West Virginia Contract Claims Concealed as Personal Injuries – Severn Peanut Co. v. Industrial Fumigant, Co.

contract-signing-1474333-1279x1705If you have recently been injured due to an accident or a mistake resulting from a business relationship or agreement, you may have claims under both your personal business contract and West Virginia negligence laws.  For instance, perhaps your business partner incorrectly loaded goods onto a truck, and when you unloaded them, they fell and caused an injury.  Does your claim for damages to cover your medical bills arise under the contract that required the goods to be correctly loaded? Or does it arise under a negligence theory because your business partner was negligent in his loading practices? A recent decision by the Fourth Circuit Court of Appeals suggests that when a claim is not viable under an existing contract, a plaintiff cannot seek to “cloak” the claim as a personal injury claim in order to get around contract issues.

In Severn Peanut Co. v. Industrial Fumigant Co., Plaintiff and Appellant Severn Peanut Company was a business selling and storing peanuts.  They entered into an agreement with Industrial Fumigant to have the company fumigate one of their peanut storage domes through the application of a pesticide. The fumigation agreement required Industrial Fumigant to apply the pesticide consistent with all relevant instructions. The agreement also provided that in return for a payment of only approximately $8,000, Industrial Fumigant did not agree to accept the risk for any incidental or consequential damages resulting from the fumigation. The fumigant that Industrial chose to use was a highly flammable tablet and could not be stacked one upon another for fear of starting a fire. Industrial ignored these instructions and dumped approximately 49,000 tablets into Severn’s peanut dome.  A fire ensued shortly thereafter and eventually resulted in an explosion that cost Severn 20 million peanuts and extensive damage to its structures and property. Severn eventually sued for both (1) breach of contract and (2) negligence.  Before the District Court, the Court found that Severn’s breach of contract claim was barred because the fumigation agreement explicitly denied coverage for consequential damages, and it denied the negligence claim as well.  Severn appealed.

On appeal, the Fourth Circuit upheld the District Court’s decision that the terms of the contract excluded claims for consequential damages. It then considered Severn’s argument that even if the contractual claims failed, Severn should still be allowed to pursue a claim of negligence.  Turning to the economic loss doctrine, the Fourth Circuit held that Severn’s contractual claims could not be recast as negligence claims in order to avoid the limitations of the contract.

The economic loss doctrine is a set of rules holding that a claim that is purely for economic (i.e. monetary) loss that could be brought as a contract claim cannot be simultaneously, or alternatively, brought as a personal injury or tort claim because contract claims are the most appropriate means for addressing these types of loss. The rationale behind this doctrine is that the parties should not be able to get around the negotiated terms of a contract by suing under a tort or personal injury theory instead. The parties are bound by what they agreed to when they signed the contract. Accordingly, since Severn agreed to a contract that did not provide for consequential damages, it could not later seek such damages by alleging negligence instead.

The Severn case serves as a good reminder to West Virginia business owners to carefully review and consider the terms of any contract before signing. Agreeing to limit your contractual rights can also prevent you from raising tort claims regarding the same subject matter down the road.

If you or a loved one has been injured as a result of an accident at work or home, it is important to consider whether you may have a stronger contract or personal injury claim, or if both types of claims are possible. When evaluating these tough questions, the West Virginia personal injury lawyers at the Wolfe Law Firm can help. Located in Elkins, West Virginia, we represent clients in a wide range of injury, criminal defense, and bankruptcy matters. Call us at 1-877-637-5756 or contact us online for a free consultation.

Related blog posts:

Filing Deadlines in West Virginia Personal Injury Cases – Hammonds v. Riverview Cemetery Association

Negligence and Foreseeability in West Virginia Car Accident Cases – Price v. LaMaster

Punitive Damages in Wrongful Death and Negligence Cases – Shulin v. Werner Enterprises