American Compensation Insurance Company v. MTD Products, Inc.

Filing 97

ORDER Granting Summary Judgment. Defendant MTD Products, Inc.'s 36 Motion for Summary Judgment is GRANTED. Pending motions 55 , 56 , 57 , 58 , 60 , 91 and 95 are thereby rendered MOOT. The Court directs that judgment be entered dismissing this civil action and all claims therein with prejudice. Defendant is awarded its reasonable costs, by Judge R. Brooke Jackson on 2/15/12.(lsw, )

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Honorable R. Brooke Jackson
Civil Action No. 09-cv-02934-RBJ-BNB
AMERICAN COMPENSATION INSURANCE
COMPANY
Plaintiff,
v.
MTD PRODUCTS, INC.
Defendant.

ORDER GRANTING SUMMARY JUDGMENT

This products liability case was filed in state court on November 2, 2009 and removed to
this Court on diversity of citizenship grounds shortly thereafter. The case is set for an eight day
jury trial beginning April 9, 2012. Several motions have been fully briefed. Because the Court
agrees with the defendant that plaintiff’s claims are barred by the statute of limitations, it does
not reach or decide the other pending motions other than to find that they are moot.
Standard of Review
Summary judgment may be granted only if the moving party shows that there is no
genuine dispute as to any material fact, and that it is entitled to judgment as a matter of law. Fed.
R. Civ. P. 56(a).
General Facts
On October 17, 2007 Bernardo Baltierrez, an employee in a Big O Tires store in Frisco,
Colorado, was injured while inflating a tire on a “snow thrower,” sometimes referred to in
documents and briefs as a “snow blower,” when the plastic rim holding the tire exploded. Big O

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Tire’s worker’s compensation carrier, American Compensation Insurance Company (referred to
hereafter either as “plaintiff” or as “ACIC”), ultimately settled Mr. Baltierrez’ claim for
$284,000. It seeks to recoup its loss against the manufacturer of the snow thrower, MTD
Products, Inc. (“MTD”), on claims asserting (1) negligence, (2) strict liability, and (3) breaches
of the implied and express warranties of merchantability.
Additional Facts Pertinent to the Statute of Limitations
The Court finds, based upon the parties’ briefs and exhibits, that the following facts are
not disputed:
1. On June 1, 2006 Mark Daniels, Manager, Recovery Services for RTW, Inc. (“RTW”),
sent a notice to the Legal Department of MTD advising that it was processing a
worker’s compensation claim of an individual named Robert Lucas. Ex. A to
defendant’s motion, CM/ECF docket #36-1. I will hereafter refer to the parties’
exhibits by the court’s docket number.
2. RTW is the parent company of ACIC. Daniels deposition in the present case [#36-2],
at 11. ACIC is one of two insurance subsidiaries of RTW. Id. at 16.
3. The notice reports that Mr. Lucas was injured in an accident on March 24, 2006 while
he was repairing an MTD snow thrower. Mr. Daniels stated that the composite
plastic wheel rim shattered with the application of air pressure, and “[i]t appears that
negligent and insufficient design of these wheels was the cause of this loss.” He
informed MTD that RTW would exercise its right of subrogation for the medical
and/or wage loss benefits it provides to Mr. Lucas. [#36-1].
4. The incident involving Mr. Baltierrez occurred on October 17, 2002. On the same
day his store manager completed an “Employer’s First Report of Injury” form. [#34-

