economic loss rule in Kentucky

2020It is well explained in Justice Keller’s concurrence in Presnell: The “economic loss rule” is a judicially created doctrine that “marks 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.” “The crux of the doctrine is not privity but the premise that economic interests are protected, if at all, by contract principles, rather than tort principles.” Although originally rooted primarily in product liability

2011However, relying on Justice Keller’s dissent in Presnell Construction Managers, Inc. v. EH Construction, LLC, 134 S.W.3d 575 (Ky.2004), the Court of Appeals found the economic loss rule did not bar Industrial Risk Insurers’ negligent misrepresentation and fraud claims because they arise in tort, independent of any contractual duty.

2025A decade later . . . the Supreme Court confronted what constitutes the “product itself” for -6- purposes of the economic loss rule and, ultimately, held that “[w]hen a manufacturer places an item in the stream of commerce by selling it to an Initial User, that item is the ‘product itself.’” Id. (citations omitted).

2025COMMERCIAL TRANSACTIONS The Franz opinion was followed 17 years later with an opinion from the Supreme Court opining on the traditional use of the economic loss rule – a product, purchased through a commercial transaction, which failed during use – Giddings, 348 S.W.3d at 733 .

2025In Real Estate Marketing, Inc. v. Franz, 885 S.W.2d 921 (Ky.1994) overruled by Giddings, 348 S.W.3d at, the Supreme Court of Kentucky grappled with an issue similar to the one in the case at bar.

2011Although our Court of Appeals applied it in a classic commercial transaction context some twenty years ago, Falcon Coal Co. v. Clark Equipment Co., 802 S.W.2d 947 (Ky.App.1990), this Court denied discretionary review of that case and then hinted that Falcon Coal’s holding was too broad in Real Estate Marketing, Inc. v. Franz, 885 S.W.2d 921 (Ky.1994), a case regarding the sale of a defective house where the economic loss rule was really never implicated.

2011Although our Court of Appeals applied it in a classic commercial transaction context some twenty years ago, Falcon Coal Co. v. Clark Equipment Co., 802 S.W.2d 947 (Ky.App.1990), this Court denied discretionary review of that case and then hinted that Falcon Coal’s holding was too broad in Real Estate Marketing, Inc. v. Franz, 885 S.W.2d 921 (Ky.1994), a case regarding the sale of a defective house where the economic loss rule was really never implicated.

2004Ky.1995) was "the first case in Kentucky to use the specific phrase `Economic Loss Rule"` and that the federal district court did so only after this Court declined the court's request to certify whether Kentucky would apply the economic loss rule to the facts of the case). [19] Ky., 402 S.W.2d 441 (1965). [20] RESTATEMENT (SECOND) TORTS § 402A (1964): (1) One who sells any product in a defective condition unreasonably dangerous to the user or consumer or to his property is subject to liability for physical harm thereby caused to the ultimate user or consumer, or to his property, if (a) the sel

2011The Economic Loss Rule Applies in Kentucky to Negligence and Strict Liability Claims Arising from the Malfunction of Commercial Products When the United States Supreme Court adopted the economic loss rule as part of admiralty law in East River Steamship, it relied heavily on Seely v. White Motor Co., 63 Cal.2d 9 , 45 Cal.Rptr. 17 , 403 P.2d 145 (1965), the case generally cited as the first articulation of the rule.

2011The Economic Loss Rule Applies in Kentucky to Negligence and Strict Liability Claims Arising from the Malfunction of Commercial Products When the United States Supreme Court adopted the economic loss rule as part of admiralty law in East River Steamship, it relied heavily on Seely v. White Motor Co., 63 Cal.2d 9 , 45 Cal.Rptr. 17 , 403 P.2d 145 (1965), the case generally cited as the first articulation of the rule.

2018“Quite simply, the economic loss rule ‘prevents the law of contract and the law of tort from dissolving one into the other.”’ Id. (quoting Rich Products Corp. v. Kemutec, Inc., 66 F. Supp. 2d 937, 969 (E.D.

2018Courts have applied the economic loss rule to bar fraud claims where “the damages plaintiffs seek are the same economic losses arising from the alleged breach of contract.” Multifamily Captive Group, LLC v. Assurance Risk Managers, Inc., 629 F. Supp. 2d 1135, 1146 (E.D.

2011See Delmarva Power & Light v. Meter-Treater, Inc., 218 F.Supp.2d 564, 570-71 (D.Del.2002) (citing numerous cases holding minimal damage to other property does not preclude application of the economic loss rule where primary losses are economic). 11 .

2011Bank v. Damien Elder & Sons, 836 S.W.2d 893, 895 (Ky.1992) (“The construction as well as the meaning and legal effect of a written instrument, however compiled, is a matter of law for the court.”) See also Exxon Shipping Co. v. Pacific Resources Inc., 835 F.Supp. 1195, 1199 (D.Haw.1993) (“In determining what constitutes the product [for purposes of the economic loss rule], the court looks first to the parties’ contract.”); Petroleum Helicopters, Inc. v. Avco Corp., 930 F.2d 389 , 393 n. 9 (5th Cir.1991) (determining what is “the product” and what is “other property” requires construing the par

2011Shipco 2295, Inc. v. Avondale Shipyards, Inc., 825 F.2d 925, 929-30 (5th Cir.1987).

2011Obviously, determining the product under this approach requires resort to the parties’ contract, ie., what exactly was “bargained for by the buyer.” Shipco 2295, Inc., 825 F.2d at 930 .

