Legal Definitions - economic-harm rule

The economic-harm rule, also known as the economic-loss rule or economic-loss doctrine, is a principle in tort law that states a plaintiff cannot sue to recover purely monetary loss caused by the defendant, without physical injury or property damage.

For example, if a company purchases a defective product that causes them to lose money, they cannot sue the manufacturer for economic loss under the economic-harm rule. However, there are exceptions to this rule, such as when the defendant commits fraud or negligent misrepresentation, or when a special relationship exists between the parties.

One way the courts have attempted to distinguish between tort and warranty is by using the economic-harm rule. This common law doctrine has achieved the status of the economic-loss doctrine in some states, meaning that once loss is defined as economic, it cannot be recovered in negligence or strict tort, and perhaps not in fraud or misrepresentation.

For instance, if a contractor builds a house with a faulty foundation, and the homeowner suffers economic loss due to the cost of repairs, they cannot sue the contractor under the economic-harm rule. However, if the contractor knowingly concealed the foundation's defects, the homeowner may be able to sue for fraud or negligent misrepresentation.

Overall, the economic-harm rule limits a plaintiff's ability to recover purely monetary loss in tort law, but there are exceptions to this rule in certain circumstances.