Title: Indemnityinsurance Company Of North America, Et Al. v. American Aviation, Inc.

State: florida

Issuer: Florida Supreme Court

Document:

Supreme Court of Florida 
 
____________ 
 
No. SC03-1601 
____________ 
 
 
INDEMNITY INSURANCE COMPANY OF NORTH AMERICA, et al., 
Petitioners, 
vs. 
AMERICAN AVIATION, INC., 
Respondent. 
 
[December 23, 2004] 
 
PARIENTE, C.J. 
The Eleventh Circuit Court of Appeals certified the following five questions 
of Florida law that are determinative of a cause pending in that court and for which 
there appears to be no controlling precedent: 
1.  WHETHER THE "ECONOMIC LOSS" DOCTRINE OF 
FLORIDA APPLIES TO ALLEGED TORTS IF THE DEFENDANT 
HAS PROVIDED SERVICES TO A PRODUCT RATHER THAN 
HAS SOLD A PRODUCT. 
2.  WHETHER THE "ECONOMIC LOSS" DOCTRINE OF 
FLORIDA APPLIES IF THERE IS NO CONTRACTUAL 
RELATIONSHIP BETWEEN THE PLAINTIFFS AND THE 
DEFENDANT. 
3.  WHETHER THE "ECONOMIC LOSS" DOCTRINE OF 
 
- 2 - 
FLORIDA APPLIES TO THE FACTS OF THIS CASE WITH 
REGARD TO DAMAGE TO THE TOTAL AIRCRAFT AS 
OPPOSED TO MERE DAMAGE TO THE LANDING GEAR 
UNDER THE "OTHER PROPERTY" EXCEPTION. 
4.  WHETHER THE PROVIDING OF CERTIFIED MECHANICAL 
SERVICES FALLS UNDER THE CATEGORY OF THE 
"PROFESSIONAL SERVICES" EXCEPTION TO THE 
"ECONOMIC LOSS" DOCTRINE OF FLORIDA OR UNDER 
SOME RELATED SERVICES EXCEPTION. 
5.  WHETHER THE NEGLIGENT MISREPRESENTATION 
CLAIM IN THIS CASE PROVIDES AN EXCEPTION TO THE 
"ECONOMIC LOSS" DOCTRINE OF FLORIDA. 
Indemnity Ins. Co. of N. America v. American Aviation, Inc., 344 F.3d 1136, 1148 
(11th Cir. 2003).  We have jurisdiction.  See art. V, § 3(b)(6), Fla. Const.  For 
purposes of this opinion, we combine and rephrase the first two certified questions 
as follows: 
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. 
For the reasons that follow, we answer the rephrased question in the 
negative.  We conclude that the "economic loss doctrine" or "economic loss rule" 
bars a negligence action to recover solely economic damages only in circumstances 
where the parties are either in contractual privity or the defendant is a manufacturer 
or distributor of a product, and no established exception to the application of the 
rule applies.  Because the defendant in this case is neither a manufacturer nor 
 
- 3 - 
distributor of a product, and the parties are not in privity of contract, this 
negligence action is not barred by the economic loss rule.  The remaining certified 
questions concerning exceptions to the economic loss doctrine are moot in light of 
our determination that the economic loss rule does not apply to this case. 
FACTS AND PROCEDURAL HISTORY 
This case arises from lawsuits filed by Indemnity Insurance Company of 
North America ("Indemnity") and Profile Aviation Services, Inc. ("Profile") 
against American Aviation, Inc. ("American") for damages to Profile's aircraft 
allegedly caused by negligent maintenance and inspection of the aircraft's landing 
gear.  The specific claim of negligence was premised on the fact that the landing 
gear did not extend because American had installed the lower thrust bearing of the 
right main actuator backwards. 
The United States District Court for the Middle District of Florida dismissed 
Indemnity's and Profile's tort claims, finding them barred by Florida's economic 
loss rule.  Indemnity and Profile appealed to the Eleventh Circuit Court of Appeals.  
In certifying the five questions to this Court, the Eleventh Circuit summarized the 
pertinent facts as follows: 
This action arises from the allegedly negligent maintenance and 
inspection of an aircraft's landing gear by American.  All mechanics 
who work on aircraft must be FAA-certified.  To become certified, a 
mechanic must graduate from a certified aviation maintenance 
technical school (or have equivalent practical experience) and must 
pass a written test on the construction and maintenance of aircraft, the 
 
- 4 - 
federal regulations, and provisions governing mechanics.  They must 
also pass an oral and a practical skills test. 
A FAA-certified mechanic who performs maintenance on an 
aircraft, airframe, engine, etc., must follow the methods, techniques, 
and practices prescribed in the aircraft's maintenance manual and 
perform the maintenance in such a manner that the condition of the 
aircraft will be at least equal to its original or properly altered 
condition.  Moreover, when maintenance has been performed, a FAA-
certified mechanic must give approval before the aircraft, airframe, 
etc., is returned to service.  Before returning the aircraft to service, the 
certified mechanic must also make an entry into the aircraft's logbook 
regarding the inspection and maintenance performed.  According to 
appellants, an aircraft owner relies on these records to determine, 
among other things, if the required maintenance has been performed, 
if the aircraft can be returned to service, and when the next 
maintenance is scheduled. 
On or around November 22, 1996, American's FAA-certified 
mechanics, pursuant to a contract to which appellants are not parties, 
performed the required 30-month end play maintenance and 
inspection on the landing gear of a Beechcraft KingAir 100 
aircraft . . . ("Aircraft").  During the course of the inspection and 
repair, American's mechanics removed the Aircraft's right main 
landing gear actuator and lower thrust bearing.  After completing the 
work, American's mechanics certified in the Aircraft's logbook that 
the work was done in accordance with the Aircraft's maintenance 
manual and FAA regulations. 
Profile purchased the Aircraft subsequent to American's 
November 1996 maintenance and inspection.  Appellants contend that 
they reasonably relied upon American's representations in the logbook 
concerning the November 1996 work.  On May 14, 1999, the Aircraft 
was severely damaged when the right main landing gear failed to 
extend during a landing.  The alleged cause of the failed landing gear 
was that the lower thrust bearing of the right main landing gear 
actuator was installed backwards.  Appellants contend that they could 
not have discovered American's alleged negligence prior to the 
accident. 
Proceedings in the District Court 
On May 10, 2002, Indemnity, which was the Aircraft's insurer, 
and Profile filed separate four count complaints in the district court.  
Appellants sought to recover for negligence (Count I), negligence per 
 
