Duty, Economic Expectations, and the Impact Rule: What Damages are Recoverable under a theory of Negligence?

This post briefly addresses the scope of Florida's "Impact Rule" in the context of claims of Negligence, and considers how the reasoning underlying the Florida Supreme Court’s impact rule jurisprudence also limits the scope of the common law “duty” owed by a Defendant in the context of a claim of Negligence.

The aforementioned statement may seem to be both dry, and rather vague, so allow me to elaborate a bit. As you may know, the Florida Supreme Court recently abolished the application of the Economic Loss Rule outside the context of products liability causes of action. Tiara Condo. Ass'n v. Marsh & McLennan Cos., 38 Fla. L. Weekly S 151 (Fla. 2013). Previously, the application of this rule served to bar claims for Negligence where the parties were in contractual privity with one another. The general reasoning behind the application of the rule in this context was that parties should not be allowed to sue in tort for disappointed economic expectations, where those disappointed expectations arose from a contract which they had freely bargained for. In such cases, their proper remedy would be to sue for a breach of contract. If their disappointed expectations could not be properly remedied in under a theory of breach of contract, it followed that they should not be allowed to go above and beyond the bargain between the parties and sue under a theory of negligence. To allow such a suit, it was said would cause “contract law to drown in a sea of tort.”

          Unfortunately, the application of this rule was deeply inconsistent, with numerous exceptions being carved out. For example, a party could sue for “independent torts” such as Fraud in the Inducement. Indeed, the contractual privity economic loss rule made almost no sense at all, and the precedent was nearly incomprehensible. As such, the Florida Supreme Court decided to put it out of its misery.

          Now that these alternative iterations of the Economic Loss Rule have been abolished, the question that necessarily follows is whether there will be any limitations on causes of action for disappointed economic expectations sounding in negligence. The answer, it seems, is that these limitations will be found in the scope of the common law duty which parties will be held to. As noted, a number of Florida Supreme Court cases relating to the impact rule can shed some light on these limitations. Accordingly, what follows is an analysis of the common law duty of care, which makes reference to Florida Cases addressing the impact rule. 

In order to support a claim of negligence, a Plaintiff must allege four elements: a duty, breach of that duty, causation, and damages. See, Curd v. Mosaic Fertilizer, L.L.C., 39 So. 2d 1216, 1227 (Fla. 2010) (quoting Clay Elec. Coop., Inc. v. Johnson, 873 So. 2d 1182, 1185 (Fla. 2003)). “[E]stablishing the existence of a duty under [Florida’s] negligence law is a minimum threshold legal requirement that opens the courthouse doors ..., and is ultimately a question of law for the court rather than a jury.” Williams v. Davis, 974 So. 2d 1052, 1057 n. 2 (Fla. 2007) (citing McCain v. Florida Power Corp., 593 So. 2d 500, 502 (Fla. 1992)).

          When determining whether or not a Defendant is subject to a duty in a particular case, the Court must ask whether the Defendant’s conduct creates “a generalized and foreseeable risk of harming others.” McCain, 592 So. 2d at 503. Put more succinctly, the Court must ask whether the Defendant’s conduct created a “foreseeable zone of risk.” Id. (quoting Kaisner v. Kolb, 542 So. 2d 732, 735 (Fla. 1989)). Accordingly, in keeping their premises in a reasonably safe condition, “[a]n owner or occupier of a place of business is not an insurer of his customers' safety; rather, he owes his customers only a duty to protect against those risks which are reasonably foreseeable.” La Villarena, Inc. v. Acosta, 597 So. 2d 336, 338 (Fla. 3d DCA 1992) (quoting Westchester Exxon v. Valdes, 524 So. 2d 452, 455 (Fla. 3d DCA 1988)); see, also Miranda v. Home Depot, Inc., 604 So. 2d 1237 (Fla. 3d DCA 1992). Where the Plaintiff’s injury is a result of an “unusual occurrence,” and it is “neither probable nor foreseeable that someone would injure themselves in this manner,” the Defendant is under no duty to guard against the injury which occurred. Miranda, 604 So. 2d at 1238-1239.

          Moreover, with respect to negligence, the common law does not impose a general duty to protect against intangible, speculative, or economic harms. Rather, the “general standards of care traditionally created by negligence law are standards designed to protect person and property from physical injury.” Monroe v. Sarasota Cnty. Sch. Bd., 746 So. 2d 530, 534 (Fla. 2d DCA 1999) (citing Sarandac Ass’n v. W.R. Frizzell Architects, Inc., 609 So. 2d 1349, 1352-55 (Fla. 2d DCA 1992).

