Florida Bar Journal

A Proposed Answer to the 11th Circuit’s Recent Certified Question About the Economic Loss Rule’s Breadth

Florida’s economic loss rule has befuddled lawyers and spawned litigation trying to decipher its intricacies for decades. Most recently, Florida’s economic loss rule has prompted an 11th Circuit panel to seek clarification regarding the rule’s breadth, certifying a question to the Florida Supreme Court. In NBIS Construction & Transportation Services, Inc. v. Liebherr-America, 93 F.4th 1304 (11th Cir. 2024), the 11th Circuit Court of Appeals asked “[w]hether, under Florida law, the economic loss rule applies to negligence claims against a distributor of a product, stipulated to be non-defective, for the failure to alert a product owner of a known danger, when the only damages claimed are to the product itself?”

In NBIS, the plaintiff sought damages for solely economic loss resulting from the collapse of a crane boom, seeking damages for the crane’s fair market value and tow/salvage expenses. The plaintiff asserted a claim for common law negligence.^[1] The plaintiff alleged that the defendant — a crane distributor and servicer — was negligent for 1) failing to properly train the crane owner’s^[2] employees; and 2) failing to timely provide the owner with an updated safety bulletin created by its affiliate. Notably, the defendant intended to send the safety bulletin to all owners of this type of crane, but because he or she had not updated ownership records, the defendant did not send the bulletin to the plaintiff until after the accident occurred.

The 11th Circuit is not one to lightly certify questions, and its decision to certify the above question underscores the confusion the economic loss rule generates. In fact, the 11th Circuit previously certified numerous questions about the rule. A review of Florida Supreme Court precedent and fundamental principles of Florida law suggests that the 11th Circuit’s certified question should be answered in the negative.

Florida’s economic loss rule is intended to bar certain products liability causes of action when a plaintiff’s damages are solely for economic loss. “Economic loss” has been defined in a few ways; but most basically, “economic loss” means damages for inadequate value, costs of repair or replacement, or lost profits, when the plaintiff does not seek damages for personal injury or damage to other property.

Courts have expanded and contracted Florida’s economic loss rule over the decades, drastically changing the rule’s breadth. Indeed, the Florida Supreme Court stated: “We must acknowledge that our pronouncements on the rule have not always been clear and, accordingly, have been the subject of legitimate criticism and commentary.”^[3] The economic loss rule evolved from its products liability origins, to being a near categorical bar on plaintiffs seeking damages for solely economic loss, to now barring only certain products liability claims when damages sought are for solely economic losses.^[4] This article reviews the economic loss rule’s original purpose, its expansion beyond that purpose, and the Florida Supreme Court’s curtailment of the expansion. The article then applies the Florida Supreme Court’s reasoning to the facts of NBIS to answer the 11th Circuit’s certified question.

The Florida Supreme Court described the historic development of the economic loss rule, stating it “developed to protect manufacturers from liability for economic damages caused by a defective product beyond those damages provided…by warranty law.”^[5] The court explained that “[i]n exchange for eliminating the privity requirements of warranty law and expanding the tort liability for manufacturers of defective products which cause personal injury, we expressly limited tort liability with respect to defective products to injury caused to persons or damage caused to property other than the defective product itself.”^[6] In other words, the economic loss rule was designed to limit liability because products liability law considerably expanded liability for those in the supply chain. The economic loss rule was the necessary counterweight to avoid nearly limitless liability in many situations in which there was no direct relationship between the manufacturer or distributor on the one hand and the final user on the other.

Despite its products liability origins, Florida courts began to expand the economic loss rule beyond the rule’s original purpose, applying the rule to bar other types of claims. For instance, the Third District Court of Appeal held that the economic loss rule barred claims for negligent repair and negligent misrepresentation asserted against a mechanic, when the plaintiff sought solely economic losses.^[7] To reach this conclusion, the court relied on expansive language by the Florida Supreme Court about the economic loss rule. The court also expanded the economic loss rule to non-products liability claims. Perhaps, most notably, in AFM Corp. v. S. Bell Tel. & Tel. Co., 515 So. 2d 180 (Fla. 1987), the Florida Supreme Court restated certified questions from the 11th Circuit as: “Does Florida permit a purchaser of services to recover economic losses in tort without a claim for personal injury or property damage?” The Florida Supreme Court answered the question in the negative — holding that a purchaser of services cannot recover in tort without a claim for personal injury or property damage — creating a sweeping version of the economic loss rule.

