On March 7, 2013, the Florida Supreme Court issued a landmark opinion of Tiara Condominium Assoc., Inc. V. Marsh & Mclennan Companies, essentially eviscerating Florida's Economic Loss Rule.
Tiara involved a claim against an insurance broker for breach of contract, negligence, negligent misrepresentation, breach of fiduciary duty and breach of implied duty of good faith and fair dealing. The issue for the court was whether the claims for negligence or breach of fiduciary duty against the broker were barred by the economic loss rule.
The Economic Loss Rule is a judicially created doctrine that sets forth the circumstances under which a tort action (such as a claim for negligence) is prohibited if the only damages suffered are economic losses. The rule has its roots in the products liability arena, and was primarily intended to limit actions in the products liability context. However, over the years, the economic loss rule has also been applied to circumstances when the parties are in contractual privity and one party seeks to recover damages in tort for matters arising from the contract. Based on this development of the Economic Loss Rule, parties to contracts have been able to limit their liability for economic damages to their contract remedies without fear that they would also be liable for tort damages where those damages are purely economic damages.
The Florida Supreme Court began hinting at its belief that the Economic Loss Rule had been extended too far over the past several years. Now, it has finally removed all doubt and has receded from any prior decisions which have applied the Economic Loss Rule to anything other than products liability claims.
The impact of the Tiara opinion will be widespread. For example, prior to Tiara, an insurance broker could have defended a claim for tort damages (i.e. negligence) if the parties had a contract which addressed the remedies available for breach by the broker. However, following Tiara, despite the parties' contractual agreement, if a plaintiff can allege a duty under a tort theory such as negligence, then the broker would be liable.
It is advisable to make a risk assessment of your business and evaluate current insurance coverage for tort claims.