John J. Tollefsen Litigation Law Blog on Lawyers.com

Economic Loss Rule prevents tort claims when contract exists

Wednesday, July 1, 2009 by John J. Tollefsen

Cox v. O'Brien, --- P.3d ----, 2009 WL 1204555 (Wash.App. Div. 2 May 05, 2009) (NO. 37194-4-II)

Purchasers of home brought action against inspector for negligent pest inspection. Inspector brought third-party claim against the sellers for breach of contract. Sellers filed fourth-party complaint against purchasers and inspector. Purchasers filed counterclaim against sellers for unjust enrichment. Following a bench trial on unjust-enrichment claim, the trial court dismissed claims against vendors finding the economic loss rule barred recovery.

The contract with the inspector was with the sellers. It limited liability to the amount of the inspection fee. The appellate court did not reach the issue of limitation of liability. It agreed with the trial court that the unjust enrichment claim was based on tort and was an attempt to avoid the limitations of the contract.

Where economic losses occur, recovery is confined to contract to ensure that the allocation of risk and the determination of potential future liability is based on what the parties bargained for in the contract. A seller sets a price in consideration of potential contractual liability. The economic loss rule prevents a party to a contract from obtaining through a tort claim benefits that were not part of the contractual bargain. The purpose of the economic loss rule is to bar recovery for alleged breach of tort duties where a contractual relationship exists between the parties and the losses are economic in nature. If the economic loss rule applies, a party will be held to the contractual remedies, regardless of how the plaintiff characterizes the claims.

The trial court was affirmed.

Posted at 12:40 PM
Topic: Litigation
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