Also known as: no duty economic loss rule · economic loss rule · economic loss doctrine
Written by attorneys — see sources below.
A tort doctrine that denies recovery in negligence for purely economic losses unaccompanied by physical injury or property damage. The rule channels claims for pecuniary harm arising from negligent interference with contractual or prospective relations into contract remedies rather than tort. It prevents indeterminate liability to an open class of plaintiffs when no physical harm occurs.
Nia Nkosi's solar firm was negotiating a power purchase agreement with Nordic Ventures. MidState Power negligently published a planning report that falsely flagged interconnection failures by Nia Nkosi's company. Nordic Ventures abandoned the deal, and Nia Nkosi sued MidState in negligence for the lost profits. The court dismissed the claim because Nia Nkosi alleged only pecuniary loss without physical harm or property damage.
Nestor Navarro's manufacturing plant bought power from Neptune Energy. Neptune negligently failed to maintain a substation, causing repeated brownouts that forced Nestor Navarro to pay overtime wages and rush freight to meet supply contracts. Nestor Navarro sued Neptune in negligence for those added expenses alone. The court rejected the claim because the losses were purely economic and unaccompanied by physical injury or property damage.
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 caseNo. The rule bars recovery only when the plaintiff seeks purely economic losses without accompanying physical injury or property damage. Claims involving physical harm or recognized special duties may still proceed in negligence.
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The rule prevents indeterminate liability to an unlimited class of plaintiffs, encourages parties to allocate risks through contract, and preserves the boundary between tort and contract remedies.
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No. When the only harm is increased expense in performing contracts and no physical injury or property damage occurs, the no-duty economic loss rule precludes recovery in negligence.
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No. Even when economic harm is foreseeable, the rule still bars negligence recovery for purely pecuniary losses unaccompanied by physical harm.
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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…