Opinion ID: 1358226
Heading Depth: 1
Heading Rank: 5

Heading: Violation of Industry Standards [6]

Text: Evidence of industry standards has been recognized by this Court as highly probative on the issue of defining the duty of care. Elledge v. Richland/Lexington Sch. Dist. Five, 352 S.C. 179, 189, 573 S.E.2d 789, 795 (2002). In Kennedy, we considered the public policy of protecting new home buyers from builders who place defective and inferior construction into the stream of commerce. Kennedy, 299 S.C. at 344, 384 S.E.2d at 736. We found a builder owes legal duties to a home buyer beyond the contract, and thus, a builder could be liable in tort for purely economic losses, where: (1) the builder has violated an applicable building code; (2) the builder has deviated from industry standards; or (3) the builder has constructed housing he knows or should know will pose a serious risk of physical harm. Id. at 347, 384 S.E.2d at 738. The Kennedy court concluded that an expansion in traditional concepts of tort duty was needed in order to provide the innocent home buyer with protection. Kennedy, 299 S.C. at 343, 384 S.E.2d at 735. The court noted the inherent unequal bargaining positions, the fact that buyers no longer supervised construction of their homes, and South Carolina's acceptance of the legal maxim caveat venditor. Id. at 343, 384 S.E.2d at 735. The same policy considerations noted in Kennedy are arguably not present in the commercial construction arena. However, in Kennedy we expressed our approval of the legal maxim caveat venditor and recognized a new framework for analysis that focused on the actor's actions, not consequences. In our view this analytical framework is universal. Again, focusing on whether or not the actor violated a non-contractual duty does not eviscerate the economic loss doctrine; it only determines its applicability to the case presented. By focusing on the actor's actions in Kennedy, we concluded that builders have a legal duty outside of the contract to make products that meet industry standards. Kennedy, 299 S.C. at 347, 384 S.E.2d at 738. This Court has also stated that if a user of a product is a member of the class for which the product was manufactured, the user is entitled to a duty of care in manufacturing commensurate with industry standards. Terlinde v. Neely, 275 S.C. 395, 399, 271 S.E.2d 768, 769 (1980) (The plaintiffs, being a member of the class for which the home was constructed, are entitled to a duty of care in construction commensurate with industry standards.). However, this Court will not extend the concept of a legal duty of care in tort liability beyond reasonable limits. See McCullough, 373 S.C. at 53, 644 S.E.2d at 49 (rejecting the notion of a special duty in the secured transactions arena). Industry standards are probative in defining the standard or duty of care; however, industry standards do not determine if the prerequisite duty of care is owed. In other words, a violation of industry standards is only helpful in determining that a duty owed has been breached. In the instant case, assuming that a duty of care is owed to Colleton, a breach of industry standards would serve as evidence of Hoover's breach of that duty of care. Being that the duty of care does not arise out of a contract, the fact that only the product itself is injured is irrelevant. Kennedy dictates that the focus of the inquiry is on Hoover's action, not the consequence of the action. Thus, the economic loss rule is not applicable and would not bar recovery in tort.