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Florida Supreme Court Rolls Back the Clock on the Economic Loss Rule

The Florida Supreme Court just rolled back

the clock on the Economic Loss Rule (ELR) inTiara Condominium Assoc., Inc. v. Marsh & McLennan Companies, Inc., 38 Fla. L. Weekly S151a (Fla. March 7, 2013), holding that the ELR only applies in Products Liability Cases. Over the years, civil defense lawyers have been quick to assert that, in general, tort claims are barred when they are premised on a dispute on an underlining contract. Often attorneys sued in tort, rather than contract, because torts opened the floodgates for punitive damages, whereas breach of contract claims limited the remedies to the provisions within the contract itself.

Explained simply, a tort is an action either intentional or negligent, which breaches a legal duty owed to another person. Previously, the ELR barred a lawyer for suing for both fraudulent misrepresentation and breach of contract. The risk was that if one sued for the tort and was opposed by diligent opposing counsel and a wise judge, then the entire lawsuit might be thrown out at the motion to dismiss stage of the proceeding because breach of contract was the appropriate remedy. Now with the ELR no longer serving as a barrier, a lawyer can confidently sue for both and survive a motion to dismiss. (Note: fraudulent inducement was always exempt from the ELR). In essence, the Court has reverted back to the original intent of the ELR, thus narrowing the scope of the rules application.

In her concurrence, Justice Pariente states that this ruling does not allow for a massive expansion of tort law, because all the elements of a tort must still be proven independent of a breach of contract. While her statement is technically correct, in reality the practical effect of this ruling is that tort claims will now accompany breach of contract claims with much greater frequency. This ruling allows for an expansion of Floridas legal engine. Now if only the rest of Floridas economy would follow its lead then this would be something to celebrate.