The folks who eroded the privity rule in A.R. Moyer v. Graham have now abolished the economic loss rule in Tiara Condominium Ass'n v. Marsh & McClennan. The decision, issued March 7, 2013 by the Florida Supreme Court, is blunt: “We . . . hold that the application of the economic loss rule is limited to products liability cases. Therefore, we recede from prior case law to the extent that it is inconsistent with this holding.” Wow!
This particular case arose when a condo association sued its broker because the condo had less insurance coverage than expected, a fact discovered after it undertook hurricane damage repair work that cost more than the available coverage. The facts of this case are less significant, though, than the sweeping decision of the Florida Supreme Court. The Florida high court called the economic loss rule “a judicially created doctrine that sets forth the circumstances under which a tort action is prohibited if the only damages suffered are economic losses.” It goes on to state: “The rule has its roots in the products liability arena, and was primarily intended to limit actions in the products liability context.”
The economic loss rule, or doctrine, dates to the mid-nineteenth century according to some commentators, although most are in agreement that the doctrine came into focus in the 1960’s. This rule has been a standard arrow in the quiver of attorneys defending professionals against tort claims for many decades. Although eroded in many jurisdictions – some have allowed economic loss claims when the plaintiff was “foreseeable,” or when the defendant had “negligently misrepresented” something (e.g., a drawing or specification) – no state appears to have been so bold until now as to declare the rule to be dead for non-product liability claims. This decision will be discussed, critiqued and criticized (and even lauded in some circles) for years to come. As most readers are aware, a decision by one state's high court will not necessarily result in other states following suit, but this decision, now a part of the judicial record, will probably be cited frequently in the arena of tort claims arising from construction projects.
Coincidentally, the Florida Construction Law Update blog reports, in an entry dated prior to the Florida court decision, that the state legislature is considering a bill to effectively impose the economic loss rule by statute.