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December 9, 2020

What Constitutes a Product under the Economic Loss Rule 

The Economic Loss Rule limits a defendant’s tort liability for defective products to injuries caused to persons or damage caused to property other  than the defective product itself.  The Economic Loss Rule has been used to exclude tort liability for damages to the constructed product.   

However, what constitutes a product?  Florida’s Third District Court of Appeal recently answered this question in 2711 Hollywood Beach Condo. Ass’n, Inc. v. TRG Holiday, Ltd., 45 Fla. L. Weekly D2179 (Fla. 3d DCA Sept. 16, 2020).  In 2711 Hollywood Beach Condo. Ass’n, Inc., a condominium association sued Nibco, a company that supplied fire sprinkler fittings, for water damage stemming from a leak in the fire sprinkler systemNibco filed a Motion for Summary Judgment on the association’s negligence claim under the Economic Loss Rule, arguing the sprinkler fittings were an integral part of the building, barring the association from being awarded damages on the building under tort.  The association conceded the Economic Loss Rule applied but argued the Court should not apply it for policy reasons. 

The Trial Court entered Summary Judgment in favor of Nibco as to the association’s count for negligence.  This was upheld by the Third District Court of Appeal which reasoned that the association bargained for a building, of which the fire sprinkler fittings were an integral part.  Consequently, the product is the building itself, not its integral parts