The Subrogation Strategist

In State Farm Fire & Cas. Co. v. Amazon.com, Inc., No. 3:18CV166-M-P, 2019 U.S. Dist. LEXIS 189053 (Oct. 31, 2019), the United States District Court for the Northern District of Mississippi considered a Motion for Judgment on the Pleadings filed by defendant Amazon.com, Inc. (Amazon). Amazon argued that, because it was a “service provider” who cannot be held liable under Mississippi’s Product Liability Act (MPLA), Miss. Code § 11.1.63, the negligence and negligent failure to warn claims filed against it by plaintiff State Farm Fire & Casualty Company (State Farm) failed as a matter of law. The court, looking beyond the MPLA, held that State Farm’s complaint stated a claim against Amazon.

In State Farm, Taylor and Laurel Boone (the Boones), State Farm’s subrogors, purchased two hoverboards from third parties in transactions facilitated by Amazon. They purchased the first hoverboard on October 31, 2015 and the second on November 10, 2015. The Boones started using the hoverboards on or about December 25, 2015. On March 16, 2016, the hoverboards caught fire and the fire spread to destroy the Boones’ home. As alleged in the amended complaint, the hoverboards were “manufactured by unknown manufacturers from China.” State Farm, as the Boones’ subrogee, filed suit asserting negligence and negligent failure to warn claims against Amazon.

Amazon filed a Motion for Judgment on the Pleadings, arguing that State Farm’s claims against it were governed by the MPLA and, as a service provider, it was not liable under the MPLA. In response, State Farm argued that Amazon was liable because it acted as a “marketplace” and that, rather than MPLA claims, Amazon is subject to common law negligence and failure to warn claims. The District Court agreed with State Farm.

As noted by the District Court, the MPLA is the exclusive remedy for claims against a manufacturer, designer or seller, but not to other parties in the chain of commerce. The court found that Amazon was in the direct chain of commerce because it facilitated transactions, collected fees and shipped products for third parties. The court also found that Amazon was a marketplace, which it considered a subcategory of service provider. Although the parties fought over whether Amazon was a “service provider” or “marketplace,” the court was not overly impressed with the labels the parties used. As noted by the court, Amazon “operated a digital space for commerce that on two occasions seamlessly connected the Boones to third party sellers.” As a marketplace that collected something of value for providing its services, the court found that common law liability applied to State Farm’s claims against Amazon.

After the court concluded that Amazon was subject to common law negligence and negligent failure to warn claims, the court considered whether State Farm’s amended complaint stated negligence and negligent failure to warn claims against Amazon. The amended complaint alleged, among other things, that Amazon owed the Boones a duty because it provided marketing and transactional services that led to the Boone’s purchases. The amended complaint further alleged that Amazon breached its duty by failing to remove hoverboards from its website, despite having knowledge of the fire hazards associated with the hoverboards. In addition, State Farm alleged that Amazon knew that it was facilitating the shipment of poor-quality hoverboards, manufactured in China - hoverboards that contained lithium ion batteries causing fires throughout the United States. Further, State Farm’s complaint alleged that Amazon sold hoverboards that failed to comply with UN/DOT 38.3, Transport of Dangerous Goods for Lithium Metal and Lithium Ion Batteries and that the hoverboards were “extremely dangerous and presented a substantial product hazard as defined in 15 U.S.C. § 2064(a).” Based on State Farm’s allegations, the District Court held that State Farm plausibly stated negligence and negligent failure to warn claims against Amazon. Thus, the court denied Amazon’s motion.

This case serves as a reminder that when pursuing claims against Amazon, subrogation professionals should focus on the state law for the specific jurisdiction at issue. In addition, subrogation professionals should consider whether the state’s product liability act provides the exclusive remedy for all parties in the chain of commerce. Where, as here, the state’s products liability law does not provide the exclusive remedy, subrogating insurers may be able to state a common law negligence claim against Amazon based on what it knew or should have known. Although some cases have exonerated Amazon for liability because it was not a “seller” or never took title to the product at issue, the momentum has shifted and, as we discussed in two recent blog posts, courts are starting to evidence a willingness to impose liability on Amazon.