Ninth Circuit Certifies Question re Economic Loss Rule to Wa Supreme Court
This is a quick post on what should be an important decision regarding tort liability in Washington.
Yesterday, the Ninth Circuit certified a question regarding the extent of the economic loss rule to the Washington Supreme Court. Affiliated FM Ins. Co. v. LKT Consulting Services Inc. The Washington Supreme Court decision – when it comes – should be an important ruling on the scope of the economic loss rule, which bars tort recovery for purely economic damages, as opposed to damages for personal injury or other property losses.
The action seeks damages as a result of a fire in 2004 which damaged the monorail trains. The monorail is owned by the City of Seattle, which in 1999 contracted with defendant LTK for a study to identify and repair problems with the monorail trains. The monorail is actually operated by Seattle Monorail Services (SMS) pursuant to a concession contract with the city. SMS did not have a contractual relationship with defendant. Plaintiff, asserting the interests of its insured, SMS, brought this action claiming tort damages as a result of the 2004 fire – alleging that the fire was the result of defendant’s negligent design work.
The district court dismissed the case finding that the economic loss rule applied. It analyzed the nature of SMS’s interest and found that SMS’s interest was akin to a license, rather than a lease, and, therefore, it was seeking damages to its economic interest, rather than for a property interest. Thus, its tort damage claim was barred by the economic loss rule.
The Ninth Circuit has now submitted the question to the Washington Supreme Court. In its order, the Ciruit notes that the Washington Supreme Court has never defined the type of interest in property required for the rule to apply. The Circuit order seems to focus on whether the economic loss doctrine, which bars tort recovery, requires privity of contract.
