Tuesday, March 9, 2021

Florida's Products Liability Economic Loss Rule Bars Claims Where Only Damage Sustained is to the Building Itself

Can a products liability claim survive the economic loss rule (“ELR”) where the only claimed damage to “other property” is to the finished building itself? If your state takes an “integrated” approach to the ELR, the answer to this question should be “no.”

In 2711 Hollywood Beach Condominium Association, Inc. v. TRG Holliday, Ltd., Florida’s Third District Court of Appeal provided clarity on the issue of whether the ELR bars a products liability claim where the only damages sought are repairs and replacement to a building system in which the product is a component part.  307 So.3d 869 (Fla. 3d DCA 2020). 2711 Hollywood was decided against the backdrop of the Florida Supreme Court’s decision in Tiara Condo. Ass'n, Inc. v. Marsh & McLennan Companies, Inc., where the Court limited the ELR to products liability cases. 110 So. 3d 399, 400 (Fla. 2013). The Tiara court reviewed and seemingly cited with approval its prior 1993 decision in Casa Clara Condominium Ass’n., Inc. v. Charley Toppino and Sons, Inc., 620 So.2d 1244 (Fla. 1993) in reaching this decision. Id., 401, 405-406. There, the Court held that the ELR barred a homeowner’s claims against a supplier of allegedly defective concrete, where the only alleged damages were rusting and spalling to the structure of the completed condominium units. Casa Clara Condominium Ass’n., Inc., 620 So.2d at 1245. Despite Tiara’s apparent reliance on Casa Clara, Westlaw’s “KeyCite” system continues to apply a “red flag” warning to the Casa Clara decision.

The 2711 Hollywood decision makes clear that Casa Clara’s holding still applies to product manufacturers and suppliers in Florida. In 2711 Hollywood, the condominium association sued the maker of the component fittings of the condominium’s fire suppression system (“FSS”), claiming that these fittings caused the fire suppression system to leak. 307 So.3d at 870. The association sought damages for future repairs and replacement of the FSS under negligent and strict products liability theories against the fittings maker. Id.

On appeal, the Court affirmed summary judgment entered in favor of the manufacturer based upon Casa Clara. Id. In doing so, it recognized that when a products liability claim arises in the context of real estate, courts are to apply the “object of the bargain” rule. Id. The focus of this rule is on “the product purchased by plaintiff,” rather than “the product sold by the defendant.” Id. Where a product is an “integral part of the finished product,” (i.e., the building), and the only alleged damages are to the building itself, such damage is not considered injury to “other property.” Id. The FSS fittings were an integral part of the FSS, and the completed building. As such, the ELR applied to bar the Association’s products liability claims, because the only alleged damages were the cost to replace the FSS and resulting repair damages to the building. Id.

The 2711 Hollywood decision also reinforces the applicability of the ELR in circumstances where a purchaser or installer attempts to bring a tort-based products liability claim against a downstream manufacturer or supplier. In 1995, the United States Court of Appeals for the Eleventh Circuit applied the ELR to a homebuilder’s claim against the manufacturer of chemicals applied by the homebuilder to its roof sheathing, which allegedly caused the roofs to deteriorate. Pulte Home Corp. v. Osmose Wood Preserving, Inc., 60 F.3d 734, 736 (11th Cir. 1995). It reasoned that while the homebuilder was required to remove roof components (shingles and untreated plywood) due to defective treated plywood, these components were not “damaged,” but rather, removed “as a consequence of replacing” damaged, treated plywood.  Id. at 742 (citing Casa Clara Condominium Ass’n., Inc., 620 So.2d at 1246).

2711 Hollywood provides needed clarification on the scope of cognizable tort-based products liability claims against building products manufacturers and suppliers in the Florida. Absent a showing of personal injury, or damage to property wholly unconnected with the completed building, such claims should be barred. The 2711 Hollywood decision ensures that products liability claims involving only “economic losses” will be dealt with in the manner which best suits them: “[c]ontract law, and the law of warranty in particular.” See Tiara Condo. Ass'n, Inc., 110 So. 3d at 404.

Author Brett M. Henson is a partner with the Sarasota, FL office of Shumaker, Loop & Kendrick, LLP, and is Board Certified by the Florida Bar in Construction Law. He is experienced in representing manufacturers of building products in all phases of litigation and trial.

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