The economic loss rule provides there can be no recovery in tort when the only damages alleged are for economic loss. In other words, a plaintiff who has sustained an economic loss, but has not sustained any injury to person or property is limited to recovery in contract.

In Blockwell Realty LLC v. J.D. Kitton, Inc., plaintiff, an owner of a building located in Huntington, New York, commenced an action to recover damages for “loss of income” against defendant-tenant (an owner of a wine/chocolate lounge), after the property was damaged by a fire on April 19, 2011.  Plaintiff’s claim for loss of income claim sought rental income for a third floor residential apartment that was not built at the time of filing this action.

Defendant moved for summary judgment, maintaining plaintiff’s action was barred by the economic loss rule since plaintiff did not allege any damages regarding personal injury or any property. In granting defendant’s motion, the court found the economic loss rule barred plaintiff’s recovery for damages was based on rental income for a third floor residential apartment that was not built at the time plaintiff commenced this action.

The economic loss rule is a helpful tool for defense attorneys in evaluating the merits of plaintiff’s allegations. In sum, even if a plaintiff can prove liability, in the event the alleged damages are not based on personal injury to a person or property, the action is subject to dismissal.

Thanks to Caroline Freilich for her contribution to this post.