The Florida Supreme Court has effectively eviscerated the economic loss rule in the recent case of Tiara Condominium Association, Inc. v. Marsh & McLennan Co., Inc., No. SC10-1022 (Fla. Mar. 7, 2013).  In Tiara, a condominium association sued its insurance broker for allegedly failing to properly advise it about its insurance needs.  The United States Court of Appeals for the Eleventh Circuit affirmed summary judgment against Tiara as to its claims for breach of contract, negligent misrepresentation, and breach of implied covenant of good faith and fair dealing, but not as to the claims for negligence and breach of fiduciary duty.  As to those claims, which dealt with the "professional services" exception to the economic loss rule, the Eleventh Circuit certified a question to the Florida Supreme Court, which initially determined that the certified question "is premised on the continued applicability of the economic loss rule in cases involving contractual privity" and then restated that certified question as follows:

Does the economic loss rule bar an insured's suit against an insurance broker where the parties are in contractual privity with one another and the damages sought are solely for economic losses?

The Court answered that question in the negative, held that application of the economic loss rule is limited to products liability cases, and receded from prior case law to the extent that it was inconsistent with that holding.  In its opinion in Tiara, the Florida Supreme Court analyzed the origins of the economic loss rule, its application to cases in which the parties are in contractual privity, and its roots in the products liability context.  The Court noted its long-standing concern with the "over-expansion of the economic loss rule," referring to the concerns expressed in Moransais v. Heathman, 744 So.2d 973 (Fla. 1999), Comptech International, Inc. v. Milam Commerce Park, Ltd., 753 So.2d 1219 (Fla. 1999), and Indem. Ins. Co. of N. Am. v. Am. Aviation, Inc., 891 So.2d 532 (Fla. 2004).  The Court concluded its opinion by noting that it had, in prior opinions, "clearly expressed its desire to return the economic loss rule to its intended purpose - to limit actions in the products liability context."  Noting that it had, however, left intact exceptions that "continue the rule's unprincipled expansion," the Court concluded that it "simply did not go far enough."  Based upon that analysis and finding the expansion of the rule "unwise and unworkable in practice," the Court took the "final step" and held that "the economic loss rule applies only in the products liability context."

In her concurring opinion, Justice Pariente states that the Court's majority opinion "merely clarifies that the economic loss rule was always intended to apply only to products liability cases."  She also argues that the Tiara ruling will not undermine contract law or provide for expansion of tort claims, stating that "basic common law principles already restrict the remedies available to parties who have specifically negotiated  for those remedies ... and [the Tiara ruling] does nothing to alter these common law concepts."  Justice Pariente argues that the results will continue to be the same under basic common-law contract law, stating:

While the contractual privity form of the economic loss rule has provided a simple way to dismiss tort claims interconnected with breach of contract claims, it is neither a necessary nor a principled mechanism for doing so.  Rather, these claims should be considered and dismissed as appropriate based on contractual principles ... .  The majority opinion does not change this statement of law, but merely explains that it is common law principles of contract, rather than the economic loss rule, that produces this result.

While Justice Pariente's explanation would appear comforting to defendants, Chief Justice Polston's and Justice Canady's dissenting opinions dash any such optimism.  Chief Justice Polston, who would have answered the certified question with a simple "no" based upon exisiting Florida Supreme Court precedent stated that:

Instead of simply answering the certified question that our cases clearly control, the majority obliterates  the use of the doctrine when the parties are in contractual privity, greatly expanding tort claims and remedies available without deference to contract claims.

Similarly, Justice Canady's dissent noted that the majority opinion in Tiara "sets a new course for the expansion of tort law at the expense of contract law."  Citing to numerous Florida Supreme Court cases, including Curd v. Mosaic Fertilizer, LLC, 39 So.2d 1216 (Fla. 2010), decided just two years earlier, Justice Canady noted that the Florida Supreme Court's opinions "have repeatedly recongized the economic loss rule as a rule that prevents contract law from 'drown[ing] in a sea of tort.'" (citing Casa Clara Condominium Association, Inc. v. Charley Toppino & Sons, Inc., 620 So.2d 1244 (Fla. 1993)).  Justice Canady's dissent takes issue with the majority's failure to explain why the economic loss rule can be applied in products liability cases, but not in contract cases, and the general failure "to justify this dramatic unsettling of Florida law." Justice Canady's dissent also attacks Justice Pariente's concurring opinion, claiming that it fails to provide any reasoning in support of its limitiation of the applicability of the economic loss rule, dismissal of the the Court's prior decisions as irrelevant, reliance on the Court's prior minority views, and unwarranted reliance upon statements from prior opinions that do not address the issues involved in Tiara.  Justice Canady's dissent concludes by stating:

With today's decision, we face the prospect of every breach of contract claim being accompanied by a tort claim.

In spite of Justice Pariente's statements that the Tiararuling will not have a significant impact due to the application of existing common-law contract principles, Justice Canady's closing thoughts clearly reflect the more likely outcome.  In the past, parties who were in contractual privity knew that they were obligated to identify and protect their expectations in their contracts.  They also were able to feel confident knowing that they would not be held liable for failing to comply with an obligation that was not negotiated for and included in the contract.  In short, the parties to a contract were limited to the "benefit of their bargain."  As noted by Justice Canady, as a result of the ruling in Tiara, virtually every plaintiff will now be able to assert a tort claim, regardless of whether that plaintiff had negotiated and agreed to the terms, conditions and obligations of its relationship and set forth those terms, conditions and obligations in a contract.  This will clearly make it more difficult for those who memorialize their relationships in contract, but easier for plaintiffs who now have another claim that they can assert in conjunction with their breach of contract claims.

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