- 5 - 
se (Count II), negligent misrepresentation (Count III), and breach of 
warranty (Count IV).  American moved to dismiss the complaints, 
arguing that Florida's economic loss rule barred the tort claims and 
that no breach of warranty action could be maintained because of a 
lack of privity between appellants and American. 
American Aviation, 344 F.3d at 1137-38 (citations and footnotes omitted). 
The federal district court dismissed the tort claims with prejudice, but 
granted ten days to amend the breach of warranty claim to allege that Profile was 
an intended third-party beneficiary of the contract between American and the 
Aircraft's prior owner.  Profile could not in good faith amend its complaint to 
allege intended third-party beneficiary status.  Thus, both Profile and Infinity 
appealed only the dismissal of the tort claims to the Eleventh Circuit.  Having 
doubt as to the correct application of Florida law under the facts of this case, the 
Eleventh Circuit certified the five questions of law to this Court. 
ECONOMIC LOSS RULE 
The economic loss rule is a judicially created doctrine that sets forth the 
circumstances under which a tort action is prohibited if the only damages suffered 
are economic losses.1  However, because there has been much confusion about the 
                                        
1.  Economic losses are, simply put, disappointed economic expectations.  In 
Casa Clara Condominium Association, Inc. v. Charley Toppino & Sons, Inc., 620 
So. 2d 1244 (Fla. 1993), we explained that economic loss has been defined as 
"damages for inadequate value, costs of repair and replacement of the defective 
product, or consequent loss of profits."  Id. at 1246 (quoting Note, Economic Loss 
in Products Liability Jurisprudence, 66 Colum. L. Rev. 917, 918 (1966)).  In the 
specific context of products liability, economic loss includes "the diminution in the 
 
- 6 - 
scope of this doctrine, it is important to review its legal underpinnings.  In this 
state, the economic loss rule has been applied in two different circumstances.  The 
first is when the parties are in contractual privity and one party seeks to recover 
damages in tort for matters arising from the contract.  The second is when there is a 
defect in a product that causes damage to the product but causes no personal injury 
or damage to other property.   
A.  Contractual Privity Economic Loss Rule 
The prohibition against tort actions to recover solely economic damages for 
those in contractual privity is designed to prevent parties to a contract from 
circumventing the allocation of losses set forth in the contract by bringing an 
action for economic loss in tort.  See, e.g., Ginsberg v. Lennar Fla. Holdings, Inc., 
645 So. 2d 490, 494 (Fla. 3d DCA 1994) ("Where damages sought in tort are the 
same as those for breach of contract a plaintiff may not circumvent the contractual 
relationship by bringing an action in tort.").  Underlying this rule is the assumption 
that the parties to a contract have allocated the economic risks of nonperformance 
through the bargaining process.  A party to a contract who attempts to circumvent 
the contractual agreement by making a claim for economic loss in tort is, in effect, 
                                                                                                                              
value of the product because it is inferior in quality and does not work for the 
general purposes for which is was manufactured or sold."  Id. (quoting Comment, 
Manufacturers' Liability to Remote Purchasers for "Economic Loss" Damages—
Tort or Contract?, 114 U. Pa. L. Rev. 539, 541 (1966)).  Economic loss has also 
been defined more broadly as the loss of the "benefit of his bargain."  Id. (quoting 
Redarowicz v. Ohlendorf, 441 N.E.2d 324, 327 (Ill. 1982)).   
 
- 7 - 
seeking to obtain a better bargain than originally made.  Thus, when the parties are 
in privity, contract principles are generally more appropriate for determining 
remedies for consequential damages that the parties have, or could have, addressed 
through their contractual agreement.  Accordingly, courts have held that a tort 
action is barred where a defendant has not committed a breach of duty apart from a 
breach of contract.  See, e.g., Electronic Sec. Sys. Corp. v. Southern Bell Tel. & 
Tel. Co., 482 So. 2d 518, 519 (Fla. 3d DCA 1986) (stating that "breach of contract, 
alone, cannot constitute a cause of action in tort . . . [and] [i]t is only when the 
breach of contract is attended by some additional conduct which amounts to an 
independent tort that such breach can constitute negligence"); Weimar v. Yacht 
Club Point Estates, Inc., 223 So. 2d 100, 103 (Fla. 4th DCA 1969) ("[N]o cause of 
action in tort can arise from a breach of a duty existing by virtue of contract."). 
The application of this principle is best exemplified by this Court's decision 
in AFM Corp. v. Southern Bell Telephone & Telegraph Co., 515 So. 2d 180 (Fla. 
1987).  In that case, AFM entered into an agreement with Southern Bell Telephone 
and Telegraph Company that included placing AFM's advertising in the yellow 
pages.  See id. at 180.  However, Southern Bell listed an incorrect phone number 
for AFM, causing AFM economic damages.  See id.  In asserting a claim for 
economic losses, AFM chose to proceed solely on a negligence theory in the trial 
court below rather than base its theory of recovery on any agreement between the 
 
- 8 - 
parties.  See id. at 181.  In determining that AFM could not recover economic 
losses based on a tort theory, this Court noted that AFM's contract with Southern 
Bell "defined the limitation of liability through bargaining, risk acceptance, and 
compensation."  Id.  Because AFM had not proved that Southern Bell committed a 
tort independent of the breach of contract, this Court concluded that AFM had no 
basis for recovery in negligence.  See id. 
Although parties in privity of contract are generally prohibited from 
recovering in tort for economic damages, we have permitted an action for such 
recovery in certain limited circumstances.  One involves torts committed 
independently of the contract breach, such as fraud in the inducement.  For 
example, in HTP, Ltd. v. Lineas Aereas Costarricenses, S.A., 685 So. 2d 1238 (Fla. 
1996), this Court stated: 
The economic loss rule has not eliminated causes of action based 
upon torts independent of the contractual breach even though there 
exists a breach of contract action.  Where a contract exists, a tort 
action will lie for either intentional or negligent acts considered to be 
independent from the acts that breached the contract.  Fraudulent 
inducement is an independent tort in that it requires proof of facts 
separate and distinct from the breach of contract. 
Id. at 1239 (citations omitted); see also Pershing Indus., Inc. v. Estate of Sanz, 740 
So. 2d 1246, 1248 (Fla. 3d DCA 1999) (claims for economic damage based on 
fraud in the inducement, conversion, and civil theft were independent torts and 
thus actionable despite existence of contract between the parties).  Another 
 
