Economic Loss In New York Construction Litigation

This article was originally published on March 7, 2011.

The economic loss doctrine preserves the basic distinction between tort and contract in construction litigation. A construction project involves complex relationships between numerous parties, such as the owner, architect, engineer, contractor, subcontractors and material suppliers. All of these separate relationships are usually governed by written contracts that define the parties' obligations and expectations, including their bargained-for economic risk. It is the parties' expectancy interest in these contracts that forms the basis for the economic loss doctrine, which provides that recovery for purely "economic loss" is limited to a contractual remedy. Conversely, the doctrine holds that absent personal injury or property damage, one may not recover for purely economic loss under a theory of negligence.¹