Florida’s economic loss rule—a state-specific rule that bars tort actions if the only damages alleged are economic—is now limited to products liability cases, a divided Florida Supreme Court held in Tiara Condominium Ass’n, Inc. v. Marsh & McLennan Co., Inc. [PDF].

Issue Presented

Tiara came before the Florida Supreme Court on a certified question from the U.S. Court of Appeals for the Eleventh Circuit. The issue presented was whether, under Florida law, the economic loss rule, which prohibits tort actions if the only damages suffered are economic, barred an insured’s insurance coverage suit against an insurance broker. In that case, the parties were in contractual privity with one another. In other words, the parties had a contractual relationship that allowed them to sue each other but prevented a third party to the contract from doing so when the damages sought were solely for economic losses.

The Florida court limited the economic loss rule to product liability cases and rejected the doctrine of privity of contract, which provides that only a party to a contract has standing to sue to enforce it even if the contract confers benefits on others in some fashion. Prior to this ruling, Florida courts routinely barred parties in privity of contract from asserting tort claims for purely economic loss where a defendant had not committed a breach of duty apart from a breach of contract.

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