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The Economic Loss Rule In Virginia

Fairfax Injury Lawyer Brien Roche Addresses Economic Loss Rule

Brien Roche

The economic loss rule was designed to prevent a buyer of goods from suing either in negligence or strict liability when the damage was to the goods alone. The rule attempts to maintain the divide between contract and tort. In other words it attempts to keep contract issues solely within the contract realm.

A second purpose of the rule is to limit the extent to which the maker of the product is exposed to claims from users downstream from the maker.

Economic Loss Rule in Virginia

The economic loss rule in Virginia is set forth in Blake Const. Co., Inc. vs. Alley, 233 Va. 31, 353 S.E.2d 724 (1987) and Sensenbrenner v. Rust Orling & Neale Architects, Inc., 236 Va. 419, 374 S.E.2d 55 (1988)  This case says that in a negligence claim a party cannot get purely economic damages from a party with whom it has no contract.  Therefore the basic elements of the economic loss rule are negligence, solely economic losses and lack of privity.

However where a plaintiff and defendant have a contract then the plaintiff may get purely economic losses where the contract is performed in a negligent fashion.  Acordia of Va. Ins. Agency, Inc. v. Genito Glenn LP, 263 Va. 377, 560 S.E.2d 246 (2002).  In Filak v. George, 267 Va. 612, 594 S.E.2d 610 (2004) the Virginia Supreme Court said that a constructive fraud claim may be barred based upon the economic loss rule where the parties were in privity.  For the most part the Supreme Court has applied the economic loss rule, except for Filak, only to negligence claims. Call, or contact us for a free consult.

Source Of Duty Rule

Another rule that may be of equal import is the source of duty rule. This rule says a contract cannot be the source of duty for a tort claim. Therefore in any case you must ask yourself what is the duty owed. In addition you must ask what is the source of the duty. When a plaintiff asserts a negligence claim for purely economic losses against a party with whom it has a contract the source of the duty cannot be the contract. However the source of duty rule is not limited to negligence claims. It applies to any tort claim.  In other words the basics of the source of duty rule are that the claim may be any tort claim and the parties must be in privity. If that is the case then you must look for the source of the duty outside of the contract.

Economic Loss Rule-Split Decisions

The Kansas and Nevada Supreme Courts have taken different views of this issue.

In the Kansas case the issue was whether the doctrine applied to actions for negligent misrepresentation arising from a building contract.

The Kansas court held that these claims are not subject to the economic loss rule.  They held that this tort claim can be limited to those to whom the defendant supplied the false info.

In contrast the Nevada court took a different view of much the same issue.  The Nevada court ruled that the economic loss rule barred a claim for negligent misrepresentation brought by a general contractor against an owner.

So these rulings from two State Supreme Courts highlight the conflict as to the scope of the economic loss rule.

Economic Loss Rule and Personal Injury

For more information on the economic loss rule, see the other pages on this site. Also see the page on Wikipedia. Call, or contact us for a free consult.

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The Economic Loss Rule In Virginia

Fairfax Injury Lawyer Brien Roche Addresses Economic Loss Rule

Brien Roche

The economic loss rule was designed to prevent a buyer of goods from suing either in negligence or strict liability when the damage was to the goods alone. The rule attempts to maintain the divide between contract and tort. In other words it attempts to keep contract issues solely within the contract realm.

A second purpose of the rule is to limit the extent to which the maker of the product is exposed to claims from users downstream from the maker.

Economic Loss Rule in Virginia

The economic loss rule in Virginia is set forth in Blake Const. Co., Inc. vs. Alley, 233 Va. 31, 353 S.E.2d 724 (1987) and Sensenbrenner v. Rust Orling & Neale Architects, Inc., 236 Va. 419, 374 S.E.2d 55 (1988)  This case says that in a negligence claim a party cannot get purely economic damages from a party with whom it has no contract.  Therefore the basic elements of the economic loss rule are negligence, solely economic losses and lack of privity.

However where a plaintiff and defendant have a contract then the plaintiff may get purely economic losses where the contract is performed in a negligent fashion.  Acordia of Va. Ins. Agency, Inc. v. Genito Glenn LP, 263 Va. 377, 560 S.E.2d 246 (2002).  In Filak v. George, 267 Va. 612, 594 S.E.2d 610 (2004) the Virginia Supreme Court said that a constructive fraud claim may be barred based upon the economic loss rule where the parties were in privity.  For the most part the Supreme Court has applied the economic loss rule, except for Filak, only to negligence claims. Call, or contact us for a free consult.

Source Of Duty Rule

Another rule that may be of equal import is the source of duty rule. This rule says a contract cannot be the source of duty for a tort claim. Therefore in any case you must ask yourself what is the duty owed. In addition you must ask what is the source of the duty. When a plaintiff asserts a negligence claim for purely economic losses against a party with whom it has a contract the source of the duty cannot be the contract. However the source of duty rule is not limited to negligence claims. It applies to any tort claim.  In other words the basics of the source of duty rule are that the claim may be any tort claim and the parties must be in privity. If that is the case then you must look for the source of the duty outside of the contract.

Economic Loss Rule-Split Decisions

The Kansas and Nevada Supreme Courts have taken different views of this issue.

In the Kansas case the issue was whether the doctrine applied to actions for negligent misrepresentation arising from a building contract.

The Kansas court held that these claims are not subject to the economic loss rule.  They held that this tort claim can be limited to those to whom the defendant supplied the false info.

In contrast the Nevada court took a different view of much the same issue.  The Nevada court ruled that the economic loss rule barred a claim for negligent misrepresentation brought by a general contractor against an owner.

So these rulings from two State Supreme Courts highlight the conflict as to the scope of the economic loss rule.

Economic Loss Rule and Personal Injury

For more information on the economic loss rule, see the other pages on this site. Also see the page on Wikipedia. Call, or contact us for a free consult.

Contact Us For A Free Consultation

Contact Us For A Free Consultation