In Commercial Painting Inc. v. The Weitz Company LLC, Case No. W2019-02089 (Sept. 29, 2023) The Tennessee Supreme Court limited the application of the ?economic loss? doctrine to only certain product liability cases, rejecting the Court of Appeals’ expanded application to of this doctrine breach of services contracts.
The Court noted that the economic loss doctrine generally precludes a contracting party who suffers only economic losses from recovering damages in tort. In Tennessee, the application of this doctrine is limited to products liability cases. In this appeal, the Court considered whether the economic loss doctrine should be expanded to apply outside the products liability context.
Here, a jury awarded compensatory and punitive damages to a drywall subcontractor in a suit against a general contractor under theories of breach of contract and tort. The Court of Appeals applied the economic loss doctrine to preclude the recovery of damages in tort in a suit between sophisticated commercial entities. The intermediate court, in part, affirmed the award of compensatory damages for breach of contract, dismissed the tort claim, and reversed the award for punitive damages. The Tennessee Supreme Court held that the economic loss doctrine only applies in products liability cases and should not be extended to other claims.
Thus, the Tennessee Supreme Court has stated that commercial contracts for services that purport to exclude recovery of incidental, consequential and punitive damages may not actually exclude the recovery of such damages by the aggrieved party. The message from the Court seems to be that despite the attempts of parties to contractually limit damages and claims, parties to services contracts should pay close attention to their limitation of damages (and other contract) provisions in light of this case and make plain whether there are any circumstances such as fraud, gross negligence or negligence when the limitation of damages provision should be ignored.