- 9 - 
situation involves cases such as those alleging neglect in providing professional 
services, in which this Court has determined that public policy dictates that liability 
not be limited to the terms of the contract.  See, e.g., Moransais v. Heathman, 744 
So. 2d 973, 983 (Fla. 1999) ("While provisions of a contract may impact a legal 
dispute, including an action for professional services, the mere existence of such a 
contract should not serve per se to bar an action for professional malpractice.").  
B.  Products Liability Economic Loss Rule 
In contrast to the contractual privity economic loss rule, which developed to 
protect the integrity of the contract, the products liability economic loss rule 
developed to protect manufacturers from liability for economic damages caused by 
a defective product beyond those damages provided for by warranty law.  Early in 
the common law, an innocent third party who purchased a product from a retailer 
or distributor could not sue the manufacturer for personal injuries sustained, even 
as the result of the intended use of the product, because of the absence of privity of 
contract with the manufacturer.  See Matthews v. Lawnlite Co., 88 So. 2d 299, 300 
(Fla. 1956) (noting that "the early common law rule . . . inhibited recovery [from a 
manufacturer of a product] where there was absence of privity of contract").  
However, in this jurisdiction and others, "[a] doctrine more in line with reason and 
justice" emerged that imposed liability on a manufacturer for personal injury 
caused by the manufacturer's failure to exercise reasonable care in the adoption of 
 
- 10 - 
a safe plan or design for a product placed in the stream of commerce, regardless of 
privity.  See id.2  The negligence standard of reasonable care, which initially 
measured the manufacturer's liability for injury to person or property, eventually 
evolved into the doctrine of strict liability.  See, e.g., West v. Caterpillar Tractor 
Co., 336 So. 2d 80, 89 (Fla. 1976) (adopting the theory of strict products liability 
in Florida). 
The doctrine of strict products liability had its origins in the landmark case 
of Henningsen v. Bloomfield Motors, Inc., 161 A.2d 69 (N.J. 1960), involving a 
defective automobile that crashed and caused property damage and personal injury.  
Although the parties were not in contractual privity, the New Jersey Supreme 
Court concluded that the plaintiffs had a cause of action based on breach of 
implied warranty of fitness.  Henningsen, 161 A.2d at 69.  The New Jersey court 
stated that "under modern marketing conditions, when a manufacturer puts a new 
automobile in the stream of trade and promotes its purchase by the public, an 
implied warranty that i
t is reasonably suitable for use as such accompanies it into 
the hands of the ultimate purchaser."  Id.  Although couched in terms of an implied 
warranty of fitness, the Henningsen holding created the foundation for what would 
                                        
2.  The seminal decision recognizing this theory of liability is MacPherson v. 
Buick Motor Co., 111 N.E. 1050 (N.Y. 1916), in which the New York Court of 
Appeals refused to apply the privity requirement to bar recovery in an action 
brought by a driver of an automobile for injuries caused by a defective wheel the 
automobile manufacturer had negligently failed to inspect. 
 
- 11 - 
become the doctrine of strict products liability in tort.  See Spring Motors Distribs., 
Inc. v. Ford Motor Co., 489 A.2d 660, 666 (N.J. 1985) (recognizing that 
Henningsen established the theory of strict products liability).  
Eventually, others courts recognized that any theory of recovery premised on 
warranty doctrine was insufficient to protect consumers from physical injury as a 
result of defective products.  See West, 336 So. 2d at 92.  Indeed, in West, we 
explained: 
[W]e recognize that in the present day marketing milieu treatment of 
the manufacturers' liability to ultimate purchasers or consumers in 
terms of implied warranty is simply using a convenient legal device to 
accomplish some recourse for an injured person. . . .  Ordinarily there 
is no contract in a real sense between a manufacturer and an ultimate 
consumer of its product. . . . 
The obligation of the manufacturer must become what in justice 
it ought to be—an enterprise liability, and one which should not 
depend upon the intricacies of the law of sales. 
Id.  Based on this rationale, the doctrine of strict products liability was adopted in 
Florida.  
In Kramer v. Piper Aircraft Corp., 520 So. 2d 37, 39 (Fla. 1988), we 
recognized that, in the absence of privity, the cause of action for breach of implied 
warranty did not survive the holding in West.  In other words, the doctrine of strict 
liability replaced all no-privity, breach of implied warranty liability.  However, a 
cause of action for breach of implied warranty remains available where the parties 
are in privity of contract.  See id.; see also Seely v. White Motor Co., 403 P.2d 
 
- 12 - 
145, 149 (Cal. 1965) ("Final recognition that '[t]he remedies of injured consumers 
ought not to be made to depend upon the intricacies of the law of sales' caused . . .  
court[s] to abandon the fiction of warranty in favor of strict liability in tort.") 
(citations omitted). 
As the theory of strict liability replaced the theory of implied warranties with 
regard to actions based on defective products that resulted in personal injury, the 
issue arose as to whether the courts should permit a cause of action in tort by one 
who suffered purely economic loss due to a defective product.  For those who were 
in contractual privity, actions based on breach of warranty continued as the viable 
method if the only damages were economic in nature.  But for those who were not 
in contractual privity and who sustained economic losses as a result of defective 
products, the question became what theory of recovery would be proper.  
The California Supreme Court's decision in Seely was the landmark case 
that held that the doctrine of strict liability in tort had not supplanted causes of 
action for breach of express warranty.  In that case, the court was confronted with a 
situation in which a plaintiff sought recovery for economic loss resulting from his 
purchase of a truck that failed to perform according to his expectations.  See Seely, 
403 P.2d at 149.  The California Supreme Court agreed with the trial court that the 
defendant could recover the money he paid on the purchase price of the truck and 
for his lost profits on the basis of breach of express warranty, see id. at 148, but 
 
