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Business tort law change could lead to increase in lawsuits

On Behalf of | Apr 19, 2013 | Business Torts |

A recent decision from the Florida Supreme Court could have serious repercussions on the way that businesses are pursued in court. At issue is the application of business tort law when a contract is in place. The case involves a plaintiff, Tiara Condominium Association and a defendant, Marsh & McClennan Companies, Inc., an insurance broker hired by Tiara. The broker secured an insurance policy through Citizens Insurance which included windstorm coverage. When two hurricanes struck the property in 2004, Tiara was assured by Marsh that loss limits coverage within the existing policy was per occurrence and not coverage in the aggregate.

Tiara went on to authorize $100 million in repairs to the condos. However, when the company sought payment from Citizens, Tiara was told that the policy had a loss limit of $50 million, not per occurrence. Citizens eventually settled for $89 million, and Tiara sued Marsh in federal court for the remaining $11 million in federal court. That suit named an array of tort claims.

A federal district court granted summary judgment to Marsh on all of the claims within the suit. Tiara appealed, and that decision was reversed on the basis of breach of fiduciary duty and negligence claims. The Florida Supreme Court, by way of certification from the federal appeals court, was tasked with examining whether the economic loss rule bars the fiduciary duty and negligence claims made by Tiara. The economic loss rule lays out the circumstances under which tort claims are prohibited when damages are limited to economic loss.

The Florida Supreme Court noted that previous rulings had expanded application of the economic loss rule beyond the initial products liability context. In its ruling, the Court held that the economic loss rule no longer applies to cases involving contractual privity. In short, parties who are within a contract can now sue for both breach of contract and under business tort law.

Source: PointOfLaw.com, “New Florida Supreme Court Decision Expands Tort Liability for Pure Economic Harm,” Michael Krauss, April 5, 2013