Insurance Liability for Pure Economic Loss

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					Pure Economic Loss




   Another attempt to draw a
   line short of all foreseeable
   victims.
Our 3 cases

Barber (majority approach):
  oil spill in Boston Harbor forces other ships to
   detour at increased cost
J’Aire (Cal. 1979)
  restaurant (tenant) sues contractor hired by
   landlord to fix HVAC system for unreasonable
   delay causing lost business.
Our cases - 2

People Express Airline (N.J. 1985)
  Railroad allowed dangerous chemical to
   escape from tank car, causing evacuation of
   nearby businesses including plaintiff airline,
   which suffered interrupted business.
Economic loss cases

How are they unlike the prior cases in the
 book?
What is the majority rule?
What if the plaintiff’s ship in Barber had
 fouled its engines due to the oil spill?
Rationales for rejection
Difficulty proving that losses were caused
 by defendant; risk of windfall or fraud.
Greatly expanded liability would:
  make tort liability even more expensive
  disproportionate to “mere”negligence
Ability of plaintiff to protect itself through
 insurance or contract [new to us]
  insurance more efficient than tort
  typically commercial plaintiffs (all 3 of ours)
Modern trend
(still a minority)

People Express (N.J.)
  does it require personal injury or property
   damage?
  Are economic loss cases in NJ now governed
   by the same outside limit on liability as claims
   for personal injury or property damage (I.e.
   proximate cause/Palsgraf)?
  What is the test that pure economic loss
   cases must meet in NJ?
Particular foreseeability

What does this mean?
Identifiable class of Ps known to D (404)
  predictable presence
  predictable approximate numbers
  predictable type of economic injury
Example of P who is “pF”?
Example of P who is not?
Why relax limits?
No evidence of unfair awards in pure
 emotional distress cases (402
Physical harm rule “capriciously showers
 compensation along the path of physical
 destruction” (403)
Broader duty serves tort goals (403)
  compensate innocent Ps hurt by negligent Ds
  deter future unsafe conduct
  shift loss to those best able to bear it (??)
J’Aire (Cal) p. 397

Most famous modern economic loss case
multi-factorial analysis (399)
  transaction intended to affect P?
  Foreseeability of harm to P
  Certainty that D caused P’s injury
  Closeness of connection betw negligence and
   P’s injuries
  moral blameworthiness
  goal of deterring future misconduct
J’Aire (Cal) p. 397

Most famous modern economic loss case
multi-factorial analysis
  transaction intended to affect P?
  Foreseeability of harm to P
  Certainty that D caused P’s injury
  Closeness of connection between
   negligence and P’s injuries
  moral blameworthiness
  goal of deterring future misconduct
J’Aire - 2

Applied to facts?
  transaction intended to affect P?
  Foreseeability of harm to P?
  Closeness of connection between negligence
    and P’s injuries?
Does Court add an extra element at the
 end???
  “injury not part of P’s ordinary business
   risk”?
Problem 22 (408)

Under Barber? Who can recover?
  Employees in the truck for lost wages, etc?
  CCR for truck repair and lost profits?
  Red Arrow Restaurant (lost business)?
  Committee to Elect Saunders (extra
   cost)?
Problem 22 --People
Express (pF)?
Employees and CCR=still have c/a.
Red Arrow Restaurant?
  predictable presence of P and predictable
   type of economic injury (to Reston)?
    Aware it was an A/C truck?
    Aware of destination? If not?
Committee to Elect Saunders?
    Even weaker case of pF.
More on People Express

What if the CCR truck driver was
 negligent too and the Ps sued CCR?
Red Arrow Restaurant?
  predictable presence of P and predictable
   type of economic injury to CCR?
Committee to Elect Saunders (extra
 cost)?
    Weaker; aware that restaurant has customers but
     not that they will be harmed or how? (404)
Prob. 22 - J’Aire

Red Arrow Restaurant v. Reston
  1. transaction intended to affect P?
  2. Foreseeability of harm to P?
  3. Closeness of connection between
   negligence and P’s injuries?
  4. “injury not part of P’s ordinary business
   risk”?
Committee to Elect Saunders
J’Aire - 2
What if Red Arrow sues CCR?
  1. transaction intended to affect P?
  2. Foreseeability of harm to P?
  3. Closeness of connection between
   negligence and P’s injuries?
  4. “injury not part of P’s ordinary business
   risk”?
Committee to Elect Saunders v. CCR?
  Much less clear duty. Jury issue?
Lessons from Prob. 22

Much tougher against Reston than CCR
 under both modern cases.
  Best chances are against a D who knows that
   P’s interests are at stake.

				
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