The economic loss doctrine bars a plaintiff from recovering certain money damages under a tort theory (e.g. negligence, products liability, property damage, etc.) where a contract defines his relationship with a defendant.
“Economic loss” means (i) damages for inadequate value, (ii) costs of repair and replacement of the defective product, (iii) loss of profits (without any claim of personal injury or damage to other property) or (iv) the diminution in the value of the product caused by its defect. (http://paulporvaznik.com/the-negligent-misrepresentation-exception-to-economic-loss-rule-the-information-v-tangible-product-dichotomy/2849).
The rule aims to keep a clear line of demarcation between breach of contract and tort law and remedies.
Kesse v. Ford Motor Company, 2015 WL 920960 (N.D.Ill. 2015) examines the economic loss doctrine through the lens of a products liability suit involving the crash of a taxi cab.
The plaintiff cab driver claimed his cab suddenly accelerated and wouldn’t stop, requiring the driver to swerve into a roadside pole to avoid hitting oncoming traffic. After hitting the pole, the cab struck and killed a pedestrian.
He sued the car maker alleging various design defects that caused the cab to accelerate without warning and that lacked a brake override system. The driver joined a consumer fraud claim against the automotive giant.
In addition to his personal injuries, the plaintiff sought damages for (i) lost income (his license was suspended after the accident), (ii) for lease payments he made to use the cab under the assumption it was defect-free, and (iii) damages for time and expense defending criminal charges brought by the State of Illinois in the wake of the fatality. The defendant moved to dismiss plaintiff’s claims.
Gutting much of the plaintiff’s damage claims, the court found that most of the claimed damages easily qualified as economic loss that can’t be recovered in a products liability (tort) suit.
The court rejected plaintiff’s argument that the crash was a “sudden and calamitous occurrence” and therefore, the economic loss rule didn’t limit plaintiff’s damages.
This exception to the economic loss rule applies where an occurrence is highly dangerous and presents a likelihood of personal injury or injury to other property (not the property involved in the occurrence). Typical examples include fires and explosions.
The court gave the sudden and calamitous occurrence exception a cramped application. It held that even if the crash was considered a sudden and calamitous occurrence, the plaintiff could still only recover for damage to other property (i.e. not the cab itself). Since the plaintiff didn’t allege damage to other property, the sudden and calamitous occurrence exception didn’t apply.
The plaintiff’s consumer fraud claim, premised on Ford not disclosing safety risks associated with the car, also failed.
An Illinois consumer fraud act claimant must show (1) a deceptive act or practice; (2) the defendant intended for the plaintiff to rely on the deception; (3) the deceptive act occurred in the course of trade or commerce; (4) actual damage to the plaintiff; and (5) damages to the plaintiff proximately caused by the defendant. *3.
A consumer fraud claim fails where the deception doesn’t actually reach the plaintiff, though. Where a plaintiff isn’t the direct or indirect recipient of deceptive communication from a defendant, such as through advertising, the plaintiff can’t establish that the defendant was the proximate cause of the plaintiff’s injuries.
Here, the plaintiff failed to allege a deceptive act by Ford or that any false statement of Ford actually reached the plaintiff. As a consequence, the court dismissed the consumer fraud count.
Sudden and calamitous occurrence only applies where the precipitating event damages property other than the defective product involved in the occurrence;
A consumer fraud plaintiff must prove that he actually read, heard, or received a deceptive act or false statement in order to show proximate cause – that his damages were caused by a deceptive act.