Economic Loss Doctrine Arizona
The economic loss doctrine precludes an aggrieved party from recovering economic damages in tort unless accompanied by physical harm -- either in the form of personal injury or property damage. Carstens, 206 Ariz. at 125-26, P 10, 75 P.3d at 1083-84.
The doctrine is a creature of judicial origin, its purpose grounded in the judicial hallmarks of distinction and clarity.
"The purpose of the 'economic loss rule' is to maintain the distinction between those claims properly brought under contract theory and those which fall within tort principles." Rissler & McMurry Co. v. Sheridan Area Water Supply Joint Powers Bd., 929 P.2d 1228, 1235 (Wyo. 1996).
"The economic loss rule thus 'serves to distinguish between tort, or duty-based recovery, and contract, or promise-based recovery, and clarifies that economic losses cannot be recovered under a tort theory.'" Carstens, 206 Ariz. at 126, P 10, 75 P.3d at 1084.
In Arizona, the economic loss doctrine has been applied in two categories of disputes: construction defects and products liability.
Salt River Project v. Westinghouse Elec. Corp., 143 Ariz. 368, 694 P.2d 198 (1984) (barring strict liability action in products liability context when only economic loss occurs), abrogated on other grounds by Phelps v. Firebird Raceway, Inc., 210 Ariz. 403, 111 P.3d 1003 (2005);
Woodward v. Chirco Constr. Co., Inc., 141 Ariz. 514, 687 P.2d 1269 (1984) (barring negligence claim for pure economic losses in construction defect context);
Carstens, 206 Ariz. 123, 75 P.3d 1081 (same);
Colberg v. Rellinger, 160 Ariz. 42, 43, 770 P.2d 346, 347 (App. 1988) (same);
Nastri v. Wood Bros. Homes, Inc., 142 Ariz. 439, 445, 690 P.2d 158, 164 (App. 1984) (same).
Federal courts applying Arizona law have not limited the application of the economic loss doctrine to construction defects and products liability cases. See, e.g., Apollo Group, Inc. v. Avnet, Inc., 58 F.3d 477, 480-81 (9th Cir. 1995) (determining that economic loss doctrine barred a claim for negligent misrepresentation, but noting that Arizona courts have not ruled on this issue); Wojtunik v. Kealy, 394 F.Supp.2d 1149 (D. Ariz. 2005) (finding that negligent misrepresentation in securities fraud action was barred by economic loss doctrine). But see Evans v. Singer, 518 F.Supp.2d 1134, 1138-48 (D. Ariz. 2007) (holding that claim against real estate agent for rendering negligent professional services was not barred by economic loss doctrine).
In the above Arizona cases, the alleged deficiencies constituted actual defects in the physical construction of the home or building, such as cracks in the foundation, flooring, and walls; improper and hazardous electrical wiring; and inadequate beam support.