The Subrogation Strategist

In Union Mut. Fire Ins. Co. v. Ace Caribbean Mkt., No. 21-2653,2023 U.S. App. LEXIS 8203 (2d Cir. Apr. 6, 2023), the United States Court of Appeals for the Second Circuit (Second Circuit) considered whether evidence that a fire may have originated in extension cords was sufficient to establish that: a) the owners/proprietors were negligent in their use of the extension cords; and b) their negligence was the cause of the fire. The Second Circuit held that the circumstantial evidence was not sufficient and affirmed summary judgment in favor of the defendant.

Union Mut. Fire Ins. involved a fire that occurred on March 4, 2017, at 110-14 Liberty Avenue, Queens, NY (the Origin Unit). The defendant, Ace Caribbean Market (Ace), operated a store on the first floor of the Origin Unit. Ace used four refrigerators and freezers within its space to display vegetables and beverages. There were no electric outlets in the floor of the store so Ace used extension cords, power strips, and surge protectors to power the refrigerators. The fire caused damage to four neighboring properties around the Origin Unit. The properties were insured by Union Mutual Fire Insurance Company (Union Mutual).

Following the loss, the New York Fire Department (FDNY) investigated the cause of the fire. The FDNY found a “V-shaped burn pattern, as well as heavily damaged power strips and extension cords” in the rear of the Origin Unit. The FDNY put the numerical code for “extension cord” as the cause of the fire on the fire report. However, the FDNY noted that the cause of the fire was “‘not fully ascertained due to [a] structural collapse’ as the collapsed roof and second floor of the building damaged the area of the fire’s origin.” In addition, the FDNY did not send any of the damaged extension cords or power strips for testing to rule out a manufacturing defect within the components. Although the lead fire marshal and his supervisor acknowledged that extension cords that are plugged into one another can overheat and start a fire, they found neither evidence of misuse nor overload.

Union Mutual filed suit against Ace in September 2018. During depositions, the lead fire marshal testified that he believed the extension cords and power strips were the cause of the fire but he could not rule out manufacturing defects in either. The fire marshal’s supervisor testified that while he agreed with the underlying findings that the extension cords were the probable cause of the fire, “he could not make that determination with certainty.”

Ace moved for summary judgment, arguing that Union Mutual could not prove that Ace caused the fire by improperly using extension cords given that the investigators could not determine with certainty the fire started: a) at the extension cords; and b) due to Ace’s improper use of the extension cords. The lower court granted summary judgment, finding that the fire marshals’ report and testimony “did not establish a reasonable probability that defendant’s negligence caused the fire, because [the lead fire marshal] could not determine the cause with certainty.”

Union Mutual appealed, arguing that it had produced sufficient evidence that Ace’s negligence caused the fire and that there existed a genuine dispute of material fact that must be decided by the jury. The Second Circuit noted that circumstantial evidence can be sufficient “if there is a strong link between[:] (1) an activity considered wrongful because it increases the risk that a particular type of harm would occur[;] and (2) the occurrence of that exact type of harm.” To establish this link, “there must be sufficient evidence of negligence on the part of the defendant that increased the chances of the harm that occurred.”

The Second Circuit found that Union Mutual failed to meet this standard, finding that “[a]t most, Union Mutual…produced weak circumstantial evidence that something wrong with the extension cords caused the fire.” The court also found that even if a jury could conclude that the fire began due to an issue with the extension cords/power strips, “Union Mutual showed no evidence of negligence whatsoever on defendant’s part, and evidence of causation by itself is not evidence of negligence.”

The Second Circuit also briefly considered whether the res ipsa loquitur theory applied to the facts. The Second Circuit found that res ipsa loquitur did not apply, as the lead fire marshal testified that the extension cords or power strips “‘[v]ery well could have’ had manufacturing defects in them.” Because a manufacturing defect was outside of Ace’s control, Union Mutual could not prove that the fire was caused by an instrumentality within the requisite control of Ace. Thus, Union Mutual could not meet the essential elements of the theory.

Subrogation professionals must always be mindful of retaining experts for the purposes of subrogation who understand the importance of analyzing a scene from a subrogation perspective. In addition, experts and professionals should understand how to prove a case using circumstantial evidence, including the need to rule out other causes. Further, subrogation professionals must always be mindful of the importance of retaining evidence to ensure testing can be performed, if possible, both to prove and rule out potential causes of a fire.