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4]. The form indicates that while Mr. Baltierrez was inflating a small tire, the “tire
blew up,” and “rubber from tire/plastic from wheel” injured him.
5. ACIC received notice of the Baltierrez incident and his claim on the same day.
Daniels depo. [#36-2] at 103.
6. Mr. Daniels confirmed in his deposition in this case that on October 17, 2007 he was
aware that the Lucas incident involved a wheel of a snow thrower that appeared to be
made of a plastic type material and that exploded while the tire was being inflated.
[#36-2] at 110-11.
7. The snow thrower involved in the present case was manufactured by MTD through its
subsidiaries. Martens Aff. [#36-3] ¶5. It is the same model of snow thrower as that
which was involved in the Lucas incident. Compare Martens Aff. at ¶4 to Daniels
letter of June 1, 2006 [#36-1].
8. On October 18, 2007 Scott Smith, an RTW employee who was acting as a claims
adjustor on this claim, assigned Global Options, an independent investigations firm,
to investigate the incident. Daniels depo. [#36-2] at 13-14, 105, 116. Smith’s file
note states, “[c]laimant was filling tire and it exploded in his face, causing serious
head/brain injury.” Id. at 116.
9. On October 19, 2007 Michael Testa, a Loss Prevention Consultant for RTW, sent an
email to a number of RTW or ACIC employees, including Scott Smith, providing
information about Mr. Baltierrez and the incident. [#36-5]. This email states, among
other things: “I will be curious is [sic] the Consumer Product Safety Commission has
any recalls or problems with inferior quality snow blower tire wheels. On the other
hand, it is unknown if Baltierrez was monitoring the air pressure as he was filling up

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the snow blower tire, or if his concentration was with making sure the tire was being
seated properly on the wheel, and he perhaps over inflated the tire and the high
pressure causing failure of the wheel. Other unknowns – where was the snow blower
was [sic] stored. If it had been left in a cold environment, perhaps the cold would
have made the wheel brittle. There are a number of factors such as cold, low
humidity winters in Colorado that could affect components of hard plastics. Other
factors that affect the quality of plastics in Colorado include UV and heat.”
10. Sharon Coburn was the investigator assigned by Global Options to do the
investigation. Daniels depo. [#36-2] at 120.
11. On October 21, 2007 Ms. Coburn sent an email to Mr. Smith which she described as
a “quick update,” adding that “Global Options” would provide a further update.
Claims Abstract [#36-6] at Bates #1200. She stated, among other things, that “[t]he
wheel was from a snow blower tire and it appeared the interior portion of the tire,
which was plastic, blew from the tire and hit the claimant in the face.” Id. at Bates
#1201. She added that the store manager, Chris, and a co-worker, Jesus Ochoa, had
never seen the interior of a snow blower tire made of plastic.
12. In another email on October 21, 2007 Ms. Coburn advised Mr. Smith that she had
obtained the instructions of the manufacturer of the machine used to inflate tires at the
Big O store. She also provided information regarding the training that tire
technicians, including Mr. Baltierrez, received on filling snow blower tires and the
frequency of their filling snow blower tires. [#36-4] at Bates #1201.
13. On October 22, 2007 Global Options provided Mr. Smith with a further update by
email. This included these statements: “The wheel was from a snow blower tire and

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it appeared the interior portion of the tire, which was plastic, blew from the tire and
hit the claimant in the face. Chris stated he has never seen the interior of a snow tire
to be made of plastic. Jesus, who was also a tire technician, stated that he fills snow
tires with air about once a week but has never seen one with the interior made of
plastic. He stated they are usually made of metal.” Id. at Bates #1202.
14. On October 24, 2007 Ms. Coburn advised Mr. Smith by email that she had spoken
with Mr. Daniels that morning. She states that “we” would be sending him the tires
and parts, and that he should receive them soon. She added that her report and
cassettes of her interviews were sent to Global, and Global should be sending them to
Mr. Smith soon. [#36-6] at Bates #1202.
15. On October 24, 2007 Mr. Daniels sent a fax to MTD’s outside counsel concerning the
Lucas case. [#36-8]. Expressing frustration that RTW’s claim against MTD had not
yet been settled, he reminds the lawyer that the composite wheels of the specific
model of snow thrower involved in the Lucas incident had been recalled. He
threatened to sue if MTD does not settle the claim. The fax continues with the
following paragraph:
“Oh, and by the way, one of our insured employee’s [sic] just recently had another
similar situation in CO. I do need to get all the facts, but it’s a composite wheel, gray
in color, from a snow thrower, and this resulting explosion caused the employee to
endure a frontal craniectomy, resulting in a rather large titanium plate being fashioned
into a forehead for him. If it’s one of MTD’s, which I think it is, then this $500.00
claim [referring to the Lucas claim] is going to be mere soda change as compared
with the next one.”