- 13 - 
rejected the argument that warranty law had been superseded by the doctrine of 
strict liability.  See id. at 149.  The Court concluded that the strict liability doctrine 
was not intended to undermine the warranty provisions of sales or contract law but, 
rather, was designed to govern the wholly separate and distinct problem of physical 
injuries caused by defective products.  See id. at 149-50. 
According to the court, "[t]he fact that the warranty theory was not suited to 
the field of liability for personal injuries, however, does not mean that it has no 
function at all."  Id. at 149.  The court recognized that the rules of warranty 
continued to function well in a commercial setting, allowing the manufacturer to 
determine the quality of the product and the scope of its liability if the product fails 
to perform.  The California Supreme Court reasoned that a manufactuer's liability 
under that theory would extend to all subsequent purchasers regardless of whether 
the manufacturer's promise regarding the fitness of the product was ever 
communicated to those purchasers.  If a manufacturer were strictly liable for 
economic losses resulting from the failure of its product to perform as promised by 
the warranty, it would be liable not only to the initial purchaser, but to every 
consumer who subsequently obtained possession of the product.  See id. at 150.   
The California Supreme Court further reasoned that the law of warranty 
should function to prevent a liability of unknown and unlimited scope: 
The distinction that the law has drawn between tort recovery for 
physical injuries and warranty recovery for economic loss is not 
 
- 14 - 
arbitrary and does not rest on the "luck" of one plaintiff in having an 
accident causing physical injury.  The distinction rests, rather, on an 
understanding of the nature of the responsibility a manufacturer must 
undertake in distributing his products.  He can appropriately be held 
liable for physical injuries caused by defects by requiring his goods to 
match a standard of safety defined in terms of conditions that create 
unreasonable risks of harm.  He cannot be held for the level of 
performance of his products in the consumer's business unless he 
agrees that the product was designed to meet the consumer's demands.  
A consumer should not be charged at the will of the manufacturer 
with bearing the risk of physical injury when he buys a product on the 
market.  He can, however, be fairly charged with the risk that the 
product will not match his economic expectations unless the 
manufacturer agrees that it will.  Even in actions for negligence, a 
manufacturer's liability is limited to damages for physical injuries and 
there is no recovery for economic loss alone. 
Id. at 151 (emphasis supplied).  Hence, the Court recognized the continuing utility 
of warranty law in cases involving economic loss to the product. 
When the United States Supreme Court subsequently considered the issue of 
economic loss resulting from defective products in the context of admiralty, the 
Court adopted the reasoning of Seely.  See East River Steamship Corp. v. 
Transamerica Delaval, Inc., 476 U.S. 858, 871 (1986).  According to the Supreme 
Court, when the damage is to the product itself, "the injury suffered—the failure of 
the product to function properly—is the essence of a warranty action, through 
which a contracting party can seek to recoup the benefit of its bargain."  Id. at 868 
(emphasis supplied).  The Court stated: 
Contract law, and the law of warranty in particular, is well 
suited to commercial controversies of the sort involved in this case 
because the parties may set the terms of their own agreements.  The 
 
- 15 - 
manufacturer can restrict its liability, within limits, by disclaiming 
warranties or limiting remedies.  In exchange, the purchaser pays less 
for the product.  
Id. at 872-73 (emphasis supplied) (footnote and citation omitted).  Recognizing 
that extending strict products liability to cover economic damage would result in 
"contract law . . . drown[ing] in a sea of tort," id. at 866, the Supreme Court held 
that "a manufacturer in a commercial relationship has no duty under either 
negligence or strict products-liability to prevent a product from injuring itself."  Id. 
at 871. 
Relying on Seely and East River, this Court adopted the products liability 
economic loss rule in Florida Power & Light Co. v. Westinghouse Electric Corp., 
510 So. 2d 899, 902 (Fla. 1987).  Florida Power & Light (FPL) entered into 
contracts with Westinghouse in which Westinghouse agreed to design, 
manufacture, and furnish two nuclear steam supply systems, including six steam 
generators.  FPL discovered leaks in all six generators.  FPL brought suit, alleging 
that Westinghouse was liable for breach of express warranties in the contracts and 
for negligence, and seeking damages for the cost of repair, revision, and inspection 
of the steam generators.  Id. at 900.   
In determining whether Florida law permitted FPL to recover the economic 
losses in tort without a claim for personal injury or separate property damage, this 
Court considered the policy issues supporting the application of a rule that limits 
 
- 16 - 
tort recovery for economic losses when a product damages itself.  Id.  Concluding 
that warranty law was more appropriate than tort law for resolving economic losses 
in this context, the Court adopted the holding in East River that "a manufacturer in 
a commercial relationship has no duty under either a negligence or strict products 
liability theory to prevent a product from injuring itself."  Florida Power, 510 So. 
2d at 901 (quoting East River, 476 U.S. at 871). 
The economic loss rule adopted in Florida Power represents this Court's 
pronouncement that, nothwithstanding the theory of strict liability adopted in West, 
strict liability has not replaced warranty law as the remedy for frustrated economic 
expectations in the sale of goods.  In 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.  In this regard, we also note that the 
products liability economic loss rule articulated in Seely and East River, and 
adopted by this Court in Florida Power, applies even in the absence of privity of 
contract.  See Airport Rent-A-Car, Inc. v. Prevost Car, Inc., 660 So. 2d 628, 631 
(Fla. 1995) (holding cause of action for negligence against manufacturer of 
defective buses was barred by the economic loss rule notwithstanding absence of 
privity); Casa Clara Condo. Ass'n, Inc. v. Charley Toppino & Sons, Inc., 620 So. 
 
