23.23 Economic Loss Rule.505 Economic losses refer to pecuniary or commercial damages, including any decreased value or repair costs for a product or property that is itself the subject of a contract between the plaintiff and defendant, and consequential damages such as lost profits.506
Some courts have stated that the economic loss doctrine bars a party from recovering economic damages in tort unless accompanied by physical harm.507 This formulation of the doctrine, however, is overly broad. In many contexts, tort recovery is available for solely pecuniary losses.508 Moreover, describing the doctrine this way conflates two distinct issues: (1) whether a contracting party should be limited to its contract remedies for purely economic loss; and (2) whether a plaintiff may assert tort claims for economic damages against a defendant absent any contract between the parties. The economic loss doctrine is best directed to the first of these issues, and the phrase is used to refer to a common law rule limiting a contracting party to contractual remedies for the recovery of economic losses unaccompanied by physical injury to persons or other property.509
The seminal case applying the economic loss doctrine to product liability issues is the aforementioned case of Salt River Project Agricultural Improvement & Power District v. Westinghouse Electric Corp. There, an electric utility company asserted contract and tort claims against the seller of a control device that had allegedly malfunctioned and damaged the utility’s turbine unit. In the context of an alleged product defect, Salt River considered whether a plaintiff could seek tort recovery for...