2011While citing the remedies available under the Uniform Commercial Code and the East River Steamship decision as supportive of its decision, the Court of Appeals did not predicate its holding on the economic loss rule (which it never mentioned by name) but relied instead on its interpretation of the plain language of Section 402A of the Restatement. 4 802 *737 S.W.2d at 948-49.

2011Bank v. Damien Elder & Sons, 836 S.W.2d 893, 895 (Ky.1992) (“The construction as well as the meaning and legal effect of a written instrument, however compiled, is a matter of law for the court.”) See also Exxon Shipping Co. v. Pacific Resources Inc., 835 F.Supp. 1195, 1199 (D.Haw.1993) (“In determining what constitutes the product [for purposes of the economic loss rule], the court looks first to the parties’ contract.”); Petroleum Helicopters, Inc. v. Avco Corp., 930 F.2d 389 , 393 n. 9 (5th Cir.1991) (determining what is “the product” and what is “other property” requires construing the par

2011Bank v. Damien Elder & Sons, 836 S.W.2d 893, 895 (Ky.1992) (“The construction as well as the meaning and legal effect of a written instrument, however compiled, is a matter of law for the court.”) See also Exxon Shipping Co. v. Pacific Resources Inc., 835 F.Supp. 1195, 1199 (D.Haw.1993) (“In determining what constitutes the product [for purposes of the economic loss rule], the court looks first to the parties’ contract.”); Petroleum Helicopters, Inc. v. Avco Corp., 930 F.2d 389 , 393 n. 9 (5th Cir.1991) (determining what is “the product” and what is “other property” requires construing the par

2011Lebanon Personal Care Home, Inc. v. Hoover Universal, Inc., 276 F.3d 845, 849 (6th Cir.2002).

2011Bank v. Damien Elder & Sons, 836 S.W.2d 893, 895 (Ky.1992) (“The construction as well as the meaning and legal effect of a written instrument, however compiled, is a matter of law for the court.”) See also Exxon Shipping Co. v. Pacific Resources Inc., 835 F.Supp. 1195, 1199 (D.Haw.1993) (“In determining what constitutes the product [for purposes of the economic loss rule], the court looks first to the parties’ contract.”); Petroleum Helicopters, Inc. v. Avco Corp., 930 F.2d 389 , 393 n. 9 (5th Cir.1991) (determining what is “the product” and what is “other property” requires construing the par

2011In Barton Brands Ltd. v. O'Brien & Gere, Inc. of North America, 550 F.Supp.2d 681, 689 (W.D.Ky.2008), the United States District Court for the Western District of Kentucky, anticipating this Court’s approach to identifying the “product itself’ for purposes of the economic loss rule, concluded that it should be “the entire unit for which a party to a complex commercial transaction has the ability to distribute risk by contract and insure against loss.” This is a wholly reasonable approach which recognizes that the economic loss rule stems from the ability of the parties to the transaction to ad

2004See also SME Industries, Inc., 28 P.3d at 680 ("Simply put, the economic loss rule holds that `economic damages are not recoverable in negligence absent physical property damage or bodily injury."` (footnote and citations omitted)); 86 C.J.S.

2004See also SME Industries, Inc. v. Thompson, Ventulett, Stainback and Associates, Inc., 28 P.3d 669, 680 (Utah 2001) ("The economic loss rule is a judicially created doctrine that marks the fundamental boundary between contract law, which protects expectancy interests created through agreement between the parties, and tort law, which protects individuals and their property from physical harm by imposing a duty of reasonable care." (citation omitted)). [5] Barrett, supra note 4 at 895. [6] See Seely v. White Motor Co., 403 P.2d 145 (1965) (truck); East River S.S.

2004Griffin Plumbing & Heating Co. v. Jordan, Jones & Goulding, Inc., 320 S.C. 49 , 463 S.E.2d 85, 88 (1995)) (emphasis added). [39] Id. at 1263. [40] Id. [41] The court cited to Keller v. A.O.

2004See Vulcan Materials Co., Inc. v. Driltech, Inc., 251 Ga. 383 , 306 S.E.2d 253, 257 (1983); Advanced Drainage Systems, Inc. v. Lowman, 210 Ga.App. 731 , 437 S.E.2d 604, 607 (1993). [34] Real Estate Marketing, Inc., 885 S.W.2d at 926 (citation omitted).

2004See Vulcan Materials Co., Inc. v. Driltech, Inc., 251 Ga. 383 , 306 S.E.2d 253, 257 (1983); Advanced Drainage Systems, Inc. v. Lowman, 210 Ga.App. 731 , 437 S.E.2d 604, 607 (1993). [34] Real Estate Marketing, Inc., 885 S.W.2d at 926 (citation omitted).

2004See Vulcan Materials Co., Inc. v. Driltech, Inc., 251 Ga. 383 , 306 S.E.2d 253, 257 (1983); Advanced Drainage Systems, Inc. v. Lowman, 210 Ga.App. 731 , 437 S.E.2d 604, 607 (1993). [34] Real Estate Marketing, Inc., 885 S.W.2d at 926 (citation omitted).

2004See Vulcan Materials Co., Inc. v. Driltech, Inc., 251 Ga. 383 , 306 S.E.2d 253, 257 (1983); Advanced Drainage Systems, Inc. v. Lowman, 210 Ga.App. 731 , 437 S.E.2d 604, 607 (1993). [34] Real Estate Marketing, Inc., 885 S.W.2d at 926 (citation omitted).