On March 7, 2013, the Supreme Court of Florida filed its opinion in Tiara Condominium Assoc., Inc. v. Marsh & McLennan Companies, Inc. With this case, the Court took the final step of receding from the application of the economic loss rule in anything other than products liability cases.

Tiaraconcerns claims by an insured against its insurance broker for both breach of contract and negligence in performance of that contract. The case came to the Court as a certified question from the Eleventh Circuit and, in a five to three decision; the Court reached the following holding:

Having reviewed the origin and original purpose of the economic loss rule, and what has been described as the unprincipled extension of the rule, we now take this final step and hold the economic loss rule applies only in the products liability context.

The case marks a final step initiated in 1999 by the Court in its Moransais v. Heathman, decision. With Tiara, the Court completes its reversal of relying on the economic loss rule to evaluate tort claims between two parties who have also entered into a contract where the contract involves the same subject matter as the tort claim.

In dissenting, Justice Canady warned that as a result of this holding “we face the prospect of every breach of contract claim being accompanied by a tort claim.” Regardless of whether Justice Canady’s forecast proves correct, the decision will create an unsettled atmosphere in all Florida courts with respect to tort claims as the Court has now receded from case law that began with its 1987 decision in AFM Corp. v. Southern Bell Tel. & Tel. Co. By washing away 25 years of jurisprudence, the result will necessarily engender uncertainty.

A note of caution: it is far too soon to weigh the impact of this case. Yet, the justices on both sides of this opinion recognize the potential impact on Florida common law. The impact could extend beyond litigation to the drafting of construction contracts. To the extent that you have breach of contract cases pending in any Florida court, the impact is immediate. We suggest that you review your forms of contract and the status of claims in pending or anticipated cases with your attorney.

We will continue to update you on this issue as it develops.