Respecting Boundaries and the Economic Loss Rule in Tort

Abstract

In this Article, I briefly comment on three aspects of the "economic loss rule" - the longstanding no-duty barrier to recovery of pure economic loss - in an effort to dig beneath the surface and explore its foundations. First, I examine the array of circumstances in which the no-duty rule comes into play, which turn out to be varied; second, I explore the set of justifications offered for the rule, which turn out to differ in persuasiveness; and third, I suggest the extent to which the rule shares some common roots with related areas of accident law (such as personal injury). More broadly, I emphasize that the constraints imposed by the economic loss rule do not reflect any single normative principle. Correspondingly, the cases do not comprise a single generic category guided by a unified set of underlying policy considerations, any more than limitations on recovery for emotional harm - ranging from direct emotional distress, to bystander emotional distress and loss of consortium - can be explained by reference to a single rationale. In both areas, attempts to generate a single rationale for what the courts are doing run the risk of oversimplifying the policy concerns at stake.

With these basic premises in mind, I offer an overview of the field based on three scenarios of negligently inflicted economic loss. I will begin by addressing the scenario in which tort is invoked as an alternative remedy in the context of disappointed contractual expectations. Next, I consider the scenario in which a defendant creates a dangerous condition or causes physical harm, resulting in economic loss to a stranger. Finally, I turn to a scenario in which there is either a negligent misrepresentation, or more broadly negligent performance of an obligation, that results in third-party economic loss. This latter category is a hybrid of sorts, falling between the realm of harm arising out of contractual expectations and that of economic loss entirely distinct from any contractual expectations.