The Florida Supreme Court, in a decision reversing many earlier rulings, limited the economic loss rule to only cases involving products liability. Tiara Condominium Assn., Inc. v. Marsh & McLennan Cos., Case No. SC10-1022 (Fla. S. Ct. March 7, 2013)(available here). The economic loss rule is a judicially created doctrine that sets forth the circumstances under which a tort action is prohibited if the only damages suffered are economic losses. Stated otherwise, the economic loss rule barred an action in tort in many contract actions (other than fraud in the inducement) because, in these contract actions, the harm was an economic loss.
Tiara Condominium Association (Tiara) retained Marsh & McLennan (Marsh) as its insurance broker. One of Marsh’s responsibilities was to secure condominium insurance overage. Marsh secured windstorm coverage through Citizens Property Insurance Corporation (Citizens). In September 2004, Tiara’s condominium sustained significant damage caused by hurricanes Frances and Jeanne. Tiara began the process of loss remediation. After being assured by Marsh that the loss limits coverage was per occurrence (meaning that Tiara would be entitled to almost $100 million rather than coverage in the aggregate, which would be half of that amount), Tiara proceeded with more expensive remediation efforts. However, when Tiara sought payment from Citizens, Citizens claimed that the loss limit was $50 million in the aggregate, not per occurrence. Eventually, Tiara and Citizens settled for approximately $89 million, but that amount was less than the more than $100 million spent by Tiara.
In October 2007, Tiara filed suit against Marsh, alleging (1) breach of contract, (2) negligent misrepresentation, (3) breach of the implied covenant of good faith and fair dealing, (4) negligence, and (5) breach of fiduciary duty. The lower court had ruled that the economic loss rule barred the negligence, and breach of fiduciary duty claims, and due to removal to federal court, the 11th Circuit Court of Appeals (federal) certified the question to the Florida Supreme Court.
The appeals court concluded that summary judgment was proper as to the breach of contract, negligent misrepresentation, and breach of implied covenant of good faith and fair dealing claims. However, the appeals court did not affirm the summary judgment granted by the trial court on the negligence and breach of fiduciary duty claims, which were based on Tiara’s allegations that Marsh was either negligent or breached its fiduciary duty by failing to advise Tiara of its complete insurance needs and by failign to advise Tiara of its belief that Tiara was underinsured.
Some exceptions to the economic loss rule have been applied. For example, cases such as those alleging neglect in providing professional services (Moransais v. Heathman, 744 So. 2d 973, 979 (Fla. 1999)); torts committed independently of the contract breach, such as fraud in the inducement (Indem. Ins. Co. of N. Am. v. Am. Aviation, Inc., 891 So. 2d 532, 536 (Fla. 2004)); negligent misrepresentation; and free-standing statutory causes of action. Am. Aviation, 891 So. 2d at 543.
The Supreme Court held that “the application of the economic loss rule is limited to products liability cases.”