Concerned about the economic loss rule’s expansion, the Florida Supreme Court started to chip away at its expanded rule over the course of nearly 15 years. The Florida Supreme Court’s reasoning in some of these opinions, described below, leads to this author’s proposed answer to the 11th Circuit’s certified question: the economic loss rule should not apply to the negligence claim asserted in NBIS.

In Moransais v. Heathman, 744 So. 2d 973 (Fla. 1999), the Florida Supreme Court reversed from the Second District Court of Appeal and held that a claim for professional malpractice could be brought against an engineer, even where the only damages the plaintiff sought were for economic loss. In doing so, the Florida Supreme Court warned against the “danger in an unprincipled extension of the [economic loss] rule.”^[8] The court explained that the economic loss rule was “never intended to bar well-established common law causes of action” and that “the rule was primarily intended to limit actions in the product liability context.”^[9] The court clarified that the economic loss rule’s “application should generally be limited to those contexts or situations where the policy considerations are substantially identical to those underlying the product liability-type analysis.”^[10] While the Florida Supreme Court’s holding was ultimately limited to the context of professional negligence claims, its concern with extending the economic loss rule was palpable. Indeed, the Florida Supreme Court discussed its prior opinion in AFM and stated that its language was “unnecessarily over-expansive.”^[11]

Five years later, in Indemnity Ins. Co. of N. Am. v. Am. Aviation, 891 So. 2d 532, 538 (Fla. 2004), Florida’s Supreme Court raised stronger concerns regarding the economic loss rule’s breadth.^[12] In American Aviation, the Florida Supreme Court considered five questions the 11th Circuit had certified regarding the economic loss rule.^[13] The plaintiffs in that case alleged that the defendant caused damages to an aircraft following the defendant’s negligent maintenance and inspection of the aircraft’s landing gear.^[14] The Florida Supreme Court restated the certified questions as “whether the economic loss doctrine bars a negligence action to recover purely economic loss in a case where the defendant is neither a manufacturer nor distributor of a product and there is no privity of contract.”^[15] The Florida Supreme Court considered its prior opinions on the economic loss rule and stated, “We now agree that the economic loss rule should be expressly limited.”^[16] The court expressly disapproved of the Third District’s holding in Palau Int’l Traders, Inc. v. Narcam Aircraft, Inc., 653 So. 2d 412, 413 (Fla. 3d DCA 1995), which held that the economic loss rule barred claims for negligent repair and negligent misrepresentation. The Florida Supreme Court again explained that the economic loss rule was intended to limit actions in the products liability context, and stated the rule should be limited to those contexts in which policy considerations are the same as those arising in the products liability sphere.^[17] The court ultimately limited its holding to defendants that are not manufacturers or distributors. The Florida Supreme Court stated: “Because the defendant in this case is neither a manufacturer nor distributor of a product…this negligence action is not barred by the economic loss rule.”^[18] The court reiterated that, based on the economic loss rule, “a manufacturer or distributor in a commercial relationship has no duty beyond that arising from its contract to prevent a product from malfunctioning or damaging itself.”^[19]

Almost a decade after American Aviation, the Florida Supreme Court reconsidered the economic loss rule and implicitly rejected its prior broad protection of manufacturers and distributors, further narrowing the economic loss rule’s breadth.^[20] In Tiara Condo. Ass’n, Inc. v. Marsh & McLennan Cos., 110 So. 3d 399 (Fla. 2013), the court considered another certified question posed by the 11th Circuit regarding the breadth of Florida’s economic loss rule. The Florida Supreme Court restated the question as: “Does the economic loss rule bar an insured’s suit against an insurance broker where the parties are in contractual privity with one another and the damages sought are solely for economic losses?”^[21] In this seminal opinion, the Florida Supreme Court held that “application of the economic loss rule is limited to products liability cases.”^[22] The court stated that its prior limitations of the economic loss rule in Moransais and American Aviation “did not go far enough,” declaring, “we now take this final step and hold that the economic loss rule applies only in the products liability context.”^[23] The court expressly “receded from [its] prior rulings to the extent that they have applied the economic loss rule to cases other than products liability.” Ultimately, the court held that the economic loss rule did not bar claims for negligence and breach of fiduciary duty, and did not include any protections for manufacturers or distributors outside of the products liability context.^[24]

With its opinion in Tiara limiting the economic loss rule to the products liability context, the Florida Supreme Court provided guidance sufficient to answer the 11th Circuit’s certified question in NBIS, allowing negligence claims where the plaintiffs sought only economic losses in both American Aviation and Tiara. The defendants in these cases were not manufacturers or distributors. However, the plaintiffs there had to establish the defendants owed them a duty. The question is, has Florida’s economic loss rule evolved to bar a claim for common law negligence related to services that happened to be provided by a manufacturer? The answer must be “no” for at least four reasons.

