Also known as: purely economic loss · pure economic loss · pure economic losses · pure economic loss doctrine
Written by attorneys · grounded in primary & secondary sources — see below
Pecuniary or commercial loss that does not arise from actionable physical, emotional or reputational injury to persons or physical injury to property. Recovery in negligence for such loss is barred absent physical harm to the plaintiff or the plaintiff's property or a narrow exception creating a duty to protect the economic interest.
Pacific Bank purchased a fleet of commercial vehicles from Pinnacle Holdings under a sales contract. After delivery the vehicles developed defects that caused only lost rental income and repair costs with no personal injury or damage to other property. Pacific Bank sued Pinnacle Holdings in tort for negligence seeking the lost profits. The claim failed because the economic loss rule confined tort recovery in products cases to situations involving physical harm.
People Express Airlines operated a terminal near a rail yard operated by Consolidated Rail Corp. A chemical spill from a tank car forced evacuation of the terminal for several days. The airline suffered only lost ticket revenue and extra expenses with no physical damage to its aircraft or injury to employees. The airline sued in negligence for the interruption losses. Recovery was denied because the harm consisted solely of relational economic loss unaccompanied by physical injury.
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East River Steamship Corp. purchased turbines manufactured by Transamerica Delaval for installation in its ships. The turbines malfunctioned and caused damage only to themselves resulting in repair costs and lost charter revenue. East River sued the manufacturer in tort for the economic harm. The claim was rejected because injury to the product itself constitutes purely economic loss governed by contract rather than products liability tort law.
Prosperity Investments relied on an audit report prepared by Arthur Young & Co. for a company in which it later purchased stock. The report contained negligent errors that caused only a decline in the stock value with no physical harm to any property. Prosperity sued the auditor in negligence for the investment loss. The claim failed because third-party investors may not recover purely economic losses from negligent auditing absent a special relationship creating a duty.
No. The rule is limited to products liability cases in some jurisdictions and prevents recovery only when the loss is unaccompanied by physical injury or property damage. Independent tort duties such as those arising from professional relationships or intentional misconduct may still support recovery for purely economic losses.
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Recovery is unavailable when the loss is purely economic and stems from negligent interference with contractual relations. The plaintiff must show physical injury to person or property or fit within a narrow exception such as negligent misrepresentation by a supplier of information.
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Purely economic loss lacks any anchor in physical injury to the plaintiff or the plaintiff's property. When the same negligent act also causes personal injury or property damage the accompanying economic consequences become recoverable as part of the tort claim.
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…stated when a defective product purchased in a commercial transaction malfunctions, injuring only the product itself and causing purely economic loss. The case requires us to consider preliminarily whether admiralty law, which already recognizes a general theory of liability for negligence, also incorporates principles of products…