Chapter 2 - § 2.3 • DEFINITION OF TERMS AND SCOPE OF COLORADO'S PRODUCT LIABILITY LAW AND STATUTE

• Jurisdiction: Colorado

§ 2.3 • DEFINITION OF TERMS AND SCOPE OF COLORADO'S PRODUCT LIABILITY LAW AND STATUTE

In order to understand product liability law, it is important to understand the definitions of the major terms — which are (1) "product liability action," (2) "product," (3) "manufacturer," and (4) "seller." This section addresses each term in turn. Also, as the definitions of manufacturer and seller are inexorably interrelated to the innocent seller rule, the innocent seller rule is addressed in this section as well.

§ 2.3.1—Defining A Product Liability Action

A "product liability action" is defined by statute, as:

any action brought against a manufacturer or seller of a product, regardless of the substantive legal theory or theories upon 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, or the failure to provide proper instructions for the use of any product.⁵⁵

This definition is broad, and includes virtually all claims discussed in this book. There is one important exception: the Colorado Court of Appeals has found that "contract claims which seek only economic loss for a defective product without collateral damage or risk of harm to others do not constitute product liability actions" for the purposes of this rule.⁵⁶ Thus, although breach of warranty claims regarding products are almost always viewed as product liability claims,⁵⁷ the Colorado Court of Appeals found that if the only alleged damage is to the product itself, breach of warranty claims do not constitute a product liability action.⁵⁸

§ 2.3.2—Defining A Product

Although Colorado's product liability statute asserts that a product liability action is one brought against a manufacturer or seller "of a product," the statute does not define the term "product."⁵⁹ The Restatement (Third) of Torts provides a definition, however, and there are a number of Colorado cases that define what is or is not considered a product under product liability law.

Practice Pointer
It is critical at the outset of a case to determine whether a "product" allegedly caused the injury, as the applicability of Colorado's product liability laws depend upon this initial threshold question of whether a "product" is involved.

The Restatement (Third) of Torts Definition

The Restatement (Third) of Torts: Products Liability provides a definition of a product. Colorado has not formally adopted this Restatement, though several Colorado cases cite to it.⁶⁰ The Restatement defines a product as "tangible personal property distributed commercially for use or consumption. Other items, such as real property and electricity, are products when the context of their distribution and use is sufficiently analogous to the distribution and use of tangible personal property that it is appropriate to apply" product liability law.⁶¹ Under the Restatement, services are not products.⁶² Also, the Restatement considers neither human blood nor human tissue to be products.⁶³

Particular Items as Products or Non-Products

Courts applying Colorado law have made determinations on whether the following items constitute products.

Human Tissue, Organs, and Blood

Although at first blush human tissues, organs, and blood might sound like products, Colorado statute specifically rejects that product liability standards apply to these items.⁶⁴

Thoughts and Ideas

Likewise, thoughts, ideas, and expressive content are not "products."⁶⁵ However, aviation charts, used by pilots to navigate, constitute a product.⁶⁶

Animals

Living things are not "products," and thus a court rejected the argument that providing a horse with a saddle constitutes a product.⁶⁷

Electricity

While electricity may be considered a product once it reaches the point where it is made available to the consumer, the delivery system of electricity (e.g., transmission lines) is a service and not a product.⁶⁸

Improvements to Real Property

As a general matter, improvements to real property are not products.⁶⁹ Thus, a vestibule at an airport does not constitute a product and does not fall under Colorado's product liability laws, even if it was removable.⁷⁰ Similarly, an indicator light that was part of an electric system for a grain elevator does not constitute a product, but rather its alleged faulty design was the result of a contractor's services.⁷¹ However, under certain circumstances, products installed in a building could fall within the gambit of product liability law.⁷²

