www.loubar.org 4 Louisville Bar Briefs PROFESSIONAL EXCELLENCE Not Just for Products Liability? The Evolving and Uneven Application of the Economic Loss Rule by Kentucky Courts Michelle C. Fox and Jacob Robbins Judicially created doctrines have long played an invaluable role in American law. Whether by addressing gaps in existing law, by articu- lating practical mechanisms for balancing competing interests or by adapting existing precedent to novel contexts, judicially cre- ated doctrines fulfill a host of purposes that ensure the continued vitality and adaptability of legal adjudication. Many of these doc- trines have endured for hundreds of years; others, lacking historical imprimatur, are still being shaped by the courts. The eco- nomic loss rule is one such newer doctrine. Litigators—particularly those whose cases often encompass claims sounding in tort and in contract—would be wise to stay abreast of the evolving application of this principle by Kentucky courts. The economic loss rule emerged in the context of products liability cases but has expanded to apply to various other areas, including construction contracting. See D.W. Wilburn, Inc. v. K. Norman Berry Assocs., Architects, PLLC, No. 2015-CA- 001254-MR, 2016 WL 7405774, at *5 (Ky. Ct. App. Dec. 22, 2016). The Kentucky Supreme Court first adopted the economic loss doctrine in 2011 in Giddings & Lewis, Inc. v. Indus. Risk Insurers, 348 S.W.3d 729 (Ky. 2011), however, it did not immediately adopt this broader formulation. In Giddings, the insurers of machining equipment that catastrophically failed brought suit against the manufacturer of that equipment, assert- ing claims for breach of implied warranty, breach of contract, negligence, strict liability, negligent misrepresentation and fraud by omission. Giddings, at 734. The trial court granted summary judgment to the manufacturer, agreeing that the implied warranty claim was barred by the statute of limitations, and that the economic loss rule barred the tort claims. Id. at 735. Taken together, these rulings effectively prevented the insurers from recovering any damages from the destruction of the equipment. The Court of Appeals largely upheld the trial court, and the Kentucky Supreme Court granted discretionary review. Id. Ultimately, the Kentucky Supreme Court upheld the trial court’s rulings, holding that the “costs for re- pair or replacement of the product itself, lost profits and similar economic losses cannot be recovered pursuant to negligence or strict liability theories but are recoverable only under the parties’ contract, including any express or implied warranties.” Id. at 738. Over the ensuing years, however, Kentucky courts have unevenly applied the economic loss rule to contexts beyond products li- ability. Citing the need to prevent tort claims and contract claims from collapsing into one another, courts have invoked the rule to dismiss tort claims that they determine are duplicative of contract claims, whether through analysis of the damages sought or of the duties under which the claims arise. For instance, a tortious claim for fraud (Continued on next page) “ Because of the economic loss rule, any plaintiff hoping to successfully prosecute both tort and contract claims should take special care to support their damages and plead their causes of action.