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16. The Colorado incident to which Mr. Daniels referred in his fax to MTD’s counsel was
the Baltierrez incident. Daniels depo. [#36-2] at 67.
17. On or after October 31, 2007 ACIC received Global Options’ report dated October
31, 2007 on the investigation to Mr. Smith. [cover letter and report are collectively
#37-2]. The report, excluding photographs, is approximately five and one-half pages
in length. It includes concerning the accident:
A customer brought in two small snow blower tires, with a maximum of 30
PSI printed on the side, manufactured by “Shredder” that had deflated over
the summer and requested that they be inflated.
According to the store manager, Chris Barbour, Big-O Tires commonly
repairs tires of all kinds, but plastic-wheeled or rimmed tires such as the one
involved in Mr. Baltierrez’ accident are rare compared to steel-wheeled tires.
The machine used to inflate tires was identified as a Coats 40550A Tire
Machine, number manufactured by The Coats Company. The label on the
machine displayed Tire Changer Coats 8028717, but the label was covered by
grime and was barely readable. Mr. Barbour stated that there had been no
history of mechanical trouble with the machine and provided information
about the servicing and lubrication of the machine as needed.
Mr. Barbour described the process for filling this type of small tire.
He stated that he had never seen or heard of an accident of this magnitude but
that plastic wheels/rims are rarely seen at this store.
He confirmed that Mr. Baltierrez was a good employee who had been
employed there for three months, had received “tire-tech” training, both

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corporate and on-the-job. He could not say whether Mr. Baltierrez was
wearing protective eyewear, as he should have been, when the incident
occurred.
“When asked what his thoughts and/or theories were on the cause of this
accident, Mr. Barbour state there are only two scenarios that he could
imagine. First, is that perhaps a crack or imperfection existed in the plastic
wheel of the snow-blower tire and the second is that the tire may have been
over-inflated by the subject. (Note: a combination of the above theories is
possible as well).” [#37-2] at Bates #2191.
A co-worker, Jesus Ochoa, reported that the tire machine has a pressure gauge
to indicate how many pounds of air pressure are in a tire, but there is no safety
mechanism to prevent over-inflation.
Parenthetically, the report states that it seemed odd to the investigator that the
tire machine was manufactured with a foot pedal for inserting air at one end of
the machine and the pressure gauge at the opposite end. According to Mr.
Ochoa, Mr. Baltierrez was having difficulty inflating the tire, and another
unidentified employee told him to use a common process of removing the
“core” from the “ball stem” and reinsert the core after inflation.
Mr. Ochoa said tires of the same size were worked on about once a week, but
he had never seen one with a plastic wheel. He has seen tires become overinflated, but they just pop out over the wheel and the air escapes. In this case,
however, the wheel was plastic and it exploded under the pressure. The