First, the reasons behind the development of the economic loss rule are not implicated where a plaintiff can establish that a manufacturer or distributor owed a common law duty. The economic loss rule was created to avoid limitless liability to the general public. However, if a plaintiff can establish that a defendant owed a common law duty and that the breach of that duty was the proximate cause of the plaintiff’s harm, these elements necessarily limit the liability a manufacturer or distributor could face. Thus, the policy considerations for barring common law negligence claims are not “substantially identical” to those underlying the products liability context.

Second, it is difficult to think of a principle to justify protecting manufacturers or distributors while not protecting entities outside the supply chain that engage in the exact same conduct. The Florida Supreme Court expressly permitted claims for negligence against non-manufacturers and non-distributors, even when a plaintiff’s damages were for solely economic loss, as seen in both American Aviation and Tiara. There is little policy rationale for the law to protect manufacturers and distributors who engage in the same conduct. In NBIS, for example, the defendant allegedly negligently trained plaintiff’s personnel and negligently failed to distribute a safety bulletin that was created, resulting in an accident causing economic loss. If a non-manufacturer/non-distributor provided the same services and engaged in the same alleged negligence, that entity could not use the economic loss rule as a defense. There is no logical basis to excuse a manufacturer or distributor that engages in the same conduct.

Third, Florida law is clear that products liability law has not supplanted claims for common law negligence.^[25] Thus, “[w]hen a set of facts will support both a theory of common law negligence and strict liability, a plaintiff is entitled to proceed on either theory or both.”^[26] This means that even when a plaintiff can satisfy the elements of a products liability claim, if he or she can also satisfy the elements of a common law negligence claim, the plaintiff can proceed only with the negligence claim if he or she so chooses. Just because the economic loss rule would bar the products liability claim, it need not bar the negligence claim — and indeed Tiara tells us it does not bar the negligence claim.

Fourth, and perhaps most fundamentally, the plaintiff in NBIS did not assert a products liability claim. Both parties in NBIS agreed the crane was not defective. The plaintiff in NBIS was not complaining that the crane did not match its economic expectations. In fact, the plaintiff’s negligence claim was not about the product at all. Instead, it was about allegedly negligent services provided directly to it by the defendant.

In seeming to question whether the plaintiff’s negligence claim must be treated as a products liability claim, the 11th Circuit’s opinion in NBIS discussed that some Florida courts have imposed a general duty to warn in cases involving goods with dangerous propensities, noting that Florida courts have described such a duty to warn as products liability actions based on negligence. However, there are other bases to establish a duty that are not founded on a duty generally owed to the public at large (and not based on products liability law). For example, the lower court in NBIS described the undertaker’s doctrine, which imposes a duty of reasonable care on a party that undertakes to perform a service for another party.^[27] The lower court’s discussion suggests that this undertaker’s duty applied to the services offered by the defendant, including when it undertook to: 1) provide the plaintiff instruction and training on safely operating the crane at issue; and 2) provide safety updates regarding the crane. The lower court held that the defendant breached the undertaker’s duty by failing to use reasonable care in performing these services by, among other things: 1) not providing the full 80 hours of training generally provided and skipping multiple training topics; and 2) failing to timely send to the plaintiff the revised safety bulletin identifying the risk at issue. Accordingly, the lower court identified a common law duty the defendant owed to the plaintiff and that the defendant had breached; the court did not rely on products liability law or the defendant’s status as a distributor.

Given the Florida Supreme Court’s holding in Tiara, as well as the reasoning provided in American Aviation and Moransais, as the law stands now, the economic loss rule should not bar the plaintiff’s common law claim for negligence in NBIS based on the facts of the case. Once a distributor enters the service world, as the defendant in NBIS did, there is no basis to shield it from the consequences of its tortious conduct when a non-distributor/non-manufacturer providing the same services would not be so protected. However, given the inconsistent treatment of the economic loss rule in the caselaw, the Florida Supreme Court will have to provide the final answer confirming or limiting its more recent reasoning regarding the rule.

This column is submitted on behalf of the Business Law Section, Manny Farach, chair, and Daniel Etlinger and Kathleen L. DiSanto, editors.