PA’s Economic Loss Rule Further Defined

Pennsylvania does not allow negligence claims against a party that result solely in economic damages. In 2005 the Pennsylvania Supreme Court provided an exception to this general rule in its Bilt-Rite Contractors, Inc. v. The Architectural Studio case which adopted the position that if an entity, in the course of its business, profession or employment, or in any transaction in which it has a pecuniary interest, supplies false information for the guidance of others in their business transactions, that entity is subject to liability for pecuniary loss caused to another which justifiably relies upon the information.  In Bilt-Rite an architect represented that portions of the project could be constructed through the use of normal and reasonable construction means and methods.  After being awarded the contract, the contractor discovered that special construction methods were necessary resulting in increased costs.  In Bilt-Rite, the contractor was entitled to recover its additional costs against the architect because of the false representations.

Subsequently in 2009, the Pennsylvania Supreme Court in Excavation Technologies, Inc. v. Columbia Gas Co., added further clarification on how narrow the exception was.  In that case a contractor brought suit against Columbia Gas for improperly locating and failing to mark gas lines in response to a Pa. One Call request.  The Court, recognizing that the economic loss doctrine precludes recovery of economic damages in a negligence action, turned to the exception set out in Bilt-Rite and quickly found that it did not apply because unlike an architect, a professional in the business of providing information, Columbia Gas was not in the business of supplying information for pecuniary gain.  It found that the relationship between Columbia Gas and a contractor bears no resemblance to the relationship discussed in Bilt-Rite.

This distinction was recently reinforced in Elliott-Lewis Corp. v. Skanska USA Building, Inc., a Federal Court case in the Eastern District of Pennsylvania.  In that case, an architect attempted to join into a law suit a company that was retained to balance the HVAC system.  The architect alleged that the balancing company supplied inaccurate flow data upon which the architect relied.  This information was relevant because the HVAC system as installed was not functioning properly and the architect was attempting to rectify the situation. The Court found that a balancing company is distinctly different than an architectural firm.  The balancing company was retained to balance the HVAC system and not to provide information.  In reaching this distinction, the Court focused on the fact that the Bilt-Rite decision provided a very narrow exception that only extended to a design professional and that Bilt-Rite cannot be extended by implication to a company that is not in the business of “supplying information”.

It is interesting to note that in the same case a pump manufacturer and the manufacturer’s representative were also erroneously dismissed even though the architect alleged that the information they provided on the functionality of certain pumps was incorrect, information on which the architect relied in designing the overall HVAC system. Again, the Court’s found that these entities are not generally in the business of providing information but are in the business of selling pumps.

The take-away from these recent cases is that entities in the construction arena, unless they are licensed professionals such as design/engineer consultants, may still take advantage of the economic loss doctrine and be shielded from claims in negligence seeking pecuniary damages. The doctrine will not however shield them any contractual liability. Contact Dave Raves at dr@mbm-law.net or 412.242.4400 with any questions.

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