquire why she was not present on a day she was expected. Id. However, we conclude this conduct is not analogous to Houle’s running across the highway. The daycare staff’s failure to look for the child did not arise out of the use of the van, whereas Houle was engaged in an activity that was assisting the travel of the semi on the highway.

 

¶ 33 The Zarnstorffs also assert that Saunders v. National Dairy Products Corp., 39 Wis.2d 575, 159 N.W.2d 603 (1968), supports their position. We do not find Saunders to be instructive because it was decided before Lawver and its analysis is inconsistent with Lawver.

 

¶ 34 In Saunders the court concluded that the coverage clause for liability from “ ‘the use in [the insured’s] business of any motor vehicle’ “ did not apply because the injuries the driver of a tractor-trailer unit sustained after getting out of the vehicle and slipping on ice were not “the proximate result” of the use of the vehicle. Saunders, 39 Wis.2d at 582-83. The court stated that there is no coverage unless there is a “causal connection between the use and the acts causing liability” and, in that case, “[t]he presence of the tractor-trailer unit in no way contributed to the presence of the ice which caused plaintiff’s injury.” Id. The Zarnstorffs point to the fact that, when the driver in Saunders fell on the ice, he was walking toward the loading dock to ascertain whether the unit was in the proper loading position. They assert that this is analogous to Houle’s conduct in checking on the underpass, and therefore he was not using a vehicle, either.

 

¶ 35 We do not see how to reconcile Saunders with Lawver. Under Lawver, as noted earlier, the language “arising out of the use of the vehicle” requires a causal connection between the use of the vehicle and the injuries but this connection “is not of the type which would ordinarily be necessary to warrant a finding of ‘proximate cause’ or ‘substantial factor’ as those terms are used in imposing liability for negligent conduct.”  Lawver, 71 Wis.2d at 415. Rather, the phrase “arising out of” is concerned with the connection between the activities which give rise to the injury and the vehicle. Id. at 415-16. The court in Saunders did not consider in its analysis that the driver was going to check on the position of the unit, apparently because of its conclusion that the use of the unit did not proximately cause or contribute to the cause of the injuries. Saunders, 39 Wis.2d at 582-83. When we are unable to reconcile two supreme court cases, we follow the latter. Kramer v. Board of Educ., 2001 WI App 244, ¶ 20, 248 Wis.2d 333, 635 N.W.2d 857. Accordingly, we follow Lawver, not Saunders.

 

Legal cause in negligence consists of two parts: (1) cause-in-fact, which requires that the negligence is a substantial factor in producing the injuries; and (2) public policy considerations that may result in denial of recovery even though there is cause-in-fact. Fandrey v. American Family Mut. Ins. Co., 2004 WI 62, ¶ 12, 272 Wis.2d 46, 680 N.W.2d 345. The term “proximate cause” was used in the past to refer to the public policy factors but is used no longer. Id., ¶ 10 n. 7.

 

The Zarnstorffs also cite Snouffer v. Williams, 106 Wis.2d 225, 229, 316 N.W.2d 141 (Ct.App.1982), in support of their position. In that case the court concluded that the coverage grant in an auto policy for injuries arising out of the use of the automobile did not apply to injuries sustained by a passenger in a vehicle who was shot by a homeowner from his home after two other passengers got out of the vehicle and knocked over the homeowner’s mailbox. Id. at 226-27. The court explained that, merely because “[t]he use of an automobile may result in a condition which is an essential part of the factual setting which later results in harm,” that harm does not arise from the use of the automobile. Id. at 228 (citation omitted). The court concluded that the activities of the other two passengers in vandalizing the mailbox and the shooting in response “were wholly independent of the use of the vehicle.” Id. at 229. For the reasons we have explained in paragraph 30 above, Houle’s conduct in running across the highway is not wholly independent from the use of the semi.

 

We note that both parties bring to our attention cases from other jurisdictions. We do not discuss them because we conclude that Wisconsin law resolves the issue of the applicability of the auto exclusion in Acuity’s CGL policy.

 

¶ 36 Because we conclude that Houle’s conduct in running across the highway to assess the height of the underpass is conduct arising out of the use of the semi, we conclude the auto exclusion applies and there is no coverage for his negligence under the CGL policy.

 

II. Sanction of Precluding Acuity from Denying Coverage

 

¶ 37 The Zarnstorffs contend that, whether or not the CGL policy provides coverage, the circuit court erred in failing to preclude Acuity from challenging coverage as a sanction for not disclosing this policy in response to discovery requests.

 

¶ 38 Both the Zarnstorffs and Acuity submitted affidavits on this issue with attached discovery materials in support of their respective positions. Acuity submitted the following interrogatory directed to Neenah Creek and the response dated September 7, 2007:

 

8. Were you the owner of any vehicle involved in the occurrence? If so, state whether you were named or covered under any policy, or policies, of liability insurance effective on the date of the occurrence and, if so, state the name of each such company or companies, the policy number or numbers, the effective period(s) and the maximum liability limits for each person and each occurrence, including umbrella or excess insurance coverage, property damage and medical payment coverage.

