3d DCA Watch — The Sad Decline of the Economic Loss Rule.


I’ve written about this before, but there was a time a few decades ago when all anyone wanted to talk about was the Economic Loss Rule.

Could it apply here? Why doesn’t it apply here? Let’s have a lunch seminar and discuss it!

It was everywhere, the “metadata” or pesto wrap flatbread legal trend of its time.

But as the bunkerized Robed Ones remind us, ding dong the ELR is dead:

This “prohibition against tort actions to recover solely economic damages for those in contractual privity is designed to prevent parties to a contract from circumventing the allocation of losses set forth in the contract by bringing an action for economic loss in tort.” Indem. Ins. Co., 891 So. 2d at 536. Moreover, when discussing the exemptions to the economic loss rule, the Florida Supreme Court, citing Moransais as an example, stated that “[a]nother situation involves cases such as those alleging neglect in providing professional services, in which this Court has determined that public policy dictates that liability not be limited to the terms of the contract.” Indem. Ins. Co., 891 So. 2d at 537. In Moransais, the Florida Supreme Court tacitly acknowledged that an extra-contractual remedy against a negligent professional is necessary because contractual remedies in such a situation may be inadequate. Moransais, 744 So. 2d at 983 (“While the parties to a contract to provide a product may be able to protect themselves through contractual remedies, we do not believe the same may be necessarily true when professional services are sought and provided.”). By allowing a professional negligence claim against an individual on common law and statutory grounds, and finding that the doctrine designed to prevent “parties to a contract from circumventing the allocation of losses set forth in the contract” does not preclude such a claim, the Florida Supreme Court implicitly acknowledged that claims of professional negligence operate outside of the contract.

Ahh Moransais — it’s been a while, welcome back my dear friend. Come sit next to my pal Venetian Salami.But I guess my question is why?

What is it about professional services contracts in particular such that public policy compels — in all circumstances — that there be extra contractual remedies available in addition to those agreed to by the parties (or in Judge Shepherd’s words, the “ancient concepts of freedom of contract”)?

In other words, the court is not allowed to pay any attention to the circumstances of the contract formation or its terms, which typically can provide an equitable basis for extra contractual relief — unequal bargaining power, obscure or buried terms, terms of adhesion, unconscionable terms, whether the parties are sophisticated etc.Apparently all of the usual equitable tools get thrown out the window where professional services are involved, and it’s simply the case that extra contractual remedies are always available?I’ve never been a fan of the ECL, but at least I’d like to understand the reasoning for the exceptions.

Perhaps another way of looking at it is why shouldn’t this exception extend beyond the professional service setting if there are compelling equitable grounds?