Supreme Court Of Florida Holds That Economic Loss Doctrine Applies Only To Product Liability Cases

In a recent decision likely to significantly expand the use of tort law in areas previously restricted to contract law, the Supreme Court of Florida limited application of the economic loss doctrine to product liability cases. On March 7, 2013, the Supreme Court of Florida answered questions certified by the United States Court of Appeals for the Eleventh Circuit in Tiara Condominium Association v. Marsh & McClennan Companies, Inc. et al., No. SC10-1022.

Background

Tiara Condominium Association ("Tiara") retained Marsh & McClennan ("Marsh") as its insurance broker. According to the opinion, Marsh secured windstorm coverage through Citizens Property Insurance Corporation, which issued a policy that contained a loss limit of approximately $50 million. In September 2004, the condominiums were damaged by hurricanes Frances and Jeanne and Tiara began the process of loss remediation. Tiara "proceeded with more expensive remediation efforts" because it had been "assured by Marsh that the loss limits coverage was per occurrence ... rather than coverage in the aggregate." Slip Op. at 3. When Tiara sought payment from Citizens, however, Citizens claimed the loss limit was $50 million in the aggregate, not per occurrence. Ultimately, Tiara and Citizens settled for approximately $89 million — an amount less than the $100 million spent by Tiara in its remediation efforts.

Tiara sued Marsh in federal court for breach of contract, negligent misrepresentation, breach of the implied covenant of good faith and fair dealing, negligence, and breach of fiduciary duty. The trial court granted summary judgment to Marsh on all claims. Tiara appealed to the Eleventh Circuit, which affirmed on all counts except for the negligence and breach of fiduciary duty claims. On those two counts, the Court certified to the Supreme Court of Florida the question of whether the economic loss doctrine barred recovery or whether "an insurance broker falls within the professional services exception" previously established under Florida law.

The Supreme Court's Analysis

The Supreme Court of Florida noted it previously had defined "economic loss" as "damages for inadequate value, costs of repair and replacement of the defective product, or consequent loss of profits without any claim of personal injury or damage to other property." Slip Op. at 5. The Court then analyzed the origin and background of the economic loss doctrine, explaining that the rule "appeared initially in both state...