In a recent decision, the Florida Supreme Court issued a categorical opinion eliminating Florida’s economic loss rule in consumer cases. The court in Tiara Condominium Assoc., Inc. v. Marsh & McLennan Companies, Inc., 38 Fla. L. Weekly S151a (Fla. March 7, 2013), held that the “the application of the economic loss rule is limited to products liability cases.”
The economic loss rule is widely accepted in most states and prevents nearly all plaintiffs from suing in tort where they maintained a contractual relationship with the alleged defendant. The Florida’s Supreme Court ruling eviscerates the broad application of the economic loss rule and opens to door to additional (and likely frivolous) claims by consumers against lenders and other financial institutions in Florida.
In Tiara Condominium Assoc., the plaintiff brought both contract and tort claims against an insurance provider based on representations regarding plaintiff’s insurance coverage. The trial court granted summary judgment in favor of the insurance provider, and the 11th Circuit Court of Appeals affirmed on all but two of the tort claims-- negligence and breach of fiduciary duty claims. The 11th Circuit certified the issue of whether the economic loss rule prohibits recovery on these claims to the Florida Supreme Court. The Florida Supreme Court held that the economic loss rule did not apply and that it was “return[ing] the economic loss rule to its origin in products liability.”
As the Florida Supreme Court explained, the rule originally grew out of products liability cases with a contractual element to the relationship between customer and seller. While the court correctly stated the rule’s origins, the dissent noted the majority opinion “articulates no explanation of why the economic loss rule is appropriately applied in the products liability context but is unworkable or unwise in [a] broader context.” And indeed there is not. The basic logic of the rule is that a random retail consumer could sue in tort, but a buyer who contracted to purchase the product had settled expectations of its performance and the opportunity to make provisions for remedies of any breach. It should not matter whether that product is physical or instead something intangible like a financial product. To varying degrees, courts often agree the principle should extend to consumer contracts, making the Florida ruling something of an outlier.
Still, the ruling comes as little surprise as Florida has been trending away from application of the economic loss rule in consumer contexts for some time. The ruling, then, does not bring a sea change to Florida law, but coming from a state supreme court, it will certainly spur consumers in all jurisdictions to allege both contract and tort claims--regardless of their merits—and could cause other courts in other jurisdictions to consider revisiting their extension of the economic loss rule to consumer cases.