The Eleventh Circuit court concluded Floridalaw was unclear regarding claims of negligence and breach offiduciary duty, and a contract dispute between an insurance brokerand a Florida condo association made its way to the state SupremeCourt for resolution following an appeal to the Eleventh Circuit inTiara Condominium Assn. Inc., A Florida Non-Profitv. Marsh & McLennan Cos. Inc., A Delaware Corp., No.09-11718 (11th Cir. 04/16/2013).

The Florida Supreme Court, in turn, stated that the applicationof the economic loss rule is limited to products liability cases inTiara Condominium Assn. Inc. v. Marsh & McLennan Cos.Inc., Fla: Supreme Court No.SC10-1022, Supreme Court of Florida, March 7, 2013.

This case is important to insurance agents and brokers doingbusiness in Florida or any other state that limits the economicloss rule to products liability. It means that an insurance brokercan be sued for its negligence even though the damages are only foreconomic losses.

Tiara Condominium Assn. (Tiara) retained Marsh & McLennan(Marsh) as its insurance broker. One of Marsh's responsibilitiesincluded securing condominium insurance coverage. Marsh securedwindstorm coverage through Citizens Property Insurance Corp.(Citizens), which issued a policy that contained a loss limit in anamount close to $50 million.

Tiara condominium tower suffered extensive wind damage from twohurricanes in September 2004. The condominium association claimedthat Marsh caused part of its losses by failing to procure anadequate insurance policy for the condominium.

Related: Read “Agree to Disagree.”

In October 2007, Tiara filed suit against Marsh, alleging breachof contract, negligent misrepresentation, breach of the impliedcovenant of good faith and fair dealing, negligence and breach offiduciary duty. The trial court granted summary judgment in favorof Marsh on all claims and Tiara appealed to the Eleventh Circuit.In 2010, the appeals court concluded that summary judgmentwas proper as to the breach of contract, negligentmisrepresentation, and breach of implied covenant of good faith andfair dealing claims.

However, the appeals court did not affirm the summary judgmentgranted by the trial court on the negligence and breach offiduciary duty claims, which were based on Tiara's allegations thatMarsh was either negligent or breached its fiduciary duty byfailing to advise Tiara of its complete insurance needs and byfailing to advise Tiara of its belief that Tiara was underinsured.As to these two claims, the appeals court certified a question tothe Florida Supreme Court to determine whether the economic lossrule prohibits recovery, or whether an insurance broker fallswithin the professional services exception that would allow Tiarato proceed with the claims.

Concerning the claims for negligence and breach of fiduciaryduty, because the Eleventh Circuit concluded that Florida law wasunclear, certified the following question to the Supreme Court ofFlorida concerning Florida's application of the economic lossrule:

Does an insurance broker provide a “professional service” suchthat the insurance broker is unable to successfully assert theeconomic loss rule as a bar to tort claims seeking economic damagesthat arise from the contractual relationship between the insurancebroker and the insured?

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In certifying the question, the Eleventh Circuit noted that theSupreme Court of Florida retains the discretion to restate theissue and to answer the question in the manner it chooses. TheSupreme Court of Florida did precisely that. It restated thecertified question as follows:

Does the economic loss rule bar an insured's suit against aninsurance broker where the parties are in contractual privity withone another and the damages sought are solely for economiclosses?

Simply put, the economic loss rule is a judicially createddoctrine that sets forth the circumstances under which a tortaction is prohibited if the only damages suffered are economiclosses. The rule has its roots in the products liability arena, andwas primarily intended to limit actions in the products liabilitycontext.

Having reviewed the origin and original purpose of the economicloss rule, and what has been described as the unprincipledextension of the rule, the Supreme Court took the final step andheld that the economic loss rule applies only in the productsliability context. In so doing, the Florida Supreme Court moved off its prior rulingsto the extent that they have applied the economic loss rule tocases other than products liability. The Supreme Court'sexperience with the economic loss rule over time, which led to thecreation of the exceptions to the rule, now demonstrates thatexpansion of the rule beyond its origins was unwise and unworkablein practice. By this opinion, the Supreme Court returned theeconomic loss rule to its origin in products liability.

Because we now limit the application of the economic loss ruleto cases involving products liability, it is not necessary for usto decide whether the economic loss rule exception forprofessionals applies to insurance brokers. Based on the foregoing,the Supreme Court answered the rephrased certified question in thenegative and held that the application of the economic loss rule islimited to products liability cases. Having answered the rephrasedcertified question, it returned this case to the Eleventh CircuitCourt of Appeals.

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By answering the question in the negative, the Supreme Court ofFlorida limited the application of the economic loss. Based on theopinion, the Supreme Court of Florida the Eleventh Circuit vacatedthe district court's grant of summary judgment in favor of Marsh onTiara's claims for negligence and breach of fiduciary duty andremanded those claims for the district court to reconsider in lightof the Supreme Court of Florida's opinion.