Omega Flex fends off big insurers' lawsuits
PHOTO | Contributed
A 2007 Omega Flex product guide shows a previous version of the company's TracPipe gas tubing, which has faced more than 50 product-liability lawsuits.
PHOTO | Contributed
This photo of TracPipe was included in a 2013 class action lawsuit against Omega Flex in Florida. The suit was ultimately dismissed by a judge.
PHOTO | Contributed
Omega Flex's modern day product, TracPipe Counterstrike, which has a thick protective jacket.
With its core manufacturing operation in Pennsylvania and its corporate headquarters tucked away in a Middletown office building, Omega Flex might not be a household name in the central Connecticut business community.
But the gas-piping manufacturer's attorneys have been a common presence in courtrooms in Connecticut and across the country. The 140-employee company has been sued more than 50 times in federal court over the past six years for product liability and negligence, according to an analysis of legal filings by the Hartford Business Journal.
The complaints allege that a now-discontinued version of Omega Flex's flexible gas piping, TracPipe, was responsible for lightning-strike related house fires, or that the product created such an increased likelihood of harm that homeowners deserved damages under negligence and liability laws.
Omega Flex, which has settled more than half of the suits privately, insists that its piping — used to transport natural gas to home appliances and heating systems — is not to blame for fires and is not uniquely susceptible to lightning damage. Not a single fatality has been linked to the product, the company contends.
In lawsuits that have made it to judgment, courts have largely sided with Omega Flex and the company has booked some high-profile wins: In December, Pennsylvania's Supreme Court vacated a trial court's $1 million ruling that TracPipe was defective and responsible for causing a house fire following a lightning strike. The high court's ruling, which sent the matter back to trial court, set new precedent in Pennsylvania product liability law, which experts say will make it more difficult to pursue such lawsuits in the Keystone State.
“It was a big deal,” Tim Scanlan, Omega Flex's general counsel, said of the Supreme Court victory. “We do feel vindicated.”
The Pennsylvania trial court's initial ruling has been the only verdict against Omega Flex to date.
Momentum shifts in legal saga
Besides gas piping, Omega Flex makes piping and hose products for solar hot water systems, vehicle engines and industrial uses.
The company was spun out of Westfield, Mass.-based Mestek in 2005. Omega Flex established its corporate headquarters in Middletown in 2007.
Its legacy TracPipe product first hit the market in the late 1990s, marketed as a cheaper and safer alternative to black iron gas pipe.
Despite the barrage of lawsuits, Omega is enjoying success, booking record sales in 2014, which the company attributed to an increased demand for its products and the recovery of the construction sector.
Even still, the legal challenges are a headache.
Insurers and homeowners have filed federal lawsuits against Omega Flex in at least 21 states since 2010. Six of them have been in Connecticut, including the most recent: a suit this month filed by Travelers related to a 2013 house fire in Woodbury.
Most suits are subrogation actions, in which insurers seek to recover costs paid out for a customer's claim.
Besides the Pennsylvania verdict, Omega Flex won dismissals of federal class action suits in Florida and Ohio last year, and in 2013, the company won jury verdicts against Nationwide Mutual Insurance in Connecticut and American Automobile Insurance in Missouri.
Omega's Scanlan said momentum is building from the company's court victories.
He said insurers and attorneys began ramping up lawsuits against Omega Flex and other manufacturers of corrugated stainless steel tubing (CSST) after Omega settled an Arkansas class action case in 2006 for $8.4 million.
Scanlan, who has coordinated the company's legal strategy from Middletown with law firms from around the country, said CSST suits have since become a legal cottage industry.
“The claims are very similar,” Scanlan said. “What plaintiffs are asking is to believe a product should be immune from an act of nature like a lightning strike.”
Omega Flex CEO Kevin Hoben was more blunt, saying the lawsuits are based on “junk science.”
“They're a nuisance. They're an annoyance,” Hoben said of the suits.
He hopes his company's recent legal victories will deter insurers from filing more suits.
“The fact that we're now winning these things…the plaintiffs' lawyers are losing their taste for this because they haven't made money like they thought they would,” he said.
Because it's expensive to litigate, Hoben said it has been a smarter decision to settle certain suits.
Omega Flex is insured against general liability, but must pay between $25,000 and $250,000 in deductibles for judgments, the company disclosed in filings. If it began to lose cases, Omega would risk being unable to purchase affordable insurance, but it says that has not happened.
Omega Flex wouldn't disclose its total settlement payouts, but Hoben said the company is still ready to fight.
“The really big [suits], we'll go to the mats,” he said. With 14 cases still open, including the recent Travelers complaint, the company may get the chance.
Travelers declined to comment on pending litigation. Mark Utke, a Pennsylvania attorney who represented American Automobile as well as the plaintiffs in the Pennsylvania Supreme Court case and the lower- court victory that led to it, did not return a call seeking comment.
Omega Flex's court victories could also be important to the approximately 10 other U.S. companies that make CSST, which is seen as easier to work with and safer than traditional black iron pipe. A number of those competitors were also named as defendants in the 2006 Arkansas class action case, including Titeflex and Ward Manufacturing, each of which has faced similar product liability suits since.
Omega Flex discontinued TracPipe in 2011 in favor of a new version of its product with a thicker plastic jacket to protect piping from lightning strikes. At least one lawsuit — which was ultimately dismissed — pointed to the product transition as acknowledgment by Omega Flex that there was something wrong with TracPipe.
But the company said the switch was voluntary, and that the new product — TracPipe CounterStrike — reduces the chances that contractors will install it incorrectly. Contractors' failure to properly bond TracPipe to grounding equipment, in order to protect it from electrical surges, was part of Omega Flex's legal defense in a number of suits.
A Strong Recovery
Despite the myriad suits, the publicly traded company is doing better than ever. Omega Flex has been profitable every year since it was spun out by Mestek in 2005.
Omega Flex reported record annual sales of $85.2 million in 2014. That was up 14 percent from 2007 — the year preceding the housing crash, which caused Omega's revenues to dip as low as $44 million before climbing back.
Hoben said the company didn't lay off any workers during the recession. Instead, it launched new products that picked up the slack and helped it recover. Those efforts, as well as the continuing rebound of the construction market, paid off last year, he said.
While Omega Flex is largely a Pennsylvania resident, Hoben said he has no plans to move the corporate office from Connecticut, barring state tax increases.
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