- 17 - 
2d 1244, 1248 (Fla. 1993) (holding cause of action against manufacturer of 
defective concrete was barred by the economic loss rule notwithstanding absence 
of privity). 
THIS CASE 
This case does not involve a cause of action against a manufacturer or 
distributor for economic loss caused by a product which damages itself.  Thus, the 
products liability economic loss rule is inapplicable.  Nor does this case involve 
parties who enjoy privity of contract.  Thus, the economic loss rule for those in 
privity of contract is inapplicable.  Rather, this case invol
ves plaintiffs who claim 
economic loss caused by the alleged negligence of a defendant with whom the 
plaintiffs were not in privity. 
Palau International Traders, Inc. v. Narcam Aircraft, Inc., 653 So. 2d 412 
(Fla. 3d DCA 1995), involved application of the economic loss rule under similar 
facts.  In Palau International, a purchaser of a used airplane brought a negligence 
action against an airplane mechanic with whom it had no privity of contract.  See 
id. at 413.  The buyer and seller had entered into a contract of sale that provided 
that at the time of delivery and closing of the sale the aircraft would have a current 
"United States' FAA Certificate of Airworthiness."  Id.  The seller hired a 
mechanic to repair and inspect the plane in an effort to obtain an airworthiness 
certificate from the FAA.  See id. at 414.  The mechanic completed the application 
 
- 18 - 
for the certificate and verified that the plane had been inspected and found 
airworthy.  The FAA subsequently issued the airworthiness certificate.  However, 
six months later, the buyer discovered that the landing gear was cracked and filed 
suit against the mechanic, alleging that the condition existed at the time the 
mechanic conducted its inspection.  See id.  The Third District affirmed the trial 
court's order granting the mechanic summary judgment based on the economic loss 
rule.  See id. at 418.   
Having reviewed the origin and purpose of the economic loss rule, we 
conclude that it should not be extended to the type of claim presented in Palau 
International and this case.  In Moransais, we recognized the danger in an 
"unprincipled extension of the rule."  744 So. 2d at 981.  We stated that those 
situations in which this Court had permitted recovery for purely economic loss, 
such as in the context of fraudulent inducement and negligent misrepresentation, 
serve[d] as reminders of the distinct limitations of the economic loss 
rule.  Today, we again emphasize that by recognizing that the 
economic loss rule may have some genuine, but limited, value in our 
damages law, we never intended to bar well-established common law 
causes of action, such as those for neglect in providing professional 
services.  Rather, the rule was primarily intended to limit action in the 
product liability context, and its 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. 
Id. at 983 (footnote omitted).  Although we limited our holding in Moransais to 
situations involving professional malpractice, we note that some courts have 
 
- 19 - 
extended the exception to the application of the economic loss rule created in 
Moransais to causes of action for breach of fiduciary duty, even if there was an 
underlying oral or written contract.  See Invo Fla., Inc. v. Somerset Venturer, Inc., 
751 So. 2d 1263, 1266 (Fla. 3d DCA 2000); Performance Paint Yacht Refinishing, 
Inc. v. Haines, 190 F.R.D. 699, 701 (S.D. Fla. 1999).  
Several justices on this Court have supported expressly limiting the 
economic loss rule to its principled origins.  In Moransais, Justice Wells stated 
"directly that it is [his] view that the economic loss rule should be limited to cases 
involving a product which damages itself by reason of a defect in the product."  
Moransais, 744 So. 2d at 984 (Wells, J., concurring).  Two justices subsequently 
joined Justice Wells when he reiterated this position in Comptech International, 
Inc. v. Milam Commerce Park, Ltd., 753 So. 2d 1219 (Fla. 1999).  See id. at 1227 
(Wells, J., concurring with an opinion in which Justices Lewis and Pariente 
joined). 
We now agree that the economic loss rule should be expressly limited.  First, 
we reiterate that when the parties have negotiated remedies for nonperformance 
pursuant to a contract, one party may not seek to obtain a better bargain than it 
made by turning a breach of contract into a tort for economic loss.  Our holding in 
AFM Corp. illustrates this well-settled rule of law.  However, because it may 
appear that AFM Corp. also expanded the products liability economic loss rule, we 
 
- 20 - 
recede from AFM Corp. to the extent that it relied on the principles adopted by this 
Court in Florida Power.  As we recognized in Moransais, AFM Corp. was 
"unnecessarily over-expansive in [its] reliance on the economic loss rule as 
opposed to fundamental contractual principles."  Moransais, 744 So. 2d at 981. 
Second, consistent with the original rationale and intent of Seely, East River, 
and Florida Power, we hold that 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.3  In other words, we reaffirm our 
recognition of the products liability economic loss rule.  However, we expressly 
note that the "other property" exception to the products liability economic loss rule 
remains viable.  Indeed, as the United States Supreme Court noted in East River, 
"[i]n the traditional 'property damage' cases, the defective product damages other 
property," and "[s]uch damage is considered so akin to personal injury that the two 
are treated alike."  East River, 476 U.S. at 867; see also Comptech, 753 So. 2d at 
1219 (concluding that computers placed in the warehouse were not an integral part 
of the product and were therefore "other property"); Southland Constr., Inc. v. 
                                        
3. Intentional tort claims such as fraud, conversion, intentional interference, 
civil theft, abuse of process, and other torts requiring proof of intent generally 
remain viable either in the products liability context or if the parties are in privity 
of contract.  As noted by one commentator, a rule barring recovery for economic 
loss "is not an escape hatch from intentional commercial torts."  Paul J. Schwiep, 
The Economic Loss Rule Outbreak: The Monster that Ate Commercial Torts, Fla. 
B. J.,  Nov. 1995, at 34, 42.     
 
