Category Archives: Economic Loss Rule

Drawing the Line: In Tennessee, the Economic Loss Doctrine Does Not Apply to Contracts for Services


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In Commercial Painting Co. v. Weitz Co. LLC, No. W2019-02089-SC-R11-CV, 2023 Tenn. LEXIS 39 (Weitz), the Supreme Court of Tennessee (Supreme Court) considered whether the economic loss doctrine barred the plaintiff’s claims for fraud, negligent misrepresentation and punitive damages arising out of a contract with the defendant for construction services. The court held that the economic loss doctrine only applies to product liability cases and does not apply to claims arising from contracts for services. This case establishes that, in Tennessee, the economic loss doctrine does not bar tort claims in disputes arising from service contracts.

In Weitz, defendant, Weitz Co. LLC (Weitz), was the general contractor for a construction project and hired plaintiff Commercial Painting Co. (Commercial) as a drywall subcontractor.  Weitz refused to pay Commercial for several of its payment applications, claiming that the applications were submitted untimely and contained improper change order requests.  Commercial filed a lawsuit against Weitz seeking over $1.9 million in damages, alleging breach of contract, unjust enrichment, enforcement of a mechanic’s lien, and interest and attorney’s fees under the Prompt Pay Act of 1991. Weitz filed a counterclaim for $500,000 for costs allegedly incurred due to Commercial’s delay and defective workmanship. In response, Commercial amended its complaint to add claims for fraud, intentional and negligent misrepresentation, rescission of the contract and $10 million in punitive damages. Commercial alleged that Weitz received an extension of the construction schedule but fraudulently withheld this information from Commercial and continued to impose unrealistic deadlines.

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This entry was posted in Contracts, Economic Loss Rule, Tennessee and tagged , , .

ELD Strikes Again! Michigan Court Hits the Brakes on Plaintiffs’ Economic Loss Claims


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In HDI Glob. SE v. Magnesium Prods. of Am., Inc., No. 360385, 2023 Mich. App. LEXIS 2602 (Magnesium Prods.), the Court of Appeals of Michigan (Court of Appeals) considered whether the lower court erred in dismissing the plaintiffs’ claim for loss of income based on the economic loss doctrine. The court found that while the defendant manufacturer owed a duty to the general public to exercise reasonable care in its manufacturing process, that duty did not apply to the economic damages alleged by the plaintiffs.

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This entry was posted in Contracts, Economic Loss Rule, Michigan, Subrogation, Uncategorized and tagged , , , .

New York Court Enforces Economic Loss Doctrine


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The economic loss doctrine is a legal principle that has confused and frustrated subrogation practitioners since its inception. Unfortunately, once practitioners understand the basic theory, they realize how frustrating it can be. If there was any doubt about the doctrine’s effect in New York, the Appellate Division put that to rest in a recent ruling on a subrogation case in which it bolstered the economic loss doctrine defense. Continue reading →

This entry was posted in Contracts, Economic Loss Rule, New York, Products Liability and tagged , , , .
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Utah Digs Deep and Finds “Design Defect” Includes Pre-Construction Geotechnical Reports


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The Supreme Court of Utah recently found that an incorrect pre-construction geotechnical engineering report is a “defective design.” Thus, actions arising from an incorrect geotechnical report are appropriately governed by Utah’s Economic Loss Statute (Statute), Utah Code Ann. § 78B-4-513(1). Continue reading →

This entry was posted in Construction Defects, Economic Loss Rule, Utah and tagged , , , , .
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Saved By The Statute: The Economic Loss Doctrine Does Not Bar Claims Under Pennsylvania’s Unfair Trade Practices and Consumer Protection Law


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In Earl v. NVR, Inc., No. 20-2109, 2021 U.S. App. LEXIS 6451, the U.S. Court of Appeals for the Third Circuit (Third Circuit) considered whether, under Pennsylvania law, the plaintiff’s Unfair Trade Practices and Consumer Protection Law (UTPCPL) claims against the builder of her home were barred by the economic loss doctrine. The UTPCPL is a Pennsylvania statute that prohibits “unfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce.” 73 Pa. Stat. Ann. § 201-3. The Third Circuit previously addressed the impact of the economic loss doctrine on UTPCPL claims in Werwinski v. Ford Motor Co., 286 F.3d 661 (3d Cir. 2002). In Werwinski, the court held that the plaintiff’s UTPCPL claim was barred by the economic loss doctrine. The Court of Appeals overturned its decision in Werwinski and held that the economic loss doctrine does not bar UTPCPL claims since such claims are statutory, and not based in tort. Continue reading →

This entry was posted in Construction Defects, Economic Loss Rule, Pennsylvania and tagged , , , .
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Wisconsin Supreme Court Induced to Narrowly Interpret Exceptions to the Economic Loss Doctrine