 

ANSWER: The semi truck and trailer were owned by Neenah Creek Custom Trucking, LLC and were insured by Acuity, a mutual insurance company, policy no. F88219 with limits of $1,000,000.00. Please see the certified insurance policy produced in response to the request for production.

 

¶ 39 Acuity also submitted the following document production request directed to Neenah Creek and the response dated September 7, 2007:

 

7. All applicable policies of insurances, including declaration pages, which may provide coverage for the incident complained of.

 

RESPONSE: Attached is a certified copy of the Acuity [auto] policy.

 

¶ 40 The Zarnstorffs submitted the same request and response to document production as did Acuity and, in addition, submitted an earlier interrogatory directed to Neenah Creek and the response dated December 15, 2006:

 

This set of interrogatories was apparently served on Neenah Creek and answered by it in an action filed by Wegert against Neenah Creek and Acuity. After the Zarnstorffs filed this action in December 2006, the two actions were consolidated.

 

19. State the name of each insurance company that provides the defendant with liability coverage for the incident referred to in the plaintiffs’ complaint. Specify the limits of coverage afforded under each such policy and the policy number. This interrogatory is intended to include, but is not limited to, insurance coverage available through partnership agreements, corporations, extended coverage, reinsurance coverage and so-called “umbrella” coverage.

 

ANSWER: Acuity, a mutual insurance company, with liability limits of $1,000,000.00.

 

¶ 41 The Zarnstorffs contended in the circuit court, as they do on appeal, that its number seven request for documents shows that they were asking for any policy that may provide coverage. Acuity asserted in the circuit court, as it does on appeal, that, because of the allegations in the complaint and first amended complaint that specifically refer to Acuity’s auto policy and because of the wording of the number eight interrogatory dated September 7, 2007, it did not have reason to understand until after the trial that the Zarnstorffs wanted to know about liability policies other than the auto policy.

 

¶ 42 The court denied the requested sanction on two primary grounds: (1) the insurance case law the Zarnstorffs provided did not support this sanction in the circumstances of this case; and (2) “[u]nder the facts of this case, the court will not expand the language of sec. 804.12 [discovery sanctions] to apply here.” The court expressed the view that this statute “presumes a motion brought prior to or at trial.”

 

¶ 43 On appeal the Zarnstorffs argue that the circuit erred because nothing in WIS. STAT. § 804.12(4) (2007-08)  precludes the circuit court from imposing a sanction after a trial and verdict. They assert that the case law on the obligation of insurers supports the estoppel sanction they seek.

 

All references to the Wisconsin Statutes are to the 2007-08 version unless otherwise noted.

 

¶ 44 A decision to impose sanctions for discovery violations is committed to the circuit court’s discretion, and we uphold discretionary decisions if they apply the correct law to the facts of record and reach a reasonable result.   Johnson v. Allis Chalmers Corp., 162 Wis.2d 261, 273, 470 N.W.2d 859 (1991). We review de novo the questions of law involved in a discretionary decision.   Robin K. v. Lamanda M., 2006 WI 68, ¶ 12, 291 Wis.2d 333, 718 N.W.2d 38.

 

¶ 45 We first address the insurance cases on which the Zarnstorffs rely, Liebovich v. Minnesota Ins urance Co., 2008 WI 75, 310 Wis.2d 751, 751 N.W.2d 764, and Jansa v. Milwaukee Auto mobile Mutual Insurance Co., 18 Wis.2d 145, 118 N.W.2d 149 (1962). We conclude they do not support the sanction they seek.

 

¶ 46 Liebovich cautions that an insurer’s “unilateral refusal to defend without first attempting to seek judicial support for that refusal can … estop insurers from being able to further challenge coverage.” Liebovich, 310 Wis.2d 751, ¶ 55. As the circuit court stated, in this case Acuity did provide a defense to Neenah Creek and did provide coverage under the auto policy, and the parties agreed on a manner for post-trial judicial resolution of the coverage dispute under the CGL policy.

 

¶ 47 Jansa holds that, if an insurer admits in any answer to having issued a policy to its insured but denies liability to the plaintiff and does not allege any limitation on liability by the terms of the policy, the policy cannot be admitted into evidence after the jury has reached its verdict unless the insurer has moved to amend its answer and the court has permitted the amendment in the proper exercise of its discretion. Jansa, 18 Wis.2d at 150. The Zarnstorffs do not develop an argument that makes the reasoning of Jansa applicable to the facts of this case.