- 21 - 
Richeson Corp., 642 So. 2d 5 (Fla. 5th DCA 1994) (concluding that "other 
structures" not involved in the building project that were damaged by the failure of 
the retaining wall, i.e., the adjoining pool deck and a different wall, were other 
property).   
We also reaffirm that in cases involving either privity of contract or products 
liability, the other exceptions to the economic loss rule that we have developed, 
such as for professional malpractice,4 fraudulent inducement,5 and negligent 
misrepresentation,6 or freestanding statutory causes of action, still apply. 7  These 
exceptions remain untouched by our ruling today. 
We further conclude that, i
n general, actionable conduct that frustrates 
economic interests should not go uncompensated solely because the harm is 
unaccompanied by any injury to a person or other property.  We therefore hold that 
cases that do not fall into either of the two categories articulated above should be 
decided on traditional negligence principles of duty, breach, and proximate cause.  
That said, we express no opinion on the existence of a cause of action or the 
                                        
4.  Moransais, 744 So. 2d at 983.  
 
5.  See HTP, Ltd., 685 So. 2d at 1239. 
 
6.  See PK Ventures, Inc. v. Raymond James & Assocs., 690 So. 2d 1296, 
1297 (Fla. 1997); First Florida Bank, N.A. v. Max Mitchell & Co., 558 So. 2d 9, 
15-16 (Fla. 1990); First American Title Ins. Co. v. First Title Serv. Co., 457 So. 2d 
467, 473 (Fla. 1984). 
 
7.  See Comptech, 753 So. 2d at 1221. 
 
- 22 - 
appropriateness of recovery for certain types of economic damages in individual 
cases.  We also decline to make any per se distinction between damages for direct 
economic injury, such as the loss of the benefit of the bargain, and consequential 
economic damages, such as lost profits. 
CONCLUSION 
In conclusion, we answer the first and second certified questions as 
rephrased herein in the negative, and decline to address the remaining certified 
questions, as our holding herein renders those questions moot.  As noted above, 
neither the products liability nor the contract economic loss rules apply to this case.  
Rather, in this case, Profile and Infinity have alleged that American Aviation was 
negligent in maintaining and inspecting an aircraft subsequently purchased by 
Profile.  If American Aviation owed Profile a duty, then Profile is not prevented 
from recovering for purely economic injuries.  We return this case to the Eleventh 
Circuit for disposition consistent with this opinion.  We further disapprove the 
Third District's decision in Palau International to the extent it is inconsistent with 
this opinion. 
It is so ordered. 
WELLS, ANSTEAD, LEWIS, QUINCE, CANTERO and BELL, JJ., concur. 
CANTERO, J., concurs with an opinion, in which WELLS, J., concurs. 
 
NOT FINAL UNTIL TIME EXPIRES TO FILE REHEARING MOTION, AND 
IF FILED, DETERMINED. 
 
 
- 23 - 
CANTERO, J., concurring. 
 
I concur in the majority opinion.  I write separately to emphasize two points: 
(1) by our opinion today we not only make the economic loss rule sounder in 
principle and easier in application, but we also bring Florida more into line with 
the majority of jurisdictions that have adopted such a rule; and (2) our limitation of 
the rule will not open the gates to widespread tort recovery for purely economic 
losses.  As the majority recognizes, plaintiffs whose cases fall outside of the 
economic loss rule must still prove “duty, breach, and proximate cause.”  Majority 
op. at 21.  The “duty” prong remains a strong filter in these cases. 
 
I discuss these concepts in turn.  
1. Simplification of Economic Loss Rule 
 
The economic loss rule has become a confusing morass.  As more than one 
court has lamented, the rule has been “stated with ease but applied with great 
difficulty.”  Delgado v. J.W. Courtesy Pontiac GMC-Truck, Inc., 693 So. 2d 602, 
606 (Fla. 2d DCA 1997) (quoting Sandarac Ass’n v. W.R. Frizzell Architects, Inc., 
609 So. 2d 1349, 1352 (Fla. 2d DCA 1992)).  We, too, have “acknowledge[d] that 
our prior pronouncements on the [economic loss] rule have not always been clear, 
and, accordingly, have been the subject of legitimate criticism and commentary.”  
Moransais v. Heathman, 744 So. 2d 973, 980 (Fla. 1999); see also Comptech Int’l, 
Inc. v. Milam Commerce Park, Ltd., 753 So. 2d 1219, 1223-24 (Fla. 1999) 
 
- 24 - 
(recognizing “the confusion that has abounded in this area of the law”).  
Apparently due to this confusion, and because we have never applied the economic 
loss rule to a case involving both the provision of services and lack of privity, the 
Eleventh Circuit Court of Appeals in this case believed that no controlling 
precedent existed, and it certified several questions.  I hope that our restriction of 
the rule will reduce some of the confusion. 
 
The Court today limits the economic loss rule to situations “where the 
parties are either in contractual privity or the defendant is a manufacturer or 
distributor of a product, and no established exception to the application of the rule 
applies.”  Majority op. at 2.  Stated negatively, the economic loss rule does not 
apply in the services context unless a contract exists and none of the established 
exceptions to the rule apply.8 
 
I agree with this limitation of the rule.  As the majority recognizes, the 
central purpose of the economic loss rule is “to protect the integrity of the 
contract,” Majority op. at 9, and thereby to prevent contract law and warranty law 
from “drown[ing] in a sea of tort.”  East River S.S. Corp. v. Transamerica Delaval, 
Inc., 476 U.S. 858, 866 (1986) (citing Grant Gilmore, The Death of Contract 87-94 
(1974)).  When parties can protect their economic interests through contract, it 
would only undermine contract and warranty law and produce economic 
                                        
8 For example, our holding does not supplant the exception for professional 
services created in Moransais, 744 So. 2d at 983.  Majority op. at 21. 
 
- 25 - 
inefficiency to allow purely economic recovery in tort.  See Alloway v. Gen. 
Marine Indus., L.P., 695 A.2d 264, 275 (N.J. 1997) (“[A] tort cause of action for 
economic loss duplicating the [causes of action] provided by the U.C.C. is 
superfluous and counterproductive.”).  It is doubtful, however, that parties can 
protect their economic interests through contract when they have not contracted 
with each other and when the basis of their indirect relationship is not a tangible 
product, but rather an intangible service.  See Congregation of the Passion, Holy 
Cross Province v. Touche Ross & Co., 636 N.E.2d 503, 515 (Ill. 1994) (“The 
characteristics of a tangible object are readily ascertainable, and they can be 
memorialized in a contract and studied by the parties.  . . .  It is not necessary or 
generally possible to memorialize all the elements of [a service] contract. . . .  
Application of the [economic loss rule], therefore, is inappropriate where a 
relationship results in something intangible.”).  In such circumstances, the parties 
often lack a sufficient nexus through which to allocate economic risks.  Indeed, 
they might not even know of their indirect relationship. 
 
