Important New "Economic Loss" Case in Colorado

In Engeman Enterprises, LLC v. Tolin Mechanical Systems, the Colorado court of appeals rejected a tort claim by one party to a contract against the other party when ammonia led to an explosion. Held the court:

Finally, and perhaps most importantly, the fact that the parties may have entered into a contract that would limit consequential damages for this injury is persuasive evidence for application of the economic loss rule, as it demonstrates that the parties could have had a remedy in contract for such damages had they chosen not to contractually limit such damages. The mere fact that such damages may have been contractually limited does not allow a party to avoid application of the economic loss rule.

However, the court preceded that holding with this: "plaintiff could have alleged that defendant committed willful and wanton breach of contract, thus potentially defeating the limitation-of-liability clause and allowing plaintiff to recover the full measure of consequential damages under the contract." (underscoring added). But isn't that an entirely different evidentiary burden? In effect, the court held that the economic loss rule applies whenever a plaintiff could have done something differently on a contract claim in litigation, but that is a radical extension of the economic loss rule which swallows the exception to contract-only remedies in cases when an independent tort duty of care would othereise exist but for the court's forward-to-the-past hypothetical. What do you think?

Comments

[Gary Benson]

Randy, as the attorney who argued the case for Engeman I couldn't agree more. Colorado courts are taking service contracts and using the boilerplate language on the back of these agreements to kill tort recovery. This is really quite amazing.

[Ricardo Barrera]

Gary, will you petitioning for cert?

[Gary Benson]

Absolutely Ricardo