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Claims against subcontractors limited

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The Tampa Tribune

Published: July 18, 2008

When building a new home, most general contractors will subcontract much of the work to be performed. Plumbers, electricians, masons, landscapers, roofers and other subcontractors are brought in to perform much of the actual work. The purchaser of the home enters into a contract with the builder or general contractor but seldom has a contract with the various subcontractors although in some instances the homeowner may receive a warranty.

Outside of a written warranty, however, the homeowner generally has no claim for negligent or defective workmanship against a subcontractor because of Florida's Economic Loss Rule. In a nutshell, the Economic Loss Rule precludes negligence claims such as defective workmanship where the parties were or could have been in contractual privity.

The seminal Economic Loss Rule case is Casa Clara Condominium Association v. Charley Toppino & Sons, Inc.

In that decision, the Florida Supreme Court held that the economic loss rule barred homeowners' negligence action against a concrete supplier for purely economic losses. The homeowners had sought to recover against the concrete supplier for damage caused to their homes resulting from the use of a high content of salt in the concrete that caused the reinforcing steel inserted in the concrete to rust which, in turn, caused the concrete to crack and break off. The Court affirmed the dismissal of the claims based upon the Economic Loss Rule noting that the rule is the fundamental boundary between contract law, which is designed to enforce the expectancy interests of the parties, and tort law, which imposes a duty of reasonable care and thereby encourages citizens to avoid causing physical harm to others.
Economic loss is defined as damages for inadequate value, costs of repair and replacement of the defective product, or consequent loss of profits without any claim of personal injury or damage to other property. The Court also rejected the homeowners' argument that their homes constituted "other property." In rejecting the argument, the Court stated that it must look at the product purchased by the homeowners and not the product sold by the supplier. Here, the homeowners purchased finished homes, not concrete, and thus their homes constituted the product and were not "other property" in the application of the Economic Loss Rule.

The Economic Loss Rule precludes negligence claims between parties who are in privity of contract or who could have defined their respective rights and obligations through contract. A party may not circumvent their contractual relationship by asserting claims founded in negligence. The Economic Loss Rule is based upon the view that contract principles rather than tort principles are more appropriate to resolve purely economic claims and encourage parties to negotiate risks through warranty provisions and price.

In today's tough economic times, contractors are struggling to stay in business. If as in the Casa Clara case the prime contractor becomes insolvent, the purchaser of a newly constructed home may have little recourse against subcontractors for construction defects.

Randall Love is an attorney with Randall J. Love & Associates, 5647 Gulf Drive, New Port Richey. Love practices in the areas of personal injury, commercial and real estate litigation, construction law and employment litigation. 727-861-7001.

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