The Demise of the Economic Loss Rule: How Will This Impact Business Litigants?
By Kluger Kaplan March 14, 2013
By Justin B. Kaplan
Last week, the Florida Supreme Court put the final nail in the coffin of the dying economic loss rule. In the landmark case Tiara Condominium Ass’n, Inc. v. Marsh & Mclennan Co., Inc., the Florida Supreme Court took advantage of a certified question from the 11th Circuit to hold that “the application of the economic loss rule is limited to products liability cases.”
The economic loss rule formerly barred a plaintiff from suing in tort where there is contractual privity between he and the defendant. For years, courts consistently chipped away at the economic loss rule, carving out exception after exception to allow litigants to pursue tort claims despite the existence of a contract governing the relationship.
As business litigators, we see many instances where fraud in the performance of a contract claims are dismissed based upon the economic loss rule. While fraud in the inducement – that fraudulent conduct pre-contract is what led to the contract’s execution – has been a permitted claim, fraud in the performance claims have generally been barred by the economic loss doctrine.
In the wake of Tiara, how business litigants will respond is unknown. I expect that will we see at the very least plaintiffs amending their complaints to include claims for fraud despite the existence of a contractual relationship. While some may say that this holding has been a long time coming, and that Tiara merely codifies the existing state of the law, the economic loss rule comes into play in a lot of my cases and I expect that good litigators will find new and interesting ways to draft complaints in the aftermath of this case.