Monday, September 12, 2011
Kentucky Adopts the Economic Loss Rule
In Giddings & Lewis, Inc. v. Industrial Risk Insurers, 2011 WL 2436154 (
2011), the Kentucky Supreme Court adopted the “Economic Loss Rule.” Under this rule, claims for economic loss that are based in tort are barred, it being the law of contracts that should address the allocation of risk. Decided in the context of the malfunction and destruction of a piece of custom machinery that had functioned for many years (and well beyond the warranty period), the decision’s effect is that there could be no claim against the manufacturer for claims arising in tort such as implied warranty and strict liability. Ky.
It remains to be seen whether and how this rule will be applied in the context of consumer products.