## Facts

- Outlook Windows Partnership (Outlook) operated a Nebraska manufacturing facility heated by a wood-fired boiler.
- In January 1997, Outlook’s wood-fired boiler suffered a catastrophic “melt-down,” which Travelers Property Casualty Insurance Company (Travelers) treated as a covered loss under its policy.
- Outlook sought to replace the heating system with natural-gas-fired boilers. York International Corporation, doing business as Natkin Services (Natkin), sold and installed two gas-fired boilers for Outlook. UtiliCorp United, Inc., doing business as Peoples Natural Gas (Peoples), was the gas supplier involved in discussions about expected operating costs.
- Travelers settled Outlook’s claim by paying Outlook the purchase price of the two gas-fired boilers sold and installed by Natkin.
- Outlook contended it agreed to the Travelers settlement and bought Natkin’s system based on representations and estimates—attributed to Natkin (and, in part, Peoples)—that operating the new gas-fired system would cost about the same as operating the prior wood-fired system.
- After installation and use, Outlook alleged that the new system was significantly more expensive to operate than it had been led to expect.
- Outlook sued Natkin, asserting breach of the implied warranty of fitness for a particular purpose under Nebraska’s version of UCC § 2-315, claiming Natkin knew Outlook required an affordable-to-operate heating system and that Outlook relied on Natkin’s assurances about operating cost.
- Outlook also sued Travelers seeking relief tied to the settlement (arguing, among other things, mutual mistake concerning operating costs) and sued Peoples based on its alleged role in providing or supporting the operating-cost estimate.
- All three defendants moved for summary judgment.

## Issues

1. Whether Outlook presented sufficient evidence to create a genuine dispute that Natkin breached an implied warranty of fitness for a particular purpose under Nebraska UCC § 2-315, where the claimed “particular purpose” centered on obtaining a replacement heating system with operating costs comparable to the prior system.
2. Whether Outlook could obtain relief against Travelers to reopen or alter the insurance settlement based on an alleged mutual mistake about the future operating costs of the replacement system.
3. Whether Peoples could be held liable on the record presented for its participation in an operating-cost estimate that proved inaccurate.

## Decision

- The court **denied** Natkin’s motion for summary judgment, holding that Outlook’s evidence could support a finding that Natkin knew Outlook’s cost-related requirement and that Outlook relied on Natkin’s judgment and assurances when purchasing the system.
- The court **granted** Travelers’s motion for summary judgment, concluding that Travelers’s obligations were satisfied by paying the agreed replacement purchase price and that the alleged mistake about operating costs did not justify setting aside or expanding the settlement.
- The court **granted** Peoples’s motion for summary judgment, determining that Outlook had not shown a viable legal basis on this record to impose liability on Peoples for the operating-cost estimate.
- The court directed entry of final judgment for Travelers and Peoples under **Federal Rule of Civil Procedure 54(b)**, while Outlook’s case against Natkin proceeded.

## Legal Principles

- Under Nebraska’s UCC § 2-315, an implied warranty of fitness for a particular purpose may arise when:
  - the seller has reason to know the buyer’s particular purpose;
  - the seller has reason to know the buyer is relying on the seller’s skill or judgment to select or furnish suitable goods; and
  - the buyer actually relies on the seller’s skill or judgment.
- A “particular purpose” can differ from a product’s ordinary purpose; whether a buyer’s stated requirements (including cost-of-operation expectations tied to the buyer’s needs) qualify, and whether reliance occurred, may present fact questions not suitable for summary judgment.
- An insurer’s replacement-cost payment for a covered physical loss does not, without specific policy or settlement terms, make the insurer responsible for the insured’s expectations about future operating economics of replacement equipment.
- Claims seeking to undo or revise a settlement based on mistaken expectations about future performance or costs generally fail absent a showing that the mistake concerns a fact that justifies rescission or reformation under applicable state law.
- Participation in providing an estimate, without more, does not automatically create warranty or tort liability; the plaintiff must show a recognized duty, a qualifying warranty relationship, and evidence supporting the elements of the claim.

## Conclusion

The court held that Outlook produced enough evidence for a jury to decide whether Natkin breached an implied warranty of fitness for a particular purpose by selling a heating system allegedly chosen and purchased based on assurances of comparable operating costs, but it entered summary judgment for Travelers and Peoples because the settlement resolved Travelers’s replacement-cost obligations and the record did not support holding Peoples liable for the operating-cost estimate.


Outlook Windows Partnership v. York International Corp., 112 F. Supp. 2d 877 (2000)