“Where the plaintiff seeks only the recovery of an economic loss, the duty element of negligence serves as an important barrier to the over-extension of liability.” Virgiliov v. Ryland Group, Inc., 680 F. 3d 1329, 1339 (11th Cir. 2012) (citing Indem. Ins. Co. of N.h Am. V. Am. Aviation, 891 So. 2d 532, 546 (Fla. 2004)). Under these circumstances, Florida Courts have refused to impose such a broad duty. Rather, Courts look to the specific relationship between the parties before imposing such a duty. See Monroe v. Sarasota Cnty. Sch. Bd., 746 So. 2d 530, 534 n. 6 (Fla. 2d DCA 1999) (explaining that "[d]ifficult economic loss cases all seem to examine the relationship between the parties to determine whether it warrants creating a duty to protect economic interests outside contract and statutory law"); cf Am. Aviation, 891 So. 2d at 547 (Cantero, J., concurring) ("Courts have considered allowing recovery from service providers for purely economic loss where a special or fiduciary relationship exists.").

          Thus, in Gracey v. Eaker, 837 So. 2d 348 (Fla. 2002), the Florida Supreme Court (finding an exception to the impact rule) emphasized that the Defendant was subject to a “statutory duty” which arose from his “confidential relationship” with the Plaintiffs, which therefore allowed the Plaintiff’s to state a cause of action for “breach of fiduciary duty.” Gracey, 837 So. 2d at 352-4. Similarly, in Fl. Dept of Corr. v. Abril, 969 So. 2d 201 (Fla. 2007), the Florida Supreme Court declined to recognize a generalized duty (in this case, of confidentiality), and again emphasized that the Defendant’s duty was derived from a statute “expressly provides that a patient's medical records are confidential and must not be disclosed without the consent of the patient,” which had the “purpose of protecting individuals from disclosure of highly personal, sensitive information.” Abril, 969 So. 2d at 207.

These clearly limited holdings in Gracey and Abril can therefore be harmonized with previous Florida Supreme Court precedent which notes that “the impact doctrine properly reflects the principle that there must be some level of harm which one should absorb without recompense as the price he pays for living in an organized society.” Rowell v. Holt, 850 So. 2d 474, 480 (Fla. 2003) (quoting Gonzalez v. Metro. Dade County Pub. Health Trust, 651 So. 2d 673, 675 (Fla. 1995)).

          To bring this full circle, in Greenacre Props. v. Rao, the Second District Court of Appeals (citing Monroe) recognized that where there is no physical impact, a Plaintiff may generally not recover for any type of damages awardable under a negligence theory: 

 [A]s a general rule, a party cannot recover damages for emotional distress in the absence of physical injury or illness. However, this "impact doctrine" or "impact rule," which is explained in a long line of cases including Rowell and R.J. v. Humana of Florida, Inc., 652 So. 2d 360 (Fla. 1995) does not merely prevent an award of monetary damages representing a party's "emotional distress" while permitting recovery for other types of damages. Rather, this doctrine generally requires proof of a physical injury or illness before a plaintiff is permitted to recover any type of damages awardable under a negligence theory.

Greenacre Props. v. Rao, 933 So. 2d 19, 25 (Fla. 2d DCA 2006) (emphasis added); see, also Tardif v. People for the Ethical Treatment of Animals, 829 F. Supp 2d 1219 (MD Fla. 2011).

          At this point, the Florida Supreme Court has not clearly weighed in on the scope of common law duty which is owed. Do “reasonably foreseeable” harms include each and every plausible economic harm? Or is negligence law limited to the physical realm (i.e., protecting the person, and physical damage to property)? As noted, the Court’s reasoning in Abril and Gracey suggests that the Court is not inclined to find an unlimited duty, and that there must be some statutory basis for the imposition of same. That being said, Abril and Gracey involved conduct which did have the effect of harming a person (rather than a party’s generalized economic expectations). Further, the “zone of risk” doctrine articulated in McCain does not necessarily imply such limits on the scope of duty. Where the Economic Loss Rule previously barred a cause of action in negligence, the question is clearly open: what is the scope of the duty owed, and what damage may be recovered? 

At this point, it appears that the Second District’s opinion in Monroe v. Sarasota Cnty. Sch. Bd., is particularly instructive (though, not authoritative). 

I hope that the aforementioned discussion has been helpful, and I would also hope that any readers would forgive a lack of clarity, as my time is rather limited. If you are looking for more insight into this matter, or, perhaps, looking to retain appellate counsel on this subject (or any other), please feel free to contact me at Hightower Stratton Wilhelm (contact information on the right).