Dean v. Barrett Homes, Inc.: Court's Expansion of Economic Loss Rule Increases Liability for Component Part Manufacturers

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In a decision that raises grave concerns for product liability defendants, the New Jersey Supreme Court recently breathed life into plaintiffs planning to sue manufacturers of products that are components of larger, integrated products. That state's economic loss rule has long presented an insurmountable barrier to recovery through tort-based theories. New Jersey's Products Liability Act (PLA), which codified the economic loss rule, permits tort remedies in strict liability or negligence only when the claim is for damage to property other than the product itself. In Dean v. Barrett Homes, Inc., 204 N.J. 286 (2010), the court parted company with those courts, including New Jersey's federal courts and its Appellate Division, that have expanded the economic loss rule through the adoption of an approach referred to as the "integrated product doctrine." That approach precludes tort-based recovery when a defective product is incorporated into another product that the defective product then damages. In other words, the PLA bars tort recovery because the defective product and the product it damages are considered the same. Thus, there can be no harm to other property. Instead, the Barrett court joined the minority, following two California decisions holding that homeowners could recover for damage to their homes caused by defective windows and a defective foundation respectively, and declined to apply the integrated product doctrine.

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