For some claims, the economic loss doctrine can be a roadblockto subrogation. Exploring exceptions to thedoctrine can provide subrogation professionals with the tools tonavigate their way to recovery. An economic loss refers to afinancial loss and damages suffered by a person or entity, whicharise from a defect in the qualitative nature of a product, serviceor improvement. Generally, an economic loss is observed on assetsrather than physical injury to a person or entity.

Illinois economic loss doctrine or the Moormandoctrine

The doctrine sets out to bar recovery in tort for purelycontractual losses or frustrated economic expectations between twocontracting parties. Under the economic loss doctrine or theMoorman doctrine as it is known in Illinois, recovery for solelyeconomic losses in relation to a product may not be had upon thetort theories of negligence or strict liability.

In Moorman, the plaintiff discovered a crack in a grain storagetank manufactured by the defendant. The damages were limited to thestorage tank itself, and the plaintiff sought recovery in tort forthe cost of repair and loss of use of the tank. The IllinoisSupreme Court affirmed the dismissal of the tort claim, holdingthat a plaintiff may not recover in tort for solely economiclosses.

The basic rationale behind the holding in Moorman and numerouscourts since is that contract law is designed to remedy lossesrelating to “disappointed expectations due to deterioration,internal breakdown or non-accidental cause, whereas causes ofaction in tort are suited for personal injury or property damageresulting from a sudden or dangerous occurrence…”

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