The
economic loss rule limits a contracting party to contractual remedies for the
recovery of economic losses that are unaccompanied by physical injury to
persons or other property. The Arizona Supreme Court recently issued the latest
decision on the economic loss rule in Sullivan
v. Pulte Home Corp. 2013 WL 3929151 P.3d (July 31, 2013), declining to expand the
application of the rule.
In Sullivan, the Court was faced with the
question of whether the economic loss rule would bar tort claims asserted
against the home builder by the second owner of the home because the second
homeowner could have sued the builder for breach of implied warranty. The
Supreme Court rejected an attempt to expand the economic loss rule to non-contracting parties. In doing so,
the Court in Sullivan re-affirmed its
“express limited holding” in Flagstaff
Affordable Housing Ltd. Pship v. Design Alliance, Inc., 223 Ariz. 320, 223
P.3d 664 (2010) that “a contracting party is limited to its contractual
remedies for purely economic loss from construction defects.”
The Sullivan decision suggests that the Arizona
Supreme Court intends to hold the economic loss rule in-check and prevent it
from being further expanded. Additionally, in citing with approval language
from a secondary source indicating that the economic loss rule should only “ .
. . relegate[e] a plaintiff to contract remedies in cases where there is an
agreement between the parties allocating
economic risks,” the Court hinted that it might also refuse to find that a
tort claim is barred by the economic loss rule where (i) a tort duty exists
independently of the contract and (ii) the parties’ agreement neither expressly
nor implicitly addresses the scope of the duty nor the relief being sought.
*Garrett Olexa is a
Member with the law firm of Jennings, Strouss & Salmon, PLC and works in
its commercial litigation practice group.
He can be contacted at golexa@jsslaw.com
or 623.878.2222.http://www.jsslaw.com/professional_bios/Garrett_J_Olexa
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