Archive:December 21, 2010

Court Refuses to Apply Economic Loss Rule

Court Refuses to Apply Economic Loss Rule

Brian & Christie, Inc. v. Leishman Elec., Inc., 2010 WL 4724264 (Idaho Nov. 24, 2010)

By:  Todd Reuter, K&L Gates, Spokane/Coeur D’Alene

Here, a restaurant owner sued a subcontractor for property damage resulting from a fire allegedly caused by defendant’s electrical work.  The electrical contractor argued that the “economic loss rule” barred the restaurant owner’s claim.  The economic loss rule is a principal of law that prohibits a plaintiff from recovering for purely monetary loss when he/she sues for a tort such as negligence.  This is distinguishable from cases in which the plaintiff sues for physical injury or property damage:  "Economic loss is recoverable in tort as a loss parasitic to an injury to person or property."  In other words, those kinds of harm are not purely economic losses, even though they are ultimately compensated for with money.  A purely economic loss might be, for example, lost profits caused by the defendant’s negligence.  While the law of negligence imposes no duty to pay for purely economic losses, this duty can be created by contract.  The Idaho Supreme Court refused to apply the rule because the restaurant owner sued for property damage, but the damage was not purely economic.

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