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Legal Watch: Volume 13
Prepared by William H. BodeCase Summary: A worker was seriously injured when he attempted to remove the lid from a fifty-five gallon drum with an acetylene torch. The torch ignited a small amount of toluene which remained in the drum, causing an explosion. Union Oil supplied the drum to the worker’s employer, a manufacturing company. The worker sued Union Oil claiming that Union Oil was negligent in not labeling the drum as dangerous, and not requiring its customer to observe reasonable safety practices. Union Oil in defense asserted the “bulk supplier doctrine” claiming that it was entitled to rely on its customer (an “intermediary”) to warn its workers about the hazards associated with toluene. A jury found Union Oil liable and awarded the injured worker $1,750,000 in damages. The award was sustained on appeal. In sustaining the jury verdict, the appeals court listed six criteria to determine whether a bulk supplier can reasonably rely on its customer to handle the product safely: (1) the dangerous condition of the product; (2) the purpose for which the product used; (3) the form of warning given; (4) the reliability of the third party (customer); (5) the magnitude of the risk involved; and (6) the burden on the supplier by requiring that he directly warn all users. The appeals court was persuaded by the fact that toluene is highly volatile and was delivered to the customer on at least one prior occasion by pumping it into unlabelled drums.
Bode & Grenier, LLP
1150 Connecticut Ave., NW
Washington, D.C. 20036
Telephone: 202-862-4300 | Email: firstname.lastname@example.org
UNION OIL LIABLE FOR INJURIES FROM EXPLODING DRUM OF TOLUENE AT CUSTOMER’S BUSINESS SITE
LESSON: A bulk terminal that supplies a customer with volatile petroleum products can be liable for injuries resulting from an explosion of that product. The terminal operator can protect itself by taking these precautions: (a) Always affix labels denoting the product as “Hazardous” and including all other warning labeling required by OSHA; (b) Include in the sales contract language requiring the customer to observe all state and federal regulations for the handling of hazardous materials and to indemnify the terminal operator from any injuries resulting from failure to follow such regulations; and (c) Sell only to reputable and responsible parties. (Timothy Tilton v. Union Oil Company of California, et al.)
TANK FARM OWNER CANNOT RECOVER FOR DEFECTIVE TANK -- TEXAS 15-YEAR REPOSE STATUTE BLOCKS LAW SUIT
LESSON: Whenever a spill occurs, a terminal operator must make a timely analysis of its exposure and be sure to file suit against every conceivable responsible party in a timely manner. In Texas, however, a law suit alleging sale of a defective tank can not be brought more than 15-years after the date of sale. (Burlington Northern & Santa Fe Railway Company v. Poole Chemical Company)
BUYER WHO BACKS OUT OF PURCHASE OF PETROLEUM FACILITY MUST PAY $220,000 IN LIQUIDATED DAMAGES
LESSON: Liquidated damages clause should be inserted in a contract whenever it is difficult to estimate damages upon a breach. To be enforceable, however, the terminal operator should commission a cost analysis prior to signing the contract that identifies the nature and extent of possible damages. This analysis, that need not be elaborate, can include damages attributable to “lost opportunity costs.” (Joseph Chandry v. RaceTrac Petroleum, Inc.)
Please address any comments or questions to Mr. Bode at 202-862-4300 or email@example.com.
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