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A restaurant owner that contracted with a general contractor to remodel a restaurant was permitted by the Supreme Court of Idaho to file a negligence-based law suit directly against an electrical subcontractor that it alleged was responsible for defective installation of a neon sign that caused a fire and resulting property damage causing financial loss.  In Brian and Christie, Inc. v. Leishman Electric, Inc., 244 P.3d 166, 150 Idaho 22,244 (2010), the trial court dismissed the restaurant owner’s complaint that alleged negligence, holding that the economic loss doctrine barred the claim.  This was reversed on appeal with the court concluding that the doctrine most appropriately applies to products liability cases, defective personal property cases, and defective real property cases, but that it does not apply in instances where the mater at issue is the rendition of services.

Comment:  The reasoning of the court in this case fails to address a fundamental issue, that being whether the electrical subcontractor owed any independent duty to the project owner.  Without such a duty, there could be no damages awarded against it to the owner for the fire damages.  Unfortunately, the court completely skips that important step in a necessary analysis and instead jumps straight to the following conclusion:  “In this case, [Restaurant owner] alleges that Subcontractor negligently performed services in connecting the neon signs and transformers to electrical power and that such negligence caused a fire that damaged the restaurant and its contents.  Such claim is not barred by the economic loss doctrine.”  That is quite a conclusion to reach without first addressing whether, how and why the subcontractor owed any duty to the owner.  It had no contractual duty since its only contractual relationship was with the general contractor.  It is difficult to understand what common law duty of care the subcontractor could owe the owner since it did not act in a way to directly damage the person or property of the owner, but merely indirectly caused financial loss by way of a fire that started as a result of work the subcontractor negligently performed for the general contractor.  One can only hope that a future case on the question of economic loss will make its way to the Idaho Supreme Court so that it can more carefully analyze what independent duty of care excuses parties from the otherwise applicable economic loss doctrine.

About the author: Article written by J. Kent Holland, Jr.,  a construction lawyer located in Tysons Corner, Virginia,  with a national practice (formerly with Wickwire Gavin, P.C. and now with Construction Risk Counsel, PLLC) representing design professionals, contractors and project owners.  He is founder and president of a consulting firm, ConstructionRisk, LLC, providing consulting services to owners, design professionals, contractors and attorneys on construction projects.  He is publisher of ConstructionRisk.com Report and may be reached at Kent@ConstructionRisk.com or by calling 703-623-1932.  This article is published in ConstructionRisk.com Report, Vol. 13, No.9 (Dec 2011).

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