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numerous pieces of the exploded wheel and its tire along with the second
wheel were collected by the investigator.
The October 31, 2007 report does not mention MTD.
Statute of Limitations
1. Statute Applicable to Claims One and Two.
The period of limitation applicable to the First and Second Claims (products liability –
negligence and products liability – strict liability) is set forth at C.R.S. § 13-80-106:
Limitation of actions against manufacturers or sellers of products. (1)
Notwithstanding any other statutory provisions to the contrary, all actions except
those governed by section 4-2-725 [breach of warranty], brought against a
manufacturer or seller of a product, regardless of the substantive legal theory or
theories on which the action is brought, for or on account of personal injury, death
or property damage caused by or resulting from the manufacture, construction,
design, formula, installation, preparation, assembly, testing, packaging, labeling,
or sale of any product, or the failure to warn or protect against a danger or hazard
in the use, misuse, or unintended use of any product shall be brought within two
years after the claim for relief arises and not thereafter.
(italicized emphasis added)
Colorado appellate courts hold that a claim for relief arises under this statute “on the date
both the injury and its cause are known or should have been known by the exercise of reasonable
diligence.” C.R.S. § 13-80-108(1)(concerning when a cause of action accrues). See, e.g., Miller
v. Armstrong World Industries, Inc., 817 P.2d 111, 113 (Colo. 1991); Salazar v. American
Sterilizer Co., 5 P.3d 357, 363 (Colo. App. 2000). “A claim for relief does not accrue until the
plaintiff knows, or should know, in the exercise of reasonable diligence, all material facts
essential to show the elements of that cause of action.” Miller, 817 P.2d at 113. The claim arises
when “ the claimant has knowledge of facts which would put a reasonable person on notice of
the nature and extent of an injury and that the injury was caused by the wrongful conduct of
another.” Salazar, 5 P. 3d at 363.
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2. Statute Applicable to Claim Three
C.R.S. 13-80-106 carves out an exception for warranty actions governed by C.R.S. § 4-2725. That statute incorporates the three-year period prescribed in section 13-80-101 and
provides that the cause of action accrues when tender of delivery is made. C.R.S. § 4-2-725(1),
(2).
Conclusions
ACIC’s complaint in this case was filed on November 2, 2009. Because October 31,
2009 was a Saturday, the claim was timely filed if it arose on or after October 31, 2007. If the
claim arose before October 31, 2007, it is barred by the statute of limitations.
In their briefs the parties in substance treat RTW and ACIC interchangeably. I agree.
Although ACIC is a separate corporate entity, it functions as one of the two workers
compensation insurance arms of its parent holding company. RTW employees acted on behalf
of ACIC in matters pertaining to the Baltierrez claim.
The undisputed facts show that RTW acted immediately and with substantial diligence in
investigating the accident. By the day after the accident, October 18, 2007, the individual
assigned to act as RTW’s claims adjuster on the claim, Scott Smith, knew that Mr. Baltierrez had
sustained a “serious head/brain injury” when a tire he was filling on the previous day “exploded
in his face.” As reflected in the October 19, 2007 email of Michael Testa, RTW’s Loss
Prevention Consultant, it wasn’t yet known whether the cause of the explosion was a product
defect, user error or something else. By October 21, 2007 an outside investigator, Sharon
Coburn, was reporting to Mr. Smith that the wheel involved was from a snow blower, and that it
appeared that the interior portion of the wheel, which was plastic, had blown from the tire and hit
Mr. Baltierrez in the face.

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Ms. Coburn discussed the incident with Mark Daniels, RTW’s “Manager, Recovery
Services,” on the morning of October 24, 2007. Mr. Daniels had prior experience with a similar
incident involving claimant Robert Lucas. According to a notice that Mr. Daniels had sent to
MTD’s legal department on June 1, 2006, Mr. Lucas had been injured in an accident on March
24, 2006 when a composite plastic wheel rim of an MTD snow thrower shattered with the
application of tire pressure. Mr. Daniels expressed the opinion in the June 1, 2006 notice that “it
appears that negligent and insufficient design of these wheels was the cause of this loss.” He
informed MTD’s legal department at that time that RTW would exercise its right of subrogation.
On October 24, 2007 Mr. Daniels was frustrated that MTD still had done nothing to settle
the Lucas claim. After talking to Ms. Coburn about the Baltierrez accident, he sent a fax to
MTD’s outside counsel expressing that frustration and threatening to sue. His fax then informed
MTD’s counsel that a similar situation involving a composite wheel of a snow thrower that
exploded and caused an injury (the Baltierrez incident) had recently occurred in Colorado. He
reported that he thought that the snow thrower was MTD’s, and if so, RTW’s claim against MTD
from the Baltierrez accident would be much greater that its claim from the Lucas accident.
In short, by October 24, 2007 a management level employee of RTW who dealt with
subrogation claims, Mr. Daniels, was aware of the nature and scope of Mr. Baltierrez’ injury. He
knew that it resulted when a composite or plastic inner wheel on a snow thrower had exploded
while the tire was being inflated. It cannot be said that he knew the cause with 100% certainty.
Even a jury verdict for ACIC on the merits would only determine the cause to a preponderance
of the evidence. However, on October 24, 2007 Mr. Daniels believed that the injury was caused
by the misconduct of another, and even more specifically, negligent or insufficient design of the
wheel. Although knowledge of the specific manufacturer is not necessary for statute of

