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Is Texas Following Florida’s Lead On Changing The Economic Loss Rule?

October 13, 2014

Practicing in both Florida and Texas I have seen the Economic Loss Rule evolve over the years, and its direct impact on the recovery potential for our subrogation claims appears to be moving in a positive direction. Recently, the Texas Supreme Court held in a per curium opinion in Chapman Custom Homes, Inc. v. Dallas Plumbing Co., 2014 WL 4116839 (Tex. Aug. 22, 2014), that a claimant can now bring a tort claim (negligence, in this case) against a party, as well as a breach of contract claim. In doing so, the Court applied “implied common law duties” to perform every contract with care and skill. Admiral Ins. Co. v. Little Big Inch Pipeline Co., 523 F. Supp. 2d 524, 538-39 (W.D. Tex. 2007). The breach of an implied duty to perform the work with skill and care creates an independent tort claim of performance under a contract.

In March of 2013, the Florida Supreme Court expanded the ELR to apply only in cases involving product liability. Tiara Condominium Ass’n, Inc. v. Marsh & McLennan Co., Inc., No. SC10-1-22 (Fla. March 7, 2013). Further, the Florida Supreme Court acknowledged exceptions to claims for professional malpractice, fraudulent inducement, negligent misrepresentation, and freestanding statutory causes of action. Thus, the ELR does not apply to those causes of action in Florida.

What does this mean? It means that less of our subrogation claims will be barred by the Economic Loss Rule. Like Florida, Texas limited the scope of the ELR when it found an implied independent duty to perform every contract with care and skill, giving rise to a separate cause of action sounding in tort, in addition to a breach of contract claim.

In the future, perhaps Texas, like Florida, will further carve out exceptions to the ELR and limit its application to product liability claims. Stay tuned…

For any further questions, please contact Mary Jo Kuusela.