In Florida, the economic loss rule previously prevented parties who allocated their risks and remedies in a contract from bringing a tort action. For many years, the economic loss rule only applied in two circumstances:
- When the parties negotiated remedies in a contract, and
- In products liability cases, when the defective product damaged only itself and not persons or other property.
Although seemingly straightforward, the rule proved problematic, as courts had difficulty determining when the rule barred a tort action between contracting parties. As a result, numerous exceptions were created, such as in cases involving professional malpractice and negligent misrepresentation.
Then, in 2013, the Florida Supreme Court amended the economic loss rule. In Tiara Condominium Association, Inc. v. Marsh & McLennan Companies, Inc., the Court receded from prior case law and held that the economic loss rule only applied to products liability cases. The Court recognized the confusion surrounding the rule, stating that “its application and parameters are somewhat ill-defined.”
The Court focused on the origin of the rule and explained that it was intended to prohibit a party from bringing a tort action to recover purely economic losses to a product because contract, rather than tort, principles were more appropriate to resolve economic loss without personal injury or property damage. The Court believed there had been an
unprincipled extension of the rule.
Although the Court in prior decisions tried to return the economic loss rule to its original purpose, it felt it simply had not gone far enough and held:
we now take this final step and hold that the economic loss rule applies only in the products liability context.
Many have interpreted the Court’s decision as an unsettling of Florida law, including Justice Canady in his dissenting opinion, who, along with critics of the decision, believe it undermined contract law while expanding tort law. However, proponents of the decision believe it will have little impact on contract law. As Justice Pariente stated in a concurring opinion:
“The majority’s conclusion that the economic loss rule is limited to the products liability context does not undermine Florida’s contract law or provide for an expansion in viable tort claims. Basic common law principles already restrict the remedies available to parties who have specifically negotiated for those remedies, and, contrary to the assertions raised in dissent, our clarification of the economic loss rule’s applicability does nothing to alter these common law concepts. For example, in order to bring a valid tort claim, a party still must demonstrate that all of the required elements for the cause of action are satisfied, including that the tort is independent of any breach of contract claim.“
Since the Court’s decision in Tiara, both state and federal courts deciding cases under Florida law have cited to Justice Pariente’s concurrence and required parties to show that the alleged tort is independent of any breach of contract claim. Courts will continue to dismiss tort actions if they are “basically a repackaged breach of contract claim.”
In practice, it appears that more and more plaintiffs will be able to survive the dismissal stage post-Tiara by pleading an independent tort in a complaint. Although the economic loss rule no longer applies to actions between contracting parties, the independent tort doctrine is alive and well in Florida and should continue to act as a barrier to tort actions brought simply to circumvent contract remedies. Thus, depending on the stage of litigation, parties should move for dismissal, summary judgment, and directed verdict based on the independent tort doctrine if it becomes apparent that the damages sought in tort are identical to the damages for breach of contract.