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
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.
Alex P. Rosenthal
Rosenthal Law Group
2115 North Commerce Parkway
Weston, Florida 33326