 

¶ 48 We next turn to the Zarnstorffs’ contention that the circuit court has the authority under WIS. STAT. § 804.12(4)(c) and (d) to impose the sanction they seek and erroneously exercised its discretion in not doing so.0 These subsections provide:

 

0. We are uncertain why the Zarnstorffs have included WIS. STAT . § 804.12(4)(d) relating to supplementing responses. They do not appear to be contending that Neenah Creek learned of the CGL policy after responding to the discovery request. See § 804.01(5)(b).

 

(4) If a party … fails … (c) to serve a written response to a request for inspection submitted under s. 804.09, after proper service of the request, or (d) seasonably to supplement or amend a response when obligated to do so under s. 804.01(5), the court in which the action is pending on motion may make such orders in regard to the failure as are just, and among others, it may take any action authorized under sub. (2)(a)1., 2. and 3….

 

¶ 49 The Zarnstorffs’ argument on WIS. STAT. § 804.12(4) is undeveloped in several important respects. First, the request for production of documents on which the Zarnstorffs rely, as well as the September 6, 2006, interrogatory they refer to, were both directed to Neenah Creek and answered by it. The Zarnstorffs do not explain how the language of WIS. STAT. §§ 804.12(4)(c) and (d), and 804.01(5), to which subsection (d) refers, can be reasonably construed to authorize sanctions on a party other than the party who was served and responded to the discovery requests. We recognize that before and during trial, Neenah Creek and Acuity were represented by the same attorney and submitted a joint answer to the complaint and amended complaint. However, if this fact makes them the same party for purposes of § 804.12(4), the Zarnstorffs do not explain why.

 

¶ 50 Second, even if we assume without deciding that this statute permits a circuit court to impose a sanction when a failure to give a complete answer to a discovery request comes to light after a trial and verdict, the Zarnstorffs do not address the standards that apply under the statute for the particular sanction they seek. Precluding Acuity from disputing coverage falls within WIS. STAT. § 804.12(2)(a)2.: “[a]n order refusing to allow the disobedient party to support or oppose designated claims or defenses….” This is a severe sanction and we conclude it therefore requires a finding of egregiousness on the part of Acuity. See Industrial Roofing Servs., Inc. v. Marquardt, 2007 WI 19, ¶ 43, 299 Wis.2d 81, 726 N.W.2d 898 (discussing § 804.12(2)(a) generally).

 

¶ 51 While the circuit court did not make an express determination on whether or not the conduct of Acuity was egregious, it is evident from the court’s decision that it did not view Acuity’s conduct to be egregious. This conclusion is supported by the record, including: the ambiguity of the discovery requests when considered together, the allegations in the complaint and amended complaint regarding the auto policy, Neenah Creek/Acuity’s counsel’s affidavit explaining why he believed the Zarnstorffs were concerned only with the auto policy, and that attorney’s willingness to inquire further about other Neenah Creek policies in response to a post-verdict letter from the Zarnstorffs and to produce the CGL policy he then learned about.

 

¶ 52 In addition, it is evident that the circuit court was influenced by the absence of prejudice to the Zarnstorffs. The existence or absence of prejudice is a relevant consideration in deciding whether a sanction is “just” as required by WIS. STAT. § 804.12(2)(a). See Rupert v. Home Mut. Ins. Co., 138 Wis.2d 1, 15, 405 N.W.2d 661 (Ct.App.1987). The Zarnstorffs do not explain how they were prejudiced by the timing of learning about the CGL policy, and we can identify no prejudice. If the Zarnstorffs had learned of the existence of this policy from discovery responses, the same procedure would have occurred pre-trial as occurred after the verdict. The parties would have briefed the issue and the court would have decided as a matter of law whether the auto exclusion applied to Houle’s conduct. The court decided the policy did not apply, and we have affirmed that.1

 

1. The Zarnstorffs do not argue that they incurred any additional expense because the CGL coverage issue was resolved post-verdict rather than pretrial, and they do not seek costs as a sanction.

 

¶ 53 In short, the Zarnstorffs have not persuaded us that the circuit court erroneously exercised its discretion in deciding not to sanction Acuity by precluding it from contesting coverage under the CGL policy. This decision should not be read to suggest any weakening of the obligation of insurers and their insureds-like all other persons and parties served with discovery-to comply with the requirements of WIS. STAT. §§ 804.08-.11. Rather, we hold only that on the facts of this case and the arguments presented, the circuit court did not erroneously exercise its discretion in declining to impose the sanction of estopping Acuity from contesting coverage under the CGL policy.

 

CONCLUSION

 

¶ 54 We affirm the circuit court’s decision that Houle’s conduct in crossing the highway is excluded by the auto exclusion of the CGL policy. We also affirm its decision declining to impose the sanction of precluding Acuity from contesting coverage under the CGL policy. Accordingly, we affirm the final order determining that Acuity has satisfied the judgment against it and dismissing the action.

 

Order affirmed.

 

Recommended for publication in the official reports.