Supplemental Conditions

The Looming Threat of Solar Panel Defect Litigation

Posted in Construction Defects

The solar energy industry has seen tremendous growth.  In 2012, solar panels generated 3.3 billion gigawatts of power. That amount is expects to more than double to 7.2 billion gigawatts by the end of 2013.  Solar energy is now a $77 billion industry and solar energy stocks are among the top performers on Wall Street.  With this growth comes an increasing number of contractors installing solar panels and developers installing solar panels on their projects.

However, this growth has come at a cost.  One of the reasons for this tepid growth is the dramatically falling costs of the photovoltaic panels (those ubiquitous blue solar panels) used to capture and generate the suns rays into electricity.  Some manufactures have sacrificed cost for quality and this has the solar industry concerned.

Early this summer, the New York Times ran a story regarding the growing anxiety in the solar energy industry over the quality of solar panels being manufactured, particularly in China.  The concern over defective panels is great enough that, according to the Times, “First Solar, one of the United States’ biggest manufacturers, has set aside $271.2 million to cover the costs of replacing defective modules it made in 2008 and 2009.”

Contractors installing solar panels and developers building projects that use them should be very concerned as well.  Although the usual claims of breach of contract and warranty exists against contractors and developers over defective solar panels, so do claims of product liability, which are relatively uncommon in the construction industry.  Under the legal theory of strict liability, a “seller” of a product is liable for damages caused by defects in the product.  Because liability is strict, a plaintiff in a strict liability case need not show that the seller knew the product had a defect.  The problem for contractor and developers is that in the world of strict liability the term seller does not just mean the manufacturer, but anyone in the chain of distribution.  This chain of distribution includes retail dealers and distributors, contractors and developers.  For contractors and developers concerned about this growing threat, now would be the time to review your insurance policies with your insurance agent to see if such claims would be covered by your current policy.  (Chances are they are not.)

Bad news for contractors and developers is good news for plaintiffs stuck with defective solar panels.  In a strict liability case, the class of potential defendants liable for the defective product is much larger than in a breach of contract or warranty case.  With a larger defendants pool, the chances of an affirmative recovery or a favorable settlement are increased.