I note that restricting the rule’s application does not place Florida at odds 
with other states.  To the contrary, it places Florida squarely in the mainstream.  
The vast majority of states restrict the rule to products cases, at least in the absence 
of a contract.  See, e.g., Ins. Co. of N. America v. Cease Elec. Inc., 688 N.W.2d 
462, 472 (Wis. 2004) (holding as a “bright line rule” that “the economic loss 
 
- 26 - 
doctrine is inapplicable to claims for the negligent provision of services”); 
Congregation of the Passion, 636 N.E.2d at 514 (stating that the economic loss rule 
applies to services relationships “only where the duty of the party performing the 
service is defined by the contract that he executes with his client”); McCarthy Well 
Co. v. St. Peter Creamery, Inc., 410 N.W.2d 312, 315 (Minn. 1987) (holding that 
the economic loss rule does not apply “if the predominant purpose of the contract 
is the rendition of services”).9  Few states apply the rule as broadly to services 
                                        
9 Many states implicitly restrict the rule to products liability cases.  These 
include Alabama, see Lloyd Wood Coal Co. v. Clark Equip. Co., 543 So. 2d 671, 
673-74 (Ala. 1989) (stating that the rule applies to products liability cases 
involving manufacturers); California, see Jimenez v. Super. Court, 58 P.3d 450, 
456 (Cal. 2002) (limiting the rule to cases involving “strict products liability . . . 
when a product defect causes damage” to the product itself); Delaware, see 
Danforth v. Acorn Structures, Inc., 608 A.2d 1194, 1198 (Del. 1992) (stating that 
the rule bars “the recovery of economic loss caused by qualitatively defective 
products”); Georgia, see Vulcan Materials Co. v. Driltech, Inc., 306 S.E.2d 253, 
257 (Ga. 1983) (stating that the rule applies “when a defective product has resulted 
in the loss of the value or use of the thing sold”); Hawaii, see State ex rel. Bronster 
v. U.S. Steel Corp., 919 P.2d 294, 302 (Hawaii 1996) (adopting the rule “insofar as 
it applies to claims for relief based on a product liability or negligent design and/or 
manufacture theory”); Maine, see Oceanside at Pine Point Condo. Owners Ass’n 
v. Peachtree Doors, Inc., 659 A.2d 267, 270 (Me. 1995) (applying the rule to bar 
“recovery for a defective product’s damage to itself”); Maryland, see Morris v. 
Osmose Wood Preserving, 667 A.2d 624, 632-33 (Md. 1995) (characterizing the 
rule as a products liability rule); Massachusetts, see Berish v. Bornstein, 770 
N.E.2d 961, 975 (Mass. 2002) (holding that the rule applies “to the purchase and 
sale of products [and] also to claims of negligent design and installation in a newly 
constructed home”); Michigan, see Neibarger v. Universal Coops., Inc., 486 
N.W.2d 612, 615 (Mich. 1992) (limiting the rule to “transactions involving the sale 
of goods for commercial purposes where economic expectations are protected by 
commercial and contract law”); Missouri, see Sharp Bros. Contracting Co. v. Am. 
Hoist & Derrick Co., 703 S.W.2d 901, 903 (Mo. 1986) (applying the rule to cases 
 
- 27 - 
rendered as to products purchased.  See Ramerth v. Hart, 983 P.2d 848, 851 (Idaho 
1999) (applying the economic loss rule to the “repair and inspection” of an airplane 
despite the absence of privity, and stating that the rule “applies to negligence cases 
in general; its application is not restricted to products liability cases”).10 
                                                                                                                              
“where the only damage is to the product sold”); Nebraska, see Nat’l Crane Corp. 
v. Ohio Steel Tube Co., 332 N.W.2d 39, 44 (Neb. 1983) (holding that “the 
purchaser of a product pursuant to a contract cannot recover [purely] economic 
losses from the seller manufacturer on claims in tort based on negligent 
manufacture or strict liability”); New Jersey, see Alloway, 695 A.2d at 267 
(stating that the rule applies to “claims arising out of the manufacture, distribution, 
and sale of defective products”); New York, see 532 Madison Ave. Gourmet 
Foods, Inc. v. Finlandia Ctr., Inc., 750 N.E.2d 1097, 1101 n.1 (N.Y. 2001) (stating 
that the rule applies to suits by “an end-purchaser of a product” against a 
manufacturer); North Carolina, see Moore v. Coachmen Indus., Inc., 499 S.E.2d 
772, 780 (N.C. Ct. App. 1998) (defining the rule in products liability terms); North 
Dakota, see Hagert v. Hatton Commodities, Inc., 350 N.W.2d 591, 595 (N.D. 
1984) (same); Oklahoma, see Okla. Gas & Elec. Co. v. McGraw-Edison Co., 834 
P.2d 980, 982 (Okla. 1992) (stating that the rule applies to “manufacturers’ 
products liability”); South Carolina, see Beachwalk Villas Condo. Ass’n v. 
Martin, 406 S.E.2d 372, 374 n.1 (S.C. 1991) (stating that the rule applies only to 
product defect cases in which the “duties are created solely by contract”); and 
South Dakota, see Diamond Surface, Inc. v. State Cement Plant Comm’n, 583 
N.W.2d 155, 161 (S.D. 1998) (stating that the rule applies when the “predominate 
purpose” of a transaction is the “sale of goods”). 
10 See also Springfield Hydroelectric Co. v. Copp, 779 A.2d 67, 71 (Vt. 
2001) (stating that “the economic loss rule clearly applies to commercial disputes 
outside the confines of product liability”); Neb. Innkeepers, Inc. v. Pittsburgh-Des 
Moines Corp., 345 N.W.2d 124, 126 (Iowa 1984) (stating broadly that “[t]he well-
established general rule is that a plaintiff who has suffered only economic loss due 
to another’s negligence has not been injured in a manner which is legally 
cognizable or compensable”). 
 
