Also known as: economic loss rule · economic loss doctrine · ELR
Written by attorneys — see sources below.
A doctrine that bars recovery in tort for purely economic losses absent accompanying physical injury or property damage. The rule originated in products liability to keep contract and warranty remedies primary but has been narrowed in some jurisdictions to that setting alone.
Northgate Bank's compliance officer misread a regulatory notice and told a shared client that Harborview Advisors' license was suspended. The client terminated the advisory contract. Harborview lost only expected fees and sued Northgate in negligence. Because the claim arose outside products liability, the economic loss rule did not bar the tort action.
Excavation Technologies struck an unmarked gas line while digging and sued Columbia Gas for added costs and lost time. No equipment was physically damaged. The court applied the economic loss rule to dismiss the negligence claim because the only harm was financial.
Excavation Technologies, Inc. was preparing to perform excavation work for a waterline extension project. Before beginning the work, the company requested that Columbia Gas Co. of Pennsylvania mark the locations of its gas lines around the work sites in accordance with the requirements of the One Call Act. Columbia Gas improperly marked some of the lines and failed to mark others entirely. As a result, Excavation Technologies struck various gas lines during the course of the project. These incidents hampered the excavation work and caused significant delays, resulting in economic damages of $74,502.06. Excavation Technologies did not sustain any physical injury or property damage. The company then filed suit against Columbia Gas on a theory of negligent misrepresentation under Section 552 of the Restatement (Second) of Torts. The suit alleged that the utility had failed to comply with its statutory duties under the One Call Act. Columbia Gas responded by filing preliminary objections in the nature of a demurrer, arguing that the economic loss doctrine barred any recovery for purely economic damages. The trial court sustained the preliminary objections and dismissed the action. Excavation Technologies appealed the dismissal to the Superior Court, which affirmed the trial court's order in an en banc decision. The Supreme Court of Pennsylvania subsequently granted allowance of appeal to address the legal question of whether Section 552 imposes liability in these circumstances.
View caseIn Florida the rule is now confined to products liability. Tort claims arising from contractual relationships are no longer automatically barred by the doctrine itself.
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Negligence that produces purely economic loss from contract termination or interference is generally not actionable absent physical harm or a special relationship creating an independent duty.
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Recovery turns on whether the claimed harm is a proven pecuniary loss caused by the tort. Pure economic loss rules may still block recovery when the loss stems from contractual expectations rather than physical injury.
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…The Jurisprudence of Classification, 41 Stan. L. Rev. 661 (1989); Bertschy, Negligent Performance of Service Contracts and the Economic Loss Doctrine, 17 J. Mar. L. Rev. 249 (1984); W. Keeton, Prosser & Keeton on Torts §92, at 655 (5th ed. 1984).) For all of that, a punch in the nose remains, for all practical purposes, a tort and not a…