Justices address economic loss rule in 2 opinions

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In two separate rulings involving the “economic loss rule,” the Indiana Supreme Court ruled against a library seeking to hold subcontractors and an engineer responsible for negligence, and in favor of a bank in its tort claim against a title company.

In Indianapolis-Marion County Public Library v. Charlier Clark & Linard, P.C., et al., No. 06S05-0907-CV-332, the justices dealt the library a blow in its attempt to recover damages for repair costs and other fees because of a delay in the construction of the Central Library in Indianapolis. Construction was delayed after problems were discovered in the concrete used for the parking garage and foundation of the library. The library brought a lawsuit against the architect, general contractor, and various subcontractors for negligence. The library settled with the architect and general contractor, with whom it had a contractual relationship.

The trial court granted the remaining defendants’ motion for summary judgment, finding the negligence claims were barred by the economic loss rule. The Indiana Court of Appeals majority affirmed.

In the IMCPL case, the justices extensively examined the economic loss rule and held that it applies in the instant case. The library is connected with the defendants through a network or chain of contracts in which the parties allocated their respective risks, duties, and remedies, and those contracts - not negligence law - govern the outcome of the library’s claims, wrote Justice Frank Sullivan.

“From the outset of the project, the Library looked to a series of contracts to establish the relative expectations of the parties. And reliance on contract law in this regard is perhaps greater in construction projects than any other industry,  …” wrote the justice.

The Supreme Court also emphasized that the economic loss rule operates as a general rule to preclude recovery in tort for economic loss and does so only for purely economic loss. There are exceptions to the general rule, but those don’t apply in the library’s case.
But one of those exceptions does apply in the case of U.S. Bank, N.A. v. Integrity Land Title Corp., No. 17S03-1002-CV-120, which is a case of first impression. The issue is whether or not a title company, after issuing an incorrect title commitment on which the lender relied to its detriment, owes a duty in tort to the recipient to which it certified clear title to the subject real property.

The facts of this case fit within the tort of negligent misrepresentation, so applicable tort law allows U.S. Bank’s tort claim to go forward, the justices ruled.

A buyer of real property got a mortgage from lender Texcorp Mortgage Bankers, who prior to lending the money, contracted with Integrity Land Title Corp. to prepare a title commitment, close the mortgage, and provide the company with an insured first and superior mortgage lien against the subject real property. Integrity’s search uncovered no judgments against the seller of the real property, but the search failed to show a 1998 foreclosure judgment from LPP mortgage.

U.S. Bank, as successor of Texcorp’s interests, intervened in LPP’s action to foreclose the 1998 judgment lien. The bank asserted claims against Integrity of breach of contract and tort of negligent real estate closing. The trial court found Integrity wasn’t in breach of contract and not negligent because it owed no duty to U.S. Bank in tort. The two parties did not have a contract.

Justice Sullivan noted that the existence or non-existence of a contract is not the dispositive factor for determining whether a tort action is allowable where special circumstances and overriding public polices have created exceptions.

Integrity should have known that Texcorp would act in justifiable reliance on the statement in the preliminary commitment that the title was free and clear. The relationship between Integrity and Texcorp was of an advisory nature and Integrity deliberately provided specific information in response to a request by Texcorp to guide Texcorp into its transaction with a third party. Integrity also affirmatively vouched for the accuracy of the information.

 Based on this, applicable tort law allows U.S. Bank’s tort claim to go forward.


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  1. If a class action suit or other manner of retribution is possible, count me in. I have email and voicemail from the man. He colluded with opposing counsel, I am certain. My case was damaged so severely it nearly lost me everything and I am still paying dearly.

  2. There's probably a lot of blame that can be cast around for Indiana Tech's abysmal bar passage rate this last February. The folks who decided that Indiana, a state with roughly 16,000 to 18,000 attorneys, needs a fifth law school need to question the motives that drove their support of this project. Others, who have been "strong supporters" of the law school, should likewise ask themselves why they believe this institution should be supported. Is it because it fills some real need in the state? Or is it, instead, nothing more than a resume builder for those who teach there part-time? And others who make excuses for the students' poor performance, especially those who offer nothing more than conspiracy theories to back up their claims--who are they helping? What evidence do they have to support their posturing? Ultimately, though, like most everything in life, whether one succeeds or fails is entirely within one's own hands. At least one student from Indiana Tech proved this when he/she took and passed the February bar. A second Indiana Tech student proved this when they took the bar in another state and passed. As for the remaining 9 who took the bar and didn't pass (apparently, one of the students successfully appealed his/her original score), it's now up to them (and nobody else) to ensure that they pass on their second attempt. These folks should feel no shame; many currently successful practicing attorneys failed the bar exam on their first try. These same attorneys picked themselves up, dusted themselves off, and got back to the rigorous study needed to ensure they would pass on their second go 'round. This is what the Indiana Tech students who didn't pass the first time need to do. Of course, none of this answers such questions as whether Indiana Tech should be accredited by the ABA, whether the school should keep its doors open, or, most importantly, whether it should have even opened its doors in the first place. Those who promoted the idea of a fifth law school in Indiana need to do a lot of soul-searching regarding their decisions. These same people should never be allowed, again, to have a say about the future of legal education in this state or anywhere else. Indiana already has four law schools. That's probably one more than it really needs. But it's more than enough.

  3. This man Steve Hubbard goes on any online post or forum he can find and tries to push his company. He said court reporters would be obsolete a few years ago, yet here we are. How does he have time to search out every single post about court reporters and even spy in private court reporting forums if his company is so successful???? Dude, get a life. And back to what this post was about, I agree that some national firms cause a huge problem.

  4. rensselaer imdiana is doing same thing to children from the judge to attorney and dfs staff they need to be investigated as well

  5. Sex offenders are victims twice, once when they are molested as kids, and again when they repeat the behavior, you never see money spent on helping them do you. That's why this circle continues