- 28 - 
 
Our simplification of the rule to cases involving either defective products or 
a contractual relationship places Florida in the mainstream of jurisdictions 
applying the economic loss rule. 
2. The Duty Element 
Limiting the scope of the economic loss rule removes one obstacle to the 
recovery of purely economic losses.  But significant obstacles remain.  As the 
majority recognizes, plaintiffs whose cases fall outside of the economic loss rule 
must still satisfy “the traditional negligence principles of duty, breach, and 
proximate cause.”  Majority op. at 21.  The “duty” prong remains a strong filter in 
these cases––virtually as strong as the rule itself.  A service provider’s mere failure 
to exercise reasonable care in performing a service contract does not render it 
liable in tort to every party who loses revenue or incurs additional expense.  The 
plaintiff still must demonstrate an independent duty to protect that plaintiff’s 
purely economic interests.  See Onita Pac. Corp. v. Trs. of Bronson, 843 P.2d 890, 
896 (Or. 1992) (holding that a “negligence claim for the recovery of economic 
losses caused by another must be predicated on some duty of the negligent actor to 
the injured party beyond the common law duty to exercise reasonable care to 
prevent foreseeable harm”).  Such a showing will be difficult in most cases. 
Illinois’s experience is instructive.  In Congregation of the Passion, 636 
N.E.2d at 514, the Illinois Supreme Court did roughly what the majority does 
 
- 29 - 
today: it limited the application of the economic loss rule in the services context to 
cases “where the duty of the party performing the service is defined by contract.”  
Id.  After Congregation of the Passion, however, Illinois courts quickly recognized 
that the “duty” element plays a filtering role similar to that of the economic loss 
rule.  As one Illinois appellate court noted, 
“[T]he concept of duty is at the heart of the distinction drawn by the 
economic loss rule.  The rule acts as a shorthand means of 
determining whether a plaintiff is suing for injuries arising from the 
breach of a contractual duty … or for injuries resulting from the 
breach of a duty arising independently of the contract . . .” 
Tolan & Son, Inc. v. KLLM Architects, Inc., 719 N.E.2d 288, 294 (Ill. App. Ct. 
1999) (quoting 2314 Lincoln Park West Condo. Ass’n v. Mann, Gin, Ebel & 
Frazier, Ltd., 555 N.E.2d 346, 351-52 (Ill. 1990)).  Thus, even without the 
economic loss rule, Illinois courts continue to deny relief to most plaintiffs seeking 
purely economic losses because they generally cannot prove a breach of a duty 
independent of the contract.  See, e.g., Harger v. Spirit Airlines, Inc., No. 01-C-
8606, 2003 WL 21218968, at *10 (N.D. Ill. May 22, 2003) (finding no 
independent duty on the part of an airline to transport passenger bags safely to their 
destination, because any such duty is merely “incidental” to the contract); Peter J. 
Hartmann Co. v. Capital Bank & Trust Co., 694 N.E.2d 1108 (Ill. App. Ct. 1998) 
(finding that any duties of a subcontractor to a property owner were merely 
“incidental to [the subcontractor’s] contractual duty”). 
 
- 30 - 
 
Courts have considered allowing recovery from service providers for purely 
economic loss where a special or fiduciary relationship exists.  See, e.g., Mut. 
Serv. Cas. Ins. Co. v. Elizabeth State Bank, 265 F.3d 601 (7th Cir. 2001) (applying 
Illinois law) (concluding that a bank’s handling of its customers’ transactions 
might create independent tort duties); Choi v. Chase Manhattan Mortgage Co., 63 
F. Supp. 2d 874, 884 (N.D. Ill. 1999) (holding that independent tort duties might 
exist “where one party, due to a close relationship, relies heavily on the judgment 
of another”). 
The experience of Illinois suggests that our limitation of the economic loss 
rule in the services context will not open up a brave new world of tort liability 
because the duty element will continue to weed out most claims for purely 
economic loss.  Even the strongest advocates of limiting the economic loss rule in 
Florida have recognized this.  See Paul J. Schwiep, The Economic Loss Rule 
Outbreak: The Monster That Ate Commercial Torts, Fla. Bar J., Nov. 1995, at 34, 
42 (“The duty-analysis, had it been employed [in this Court’s previous] cases, may 
very well have led to the same final outcome [as the economic loss rule]––the facts 
aren’t clear.  The point of this article is not to criticize the result, but to urge rigor 
in the analysis.”).  
 
- 31 - 
CONCLUSION 
The practical effect of today’s decision in terms of overall tort liability 
should be unremarkable.  Although the economic loss rule no longer applies in the 
services context i
n the absence of a contract, the duty element of traditional 
negligence claims should continue to filter out the undeserving claims previously 
barred by the economic loss rule.  The Court does nothing to alter the underlying 
causes of action on which recovery for purely economic losses may be based.  
Majority op. at 21 (“[W]e express no opinion on the existence of a cause of action 
or the appropriateness of recovery for certain types of economic damages in 
individual cases.”).  Rather, it merely ensures that deserving claims for purely 
economic recovery in tort––exceptional though they may be––will not be 
swallowed by an over-inclusive rule.  Therefore, I concur. 
WELLS, J., concurs. 
 
 
Certified Question of Law from the United States Court of Appeals for the 
Eleventh Circuit - Case No. 02-14828 and 02-14830 
 
Hugh C. Griffin and Gary Y. Leung of Lord, Bissell and Brook, LLP, Chicago, 
Illinois, and Michael P. Bruyere, Thomas J. Strueber and Jonathan R. Friedman of 
Lord, Bissell and Brook, LLP, Atlanta, Georgia, 
 
 
for Appellant 
 
John M. Murray of Murray, Marin and Herman, P.A., Tampa, Florida and Carolyn 
A. Pickard of Murray, Marin and Herman, P.A., Coral Gables, Florida, 
 
 
for Appellee 
 
- 32 - 
Daniel S. Green of Ullman and Kurpiers, LLC, Tampa, Florida and Tracy Raffles 
Gunn of Fowler, White, Boggs and Banker, P.A., Tampa, Florida on behalf of the 
Florida Defense Lawyers’ Association; and Richard A. Solomon of the Andersen 
Firm, P.C., Winter Park, Florida on behalf of the Florida Concrete and Products 
Association, Inc., 
 
 
As Amici Curiae