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Construction Or Design Defect? The Answer Matters To Your Chances At Cash Recovery

Friday, March 19, 2010 01:56 am


When suing for economic damages thanks to a disappointing project outcome, you must sue someone you have a contract with. That's the bare bones of the economic loss rule, which distinguishes between damages that arise from contractual obligation and those that stem from an implied duty (i.e., in tort) -- and bars recovery for the latter.

However, an Arizona Court of Appeals recently ruled that the economic loss doctrine did not bar recovery in tort on a defective design claim where the architect had a duty to skillfully render its professional services. The doctrine "does not foreclose a cause of action for professional negligence against an architect, even though the claim seeksonly economic damages," the court explained.

Construction defects: Collect from contract parties only

Historically, Arizona courts have not allowed a party to recover in tort for economic losses in construction defect disputes -- that is, cases involving defects in a building's physical construction, such as foundation cracks, improper wiring and inadequate beam support. For instance, in Carstens v. City of Phoenix, 2003 Ariz. App. Lexis 145 (Sept. 9, 2003), the rule barred a negligence claim against the City of Phoenix, whose inspectors had failed to discover a building's code violations and structural defects.

The rule didn't prevent the owners from recovering losses, it just restricted them to suits against those contractually liable, the court explained. Understood in that context, the economic [...]

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