The Economic Loss Rule – Variations on Enforcement

By Lindsey D. Smith, Esq.

Courts in different jurisdictions come to different conclusions on similar legal issues, often, with vastly disparate consequences for design professionals. The economic loss rule—a doctrine preventing negligence claims seeking purely economic damages—is no different. Recently, two court cases, one out of California and one out of Texas came to different conclusions regarding the application of the economic loss rule to claims brought against architects by plaintiffs with whom the architects had no contract. In the Texas case the court applied the economic loss rule to dismiss claims brought by a contractor against the architect; while in the California case, the court refused to apply the rule to dismiss claims brought by a condominium association against the architect who provided the general conceptual design of the condominium building several years before the building was occupied. The lesson for design professionals: understand that the law may differ from state to state and that the scope of the design professional’s duty may be expanding to include third parties whom the design professional has never met.

To learn more about the economic loss rule, read the full Design & Construction Professional Management Professional Reporter article.