In Safeco Ins. Co. of Ill. vs. LSP Prods. Group., 2022 US Dist. LEXIS 139566, the United States District Court for the District of Idaho (District Court) considered whether plaintiff’s tort claims against the manufacturer of an allegedly defective toilet water supply line were excluded by the economic loss rule. Defendant filed a motion for summary judgment arguing that since the supply line was part of the house when plaintiff’s policyholders purchased it, plaintiff was barred by the economic loss rule from suing in tort against the manufacturer. The district court granted the defendant’s motion for summary judgment, ruling that the supply line was part of the house, which was the subject of the transaction, at the time of its purchase. Thus, the district court held that the economic loss rule precluded plaintiff’s tort claims.
In 2012, Melissa Norris and Richard Meyers (collectively, the owners) purchased a newly built home in Eagle, Idaho. In 2016, a toilet supply line in one of the bathrooms began to leak causing water damage to the house as well as blinds, oven and dishwasher. Landlords also suffered a loss of rental income. The owners submitted a claim to Safeco Insurance Company (insurer), their property insurance company, which ultimately covered the owners’ losses.
The insurer brought a subrogation action against LSP Products Group, Inc. (LSP), the manufacturer of the water supply line, which the insurer claims was defective and caused the water leak. Specifically, the insurer alleged that a plastic fitting was faulty designed, making it susceptible to breakage during normal and intended use of the product. The insurer’s complaint contained charges of strict liability, negligence and breach of warranty.
LSP filed a motion for summary judgment, arguing that the insurer’s tort claims were barred by the economic loss rule and that its warranty claim had failed in law because there was no contractual relationship between LSP and the owners. The insurer agreed to dismiss the warranty claim, leaving the court to decide one question: Did the economic loss rule exclude the insurer’s tort claims?
The district court recognized that Idaho’s economic loss rule generally prohibits recovery of economic loss in cases of strict product liability and negligence. The court also recognized that prior Idaho courts defined economic loss to include the cost of repairing and replacing defective goods that were the subject of the transaction, as well as commercial loss for inadequate value and loss result of benefits/use. Essentially, Idaho’s economic loss rule prohibits tort claims for property damage that were part of a contractual transaction, which in this case, according to LSP, was the purchase of the home.
The insurer argued that the object of the transaction was the house and not the water supply line. Specifically, the insurer argued that the small replaceable plumbing product was not integral to the whole house and therefore its tort claims should not be subject to the economic loss rule. Alternatively, the insurer argued that some of the damaged property, such as blinds, oven and dishwasher, may not have been purchased as part of the house and therefore the rule of economic loss did not apply to claims based on damage to these items. . The insurer also claimed that the loss of rental income was recoverable because these expenses were “parasitic to an injury”.
In considering whether the water supply line was part of the subject matter of the transaction, the district court referred to the Idaho Supreme Court’s finding that “the ‘object of the transaction’ is synonymous with ‘object of the contract’. “Rather than focusing on the size, purpose or functionality of the water supply line, the court simply looked at the subject matter of the contract and whether the supply line was part of the subject matter at the time of the contract. the sale. The court determined that the house was the subject of the transaction and therefore the economic loss rule applied to everything that was part of the house at the time of its purchase. Since the water supply line was part of the house when it was sold, any tort action related to the water supply line was precluded by the economic loss rule.
Further, the district court held that, although the economic loss rule does not apply to damage to property that was not the subject of the transaction, since the insurer did not provide evidence that the contents of the house, including the damaged blinds, oven and dishwasher, were purchased after the homeowners purchased the house, the court found that claims for such damage were also barred by the rule economic loss. Finally, the district court ruled that the claim for loss of rental income was barred by the economic loss rule since, under Idaho law, the definition of economic loss includes loss of business profits. a property.
This case establishes that in Idaho, tort claims by a landlord for damage to objects that are inside a property when purchased may be barred by the loss rule. economic. This case is also an important reminder that in Idaho, the economic loss rule also applies to claims for loss of rental income or profit. Subrogation professionals handling property losses in Idaho should keep this case in mind when determining whether the economic loss rule poses recovery concerns.