Burr Alert: The Emperor’s New Economic Loss Rule


For years, litigating breach of contract cases in Florida meant having to struggle with the array of cases dealing with the Economic Loss Rule. In its simplest form, the Economic Loss Rule is a judicially created principle that prohibits tort damages in a breach of contract action where the damages are limited to an “economic loss.” Breach damages are typically limited to the amount of expectation damages one would normally anticipate from contractual non-performance. In a simple breach, therefore, one could calculate the cost to cure the breach and measure the damages. Tort damages, in contrast, are not necessarily constrained to strict formulas or calculations. As a result, a negligent driver causing an injury can expect to pay damages, whereas a grossly negligent driver causing the same injury may end up paying higher damages. The possibility of seeking negligence damages in an amount higher than otherwise available for contract damages was a plaintiff’s dream.

Construction lawyers have always struggled with this concept. For one thing, many insurance policies will cover negligent acts, whereas they do not necessarily cover contractual breaches. So the question often arose, can a contractor negligently build, or is the improper construction merely a breach of the agreement to build according to the plans and specifications? How is the situation complicated if the contractor builds according to the plans and specifications, only to find out later that the project was negligently designed?

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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