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limitations purposes, see Yoder v. Honeywell, Inc., 900 F.Supp. 240, 248 (D.Colo. 1995), aff’d
104 F.3d 1215 (10th Cir. 1997), cert denied, 522 U.S. 812 (1997), Mr. Daniels believed that the
wheel was MTD’s and that the claim, therefore, would be against MTD. He even warned
MTD’s counsel that the claim would make the Lucas claim look like “soda change.”
ACIC does not suggest that Mr. Daniels’ knowledge is not attributable to or that it does
not bind ACIC. Rather, ACIC makes several arguments as to why the claim did not arise on
October 24, 2007.
ACIC argues that the claim did not arise at least until October 31, 2007 when RTW
received Global Options’ report. “The only reasonable and permissible inference favorable to
Plaintiff ACIC is that the October 31, 2007 report contained the facts necessary for Mr. Daniels
to utilize the additional information from the Lucas case to identify that a defect in the tire rim
caused the explosion in Colorado.” Plaintiff’s Response at 7. I disagree. The October 31, 2007
report did not provide any significant information about the cause of the accident beyond that
which RTW had already received from earlier communications. It provided more detail about
the machine Mr. Baltierrez was using and the technique by which small snow thrower wheels are
inflated. It provided the store manager’s theories as to what might have caused the accident.
However, the investigators did not provide their own thoughts as to causation. Mr. Daniels
already had more knowledge about the cause of an accident of this nature than anything provided
by the Global Options report. Because of his prior experience, he had already determined that a
products liability claim was likely and that it probably would be against MTD. Mr. Daniels does
not believe that he even saw the Global Options report on October 31, 2007. Daniels depo. [#362] at 157-58.

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ACIC argues that “suspicion of a possible connection does not necessarily put a
reasonable person on notice of the nature, extent, and cause of an injury.” Salazar, 5 P.3d at 363.
The court said that in the context of rejecting “inquiry notice,” whereunder a statute of
limitations begins to run when a person becomes aware of facts that would prompt a reasonable
person to begin seeking information as to the problem and its cause. In any event, the
undisputed facts here show that Mr. Daniels had more than a mere suspicion on October 24,
2007. He had enough facts to advise MTD’s counsel that the Baltierrez accident was similar to
the Lucas accident, which he attributed to negligent or insufficient design; that ACIC’s claim
would be significantly greater than in the Lucas case; and that he believed the claim would be
against MTD.
ACIC argues that Mr. Daniels did not have knowledge of facts that establish each of the
elements of a products liability claim under Colorado law. As indicated above, if that meant that
the facts or the liability had to have been established with absolute certainty, then a statute of
limitations defense could never be established without a trial on the merits, and even then a
verdict would only mean that a jury found the elements to have been established as more likely
than not. Nor is it necessary that the plaintiff know the precise legal theory upon which the
action may be brought. Salazar, 5 P.3d at 363; Winkler v. Rocky Mountain Conference of United
Methodist Church, 923 P.2d 152, 159 (Colo. App. 1995). In this case, however, Mr. Daniels
actually had formed opinions by October 24, 2007 not only about the facts but about the legal
theories and even the identity of the wrongdoer.
Alternatively, noting that as subrogee it steps into its insured’s shoes and acquires his
rights, ACIC points to Mr. Baltierrez’ deposition testimony given on April 11, 2011 [#37-5] that
even by then he had not heard of MTD and did not know what caused the wheel to burst. Id. at

