Written By: Brian L. Wagner, Esq.
Mateer Harbert, PA
Orlando, Florida
In a recent decision that has caused a stir in the Florida construction industry, the Florida Supreme Court limited the application of the Economic Loss Rule to cases involving products liability. The Economic Loss Rule is a judicially created doctrine that sets forth circumstances under which a tort action (a wrongful act, other than under a contract, leading to legal liability) is prohibited if the only damages suffered are economic losses. For years this doctrine was used as a defense in construction law cases to prevent a claimant from obtaining damages over and above breach of contract remedies when the only action complained of was the breach of contract itself.
With the Florida Supreme Court’s decision in Tiara Condominium v. Marsh & McLennan, No. SC10-1022, the days of using the Economic Loss Rule to defeat tort claims in construction contract disputes are gone. Judge Canady, in his dissent in the case, stated that “Florida’s contract law is seriously undermined by the action” and opined that litigants now “face the prospect of every breach of contract claim being accompanied by a tort claim.” If this is the result, then a litigant’s liability exposure in what initially was just a breach of contact claim may be increased. In addition to increased legal fees in defending the tort claim, certain exposures such as punitive damages may now be present, which would likely not be available in a breach of contract claim. The fear now is that this decision will “open the floodgates” to litigation in tort despite the existence of a contract.
There is a light at the end of the tunnel. In a concurring opinion, Judge Pariente pointed out that parties can avoid tort liability by drafting contractual clauses that limit their duties to the other party. It would be wise for owners, contractors and sub-contractors to review all their contracts in light of this decision to eliminate as many duties and/or damages that are foreseeable. The Florida Supreme Court may have “opened the floodgates” for tort claims in contractor contract disputes, but the savvy owner/contractor will attempt to minimize the impact (and their exposure) on the front-end by inserting new contract language to protect their interests.
Brian Wagner is a shareholder in the firm of Mateer Harbert, P.A., with offices in Orlando and Ocala, Florida.
For more information about Mateer Harbert, PA, please visit the International Society of Primerus Law Firms.
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