Distinguishing Services and Sale of Products

The most common issue regarding defining a product and whether an action is a product liability action arises in the context of distinguishing sales from services. In broad terms, the sale of products falls within the scope of a product liability action, while the provision of services does not.⁷³ While it is usually easy to distinguish the two items, this task becomes more difficult when there is both a sale of products and a performance of services associated with those products. Even if the defendant furnishes some service in relation to a product sold, that does not necessarily result in the action not falling within the ambit of product liability.⁷⁴ Rather, "[t]he controlling criterion [on whether a claim is a product liability action], in our view, is whether the primary purpose of the sales transaction was the sale of goods with the rendition of labor or service only incidentally involved or whether, in contrast, the rendition of services was the primary or dominant purpose of the sale."⁷⁵ The following factors apply to determining this issue:

(1) The contractual language; (2) whether an overall price is charged, or the goods and labor are separately billed; (3) the ratio of the cost of the goods to the overall contract price; and (4) the nature and reasonableness of the purchaser's expectations of acquiring a property interest in the goods.⁷⁶

A few examples help illustrate this issue. For example, in a case that involved the sale and installation of tires, the Colorado Court of Appeal Court concluded that the sale and installation constituted a sale for the purposes of Colorado Uniform Commercial Code because the receipts referred to "purchase" and the "merchandise" sold, the charge was only for the tires while the installation was done without additional charge, and the plaintiff acquired a property interest in the installed tires.⁷⁷ Thus, the court found that a strict liability failure to warn product liability claim was also warranted and should have been submitted to the jury, as the defendant allegedly failed to warn about the improper installed parts of the tire.⁷⁸

For another example, the Colorado Supreme Court has held that the negligent showing of a film as part of selling tires for large earth movers fell within the definition of a product liability action as the film was an integral part of the role of selling the tires.⁷⁹

Third, applying Colorado law, the Tenth Circuit held that the construction of a conveyor system by a contractor was a service, not the sale of a product.⁸⁰ Indeed, as a general matter, actions by contractors constitute services, not products.⁸¹

§ 2.3.3—Defining A Manufacturer

As product liability lawsuits are actions against manufacturers and sellers,⁸² assuming the latter entities are not protected by the innocent seller rule, the definition of manufacturers and sellers is of critical importance. The statute defines both manufacturers and sellers.⁸³ The statutory definition of a manufacturer contains four sentences. The first sentence defines a manufacturer, and then the second, third, and fourth sentences discuss the situations under which a seller is also considered to be a "manufacturer."⁸⁴ As the issues of when a seller is considered to be a manufacturer are addressed in the section on the innocent seller rule, § 2.3.4, only the first sentence is addressed here.

The first sentence of the statute states: "'Manufacturer' means a person or entity who designs, assembles, fabricates, produces, constructs, or otherwise prepares a product or a component part of a product prior to the sale of the product to a user or consumer."⁸⁵ This definition includes component part manufacturers, addressed below.

Usually, it is fairly obvious what entity or entities are the manufacturer. And, a product can have more than one manufacturer. Heinrich v. Master Craft Eng'g, Inc., 131 F. Supp. 3d 1137, 1153 (D. Colo. 2015). However, issues arise where a defendant modifies a product. In the case of Miller v. Solaglas California, Inc., the Colorado Court of Appeals found that a glass installation and replacement store owned by the defendants could be held liable as a manufacturer for the windshield retention system that failed in a truck accident.⁸⁶ While the defendants did not manufacture the component parts of the windshield retention system or the windshield, unlike the original windshield that used a strip of urethane glue to seal it, the defendants "used silicone, rather than [sic] urethane, to seal the windshield installed in the truck driven by plaintiff."⁸⁷ As this evidence showed the defendants "sold a windshield retention system that differed significantly" from the original windshield system, the Colorado Court of Appeals found "sufficient evidence from which reasonable jurors could have concluded that the component parts of the windshield retention system constituted a 'product'" made by the defendants.⁸⁸

Also, it is important to note that the defendant must be somewhere in the chain of distribution to be considered a manufacturer.⁸⁹ Thus, a defendant that held a trademark to the name of the product, but that itself never manufactured, distributed, or sold the product, cannot be held liable under...