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5, 142. That argument proves too much. If it is followed to its logical conclusion, ACIC’s claim
had not arisen by April 11, 2011 (some 15 months after ACIC filed this lawsuit) and might never
arise. The nature of an injury might be such that an insured could never learn, whatever his
degree of diligence, what caused an injury. Perhaps recognizing the problem, ACIC suggests
that Mr. Baltierrez perhaps should be deemed to have known the cause of his injury on
November 18, 2009 “when Plaintiff ACIC placed Mr. Baltierrez on notice that it had a potential
subrogation claim when it filed its Notice with the Colorado Division of Workers’
Compensation,” or on September 29, 2010, “when the report was provided to Mr. Baltierrez’
attorney of record.” Id. at 14. Both of those dates also fall after ACIC asserted in this suit the
very claims that it suggests had not yet arisen. Courts have rejected arguments that an insurer’s
subrogation claim does not arise for statute of limitations purposes until the insurer pays the
insured, holding in that context that the claim arises when the insured’s claim arises. See, e.g.,
Union Ins. Co. v. RCA Corp., 724 P.2d 80, 82 (Colo. App. 1986). It does not follow that the
insurer’s claim does not arise even though the insurer has discovered both the injury and its
cause.
As another alterative, ACIC argues that claim did not arise until it admitted liability to
Mr. Baltierrez for workers’ compensation benefits and thereby suffered an “injury.” However,
courts, including the Colorado Court of Appeals, have rejected insurers’ arguments that their
claim against a third-party tortfeasor does not arise until the insurer pays the insured. E.g.,
Union Ins. Co., 724 P.2d at 82. That court in turn cited 91 A.L.R. 3d 844, 850 which states,
While a subrogated insurer frequently contends that its action against the thirdparty tort feasor who allegedly caused the damage or injury for which the insurer
had to recompense its insured did not accrue, and the statute of limitations did not

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begin to run thereon, until the insurer had made the payments required under its
insurance contract, courts have held generally that such a contention was without
merit.
ACIC attempts to distinguish such authorities on the basis that its claim against MTD is
not merely a subrogation claim but is a claim created by statute. ACIC cannot explain, however,
how that distinction makes a difference. In any event, it is evident from the undisputed facts that
at least by October 24, 2007 Mr. Daniels understood that ACIC was likely liable to Mr.
Baltierrez for workers compensation benefits and would be pursuing a products liability claim
against the manufacturer.
The Court concludes, based upon undisputed facts, that ACIC knew of the injury and its
cause within the meaning of Colorado law by October 24, 2007. Therefore, ACIC’s First Claim
(products liability, negligence) and Second Claim (strict products liability) are barred by the
statute of limitations. ACIC did not respond to MTD’s arguments regarding the running of the
statute of limitations applicable to ACIC’s Third Claim (breach of warranty). The Court
therefore deems the motion to have been confessed as to that claim.
ORDER
1. Defendant MTD Products, Inc.’s Motion for Summary Judgment, docket #36, is
GRANTED.
2. Pending motions 55, 56, 57, 58, 60, 91 and 95 are thereby rendered MOOT.
3. The Court directs that judgment be entered in favor of the defendant, MTD Products,
Inc., and against the plaintiff, American Compensation Insurance Company,
dismissing this civil action and all claims therein with prejudice. Defendant is
awarded its reasonable costs.

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DATED this 15th day of February, 2012.
BY THE COURT:

___________________________________
R. Brooke Jackson
United States District Judge

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