Washington Supreme Court Recasts the Economic Loss Rule to Allow Third Party Tort Claims Against Design Professionals


A sharply divided Washington Supreme Court has held that an engineering firm owes a "duty of reasonable care encompassing safety risks of physical damage" to a party not in privity with the engineering firm. The decision in Affiliated FM Ins. Co. v. LTK Consulting Servs., Inc., could lead to a departure from what had been known as the "economic loss rule," which courts traditionally interpreted as barring tort claims for any harm not involving physical injury to other property or to a person. Under LTK Consulting, the lead opinion of the court said that the economic loss rule (renamed the independent duty rule) would not bar a tort claim based on an engineering firm's duty of care to avoid damages to a third party.

The LTK Consulting decision answered a question referred to it by the Ninth Circuit Court of Appeals regarding the economic loss rule under Washington law. LTK Consulting had a contract with the City of Seattle for maintenance on the Seattle monorail; however, the city does not operate the monorail. Instead, the city has a concession agreement with Seattle Monorail Services ("SMS"). In 2004, one of the monorail trains caught fire, resulting in millions of dollars in losses to SMS while the trains were out of service. SMS's insurer sued LTK Consulting, which successfully argued at the trial court level that the claims were barred by the economic loss rule.

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