Thoughts on construction law from Christopher G. Hill, Virginia construction lawyer, LEED AP, mediator, and member of the Virginia Legal Elite in Construction Law

The Economic Loss Rule Applies Only to Products Liability Cases, at least in Florida

Craig_Martin_IndexFor this week’s Guest Post Friday here at Construction Law Musings, we welcome a friend and sometime co-presenter Craig Martin. Craig (@craigmartin_jd) is a partner in the law firm of Lamson Dugan and Murray, LLP in Omaha, Nebraska. He has a background and experience in all aspects of construction law. As part of his practice he counsels contractors, subcontractors, developers, owners, materials suppliers and design professionals in various construction disputes. He also successfully represents them in both State and Federal courts. Craig’s business goal is to provide cost-effective and distinguished counsel to the construction industry. Craig also authors the Construction Contractor Advisor blog.

The Florida Supreme Court was recently asked to weigh in on whether the Economic Loss Rule bars an insured’s suit against an insurance broker for economic damages. Instead of limiting its ruling to an esoteric insurance law question, the Court reviewed its entire history of applying the Economic Loss Rule. The court reversed its earlier decisions that applied the rule to construction cases and held that from now on, it should only apply in products liability cases. This is quite a change in Florida law and may have ramifications throughout the country.

The Economic Loss Rule provides that a party who suffers only economic injury may recover damages for that harm in a breach of contract claim and not on a tort theory, such as negligence. The Economic Loss Rule, which started in products liability, has become a fixture in construction cases for decades. At its apex, the economic loss rule barred all tort claims against an entity with which you contracted. So, if you had a contract with a subcontractor or an architect, you could only bring a breach of contract claim, not a negligence claim. And, those limitations of damages incorporated into the contract limited the amount that could be recovered in the breach of contract claim.

Florida court consistently applied the Economic Loss Rule, holding that it barred a cause of action in tort for providing defective concrete where there was no personal injury or damage to property other than the product itself. See, Casa Clara Condominium Ass’n, Inv. V. Charley Toppino and Sons, Inc., 620 So.2d 1233 (Fla. 1993). But, over time, the steadfast application of the Economic Loss Rule eroded and cracks in the armor were recognized by the court. In 2004, several justices on the court supported limiting the Economic Loss Rule to its origins of products liability. See, Indem. Ins. Co. of N. Am. V. Am. Aviation, Inc., 891 So.2d 532 (Fla. 2004).

It took, however, until 2013 for the court to recede from its prior rulings applying the Economic Loss Rule to cases other than products liability. Now, in Florida, it appears that the Economic Loss Rule will no longer prevent parties to a construction contract from lodging tort claims against each other and seeking to recover tort based damages, like consequential damages.

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