Dean v. Barrett Homes, Inc.: A Crack in the 'Economic Loss' Rule for 'Integrated Products'

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In Dean v. Barrett Homes, Inc., A-15, New Jersey Supreme Court (November 15, 2010), the New Jersey Supreme Court significantly narrowed the "economic loss rule" and its corollary, the "integrated product doctrine," when it adopted the decidedly minority view concerning the applicability of these principles in a consumer context. Given the leading role that New Jersey courts have played in this area of jurisprudence, the case has potentially broad implications for both product liability and construction cases throughout the country.

The economic loss rule was established by the New Jersey Supreme Court in 1985 in a commercial contract dispute involving defective trucks. (Spring Motors Distributors, Inc., v. Ford Motor Co., 98 N.J. 555 (1985).) The court held that when a claimant seeks recovery for injury to the product itself, the proper remedy should be sought in contract, not tort. The U.S. Supreme Court soon adopted the rule in an admiralty matter involving the purchase of defective turbines aboard several ships that led to lost revenues during repairs. (East River Steamship Corp., v. Transamerica Delaval Inc., 476 U.S. 858 (1986).) Later, in Alloway v. Gen. Marine Indus., L.P., 149 N.J. 620, 642 (1997), the New Jersey Supreme Court extended the economic loss rule to consumers when it held that the U.C.C. "amply protects all buyers – commercial purchasers and consumers alike – from economic loss arising out of the purchase of a defective product." Alloway involved a consumer's purchase of an allegedly defective boat and sought the cost of repairs and loss of value. Thus, even in the consumer context, the court sought to recognize the separate interests protected by tort and contract law.

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Published In: Civil Remedies Updates, General Business Updates, Construction Updates, Personal Injury Updates, Products Liability Updates

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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