Attorney At Law Magazine Vol 5 Issue 10 - Page 10

Insurance Defense Will Arizona’s Economic Loss Doctrine Limit or Expand Construction Defect Claims? By Adam B. Campbell R ecently, the Arizona Supreme Court sought to clarify Arizona’s version of the economic loss doctrine. Sullivan v. Pulte Home Corp., No. CV-12-0419-PR, 2013 WL 3929151 (July 31, 2013). The Sullivans purchased a home in 2003 that Pulte had constructed and sold in 2000 to the original purchasers. In 2009, the Sullivans noticed problems with a retaining wall that an engineer confirmed had been built defectively. The Sullivans sued Pulte on claims of consumer fraud, fraudulent concealment, negligence, negligent nondisclosure, negligence per se, negligent misrepresentation, and breach of implied warranty. The trial judge dismissed the consumer fraud and fraudulent concealment claims because Pulte made no representations to the Sullivans. The court also dismissed the breach of implied warranty claim because the statute of repose period had passed. The trial court held that the economic loss doctrine barred the remaining tort claims. The court of appeals remanded, holding that the doctrine did not bar the tort claims because the Sullivans did not contract with Pulte. Reaffirming its application of the economic loss doctrine in Flagstaff Affordable Hous. Ltd. P’ship v. Design Alliance, Inc., 223 Ariz. 320, 223 P3d. 664 (2010), the Arizon a Supreme Court in Sullivan reiter- ated that the doctrine precludes tort recovery for pecuniary damage only when a product or property is the subject of a contract between the litigating parties. The court declined to extend the doctrine to non-contracting parties such as Pulte and the Sullivans, finding that limiting the doctrine to contractAdam Campbell is a partner in the law firm of Rai & Barone, P.C. His firm represents clients in the practice areas of construction defect litigation, specializing in subcontractor defense, general liability, business transactions, commercial litigation and insurance defense of all types. The firm has extensive arbitration, mediation and trial experience. Rai & Barone’s goal is to provide expeditious, affordable and effective representation to its clients. Adam can be reached at (602) 476-7100 or via email at adam.campbell@raibarone.com. ing parties furthers the public policies “to encourage the private ordering of economic relationships, protect the expectations of contracting parties, ensure the adequacy of contractual remedies, and promote accident-deterrence and loss-spreading.” Significantly, the Supreme Court rejected Pulte’s argument that the economic loss doctrine should bar the Sullivans’ tort claims because they could pursue a possible breach of implied warranty claim. The court reasoned that the implied warranty did not arise from an opportunity to negotiate with Pulte but rather was imputed by law. The court found that allowing tort remedies would not frustrate the purposes of the statute of repose, which applies only to contract claims. The Supreme Court chose not to grant review on the remainder of the court of appeals decision,