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In Hinrichs v. Dow Chem. Co., 2020 WI 2, 2020 Wisc. LEXIS 2 (2020), the Supreme Court of Wisconsin considered whether two recognized exceptions to the economic loss doctrine—the “fraud in the inducement” and “other property” exceptions—applied to allow the plaintiffs’ tort claims to go forward. The court held that the fraud in the inducement exception only applies to alleged fraud that is unrelated to either the quality or characteristics of the product for which the parties contracted or performance of the contract. In addition, the court held that the fraud in the inducement exception did not apply to the plaintiffs’ tort claims because the alleged fraud was related to the quality and characteristics of the product, and thus was not extraneous to the contract. The court also held that the “other property” exception to the economic loss doctrine did not apply because the product at issue was integrated into a more complete product, and when that happened, the completed product ceased to be “other property” for purposes of the economic loss doctrine. This case narrows the application of two exceptions to the economic loss doctrine, which is a common defense in product defect cases. Continue reading →

This entry was posted in Economic Loss Rule, Fraud - Misrepresentation, Products Liability, Wisconsin and tagged , , .
Community

Virginia Molds Tort Versus Contract Law in New Home Construction Case


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Often times, both contract and tort claims co-exist in a subrogation matter and the line between the two can be blurred. This is especially true in the context of damages resulting from new home construction defect claims. However, states are increasingly attempting to define the scope of when the “gist of the action” is based in contract only. In Tingler v. Graystone, 834 S.E.2d 244 (Va. 2019), the Supreme Court of Virginia defined that scope in terms of new home construction. The court defined the “source of duty rule” by holding that claims of nonfeasance sounding only in contract do not give rise to an independent tort claim. The court also reiterated its application of the economic loss doctrine, stating that, when negligent actions result in damage to property other than the product itself, there can be a viable tort claim. Continue reading →

This entry was posted in Construction Defects, Contracts, Economic Loss Rule, Virginia and tagged , , .
Construction Defect

Rhode Island Examines a Property Owner’s Intended Beneficiary Status and the Economic Loss Doctrine in the Context of a Construction Contract


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In Hexagon Holdings Inc. v. Carlisle Syntec, Inc. No. 2017-175-Appeal, 2019 R.I. Lexis 14 (January 17, 2019), the Supreme Court of Rhode Island, discussing claims associated with allegedly defective construction, addressed issues involving intended beneficiaries to contracts and the application of the economic loss doctrine. The court held that, based on the evidence presented, the building owner, Hexagon Holdings, Inc. (Hexagon) was not an intended third-party beneficiary of the subcontract between the general contractor (A/Z Corporation) and the subcontractor, defendant McKenna Roofing and Construction, Inc. (McKenna). In addition, the court held that, in the context of this commercial construction contract, the economic loss doctrine applied and barred Hexagon’s negligence claims against McKenna. Continue reading →

This entry was posted in Construction Defects, Contracts, Economic Loss Rule, Rhode Island, Warranty-Implied and tagged , .
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Wisconsin Court of Appeals Holds Economic Loss Doctrine Applies to Damage to Other Property If It Was a Foreseeable Result of Disappointed Contractual Expectations


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In Kmart Corp. v. Herzog Roofing, Inc., 2018 Wisc. App. Lexis 842, the Court of Appeals of Wisconsin considered whether the economic loss doctrine barred the plaintiff’s negligence claims against the defendant roofer for damages resulting from the collapse of a roof. The Court of Appeals held that, while some of the plaintiff’s property damages were unrelated to the scope of the contract, the economic loss doctrine still applied to those damages because they were a foreseeable result of the defendant’s breach of the contract. This case establishes that in Wisconsin, the economic loss doctrine bars tort claims for damage to property unrelated to the contract if those damages were a reasonably foreseeable risk of disappointed expectations of the contract. Continue reading →

This entry was posted in Damages, Economic Loss Rule, Wisconsin and tagged , , .

Economic Loss Doctrine Bars Negligence Claim Against Building Company Owner, Individually


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In Beaufort Builders, Inc. v. White Plains Church Ministries, Inc., 783 S.E.2d 35 (N.C. Ct. App. 2016), the Court of Appeals of North Carolina addressed whether the economic loss rule barred the negligence claim of White Plains Church Ministries, Inc. (White Plains) against Charles F. Cherry (Cherry), the owner of Beaufort Builders, Inc. (Beaufort Builders). The court held that, because the economic loss rule would bar White Plains’ negligence claims against Beaufort Builders, White Plains could not pursue a third-party negligence claim against Cherry, individually.

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This entry was posted in Construction Defects, Economic Loss Rule, North Carolina and tagged , , .