Oregon Court of Appeals puts limits on the "economic loss" doctrine

The Oregon Court of Appeals this week clarified the scope of the "economic loss" doctrine, an important limitation on the type of damages recoverable for negligence.  Under Oregon's economic loss doctrine, a plaintiff cannot recover damages for purely economic losses resulting from defendant's negligence, unless the defendant owes some special duty to plaintiff beyond the common law duty to exercise reasonable care.   So, for example, an employer cannot sue a party for the loss of the services of its employee based on that party's negligent injury of the employee; in such a case, the employer suffered no injury to its person or property, so its losses are purely economic and cannot be recovered from the tortfeasor.

The issue the Court of Appeals addressed in Harris v. Suniga was how to define "economic losses."  In that case, the plaintiffs were subsequent purchasers of an apartment building, and the defendant was the builder whose negligent construction allegedly resulted in extensive dry rot.  Because plaintiffs had no contractual relationship with the builder, they could not sue for breach of contract.  Instead, they made a claim for negligence.  The defendant sought to dismiss based on the economic loss doctrine, arguing that plaintiff's loss was simply a decrease in the value of their investment and therefore was not recoverable in a negligence claim.  Judge Landau, writing for the court, disagreed.  He concluded that plaintiffs' claim was based on injury to their property and was not purely economic.  On that basis, the economic loss did not bar a negligence claim and plaintiffs are entitled to proceed against the builder.