RUTHE L. CLAYTON, APPELLANT,
v.
STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, AND STATE FARM FIRE AND CASUALTY COMPANY, APPELLEES
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Clayton sued State Farm for fraud in the inducement and breach of fiduciary duty, claiming State Farm misrepresented that damaged vehicles would be repaired with original equipment manufacturer (OEM) parts of "like kind and quality" when State Farm actually intended to use inferior non-OEM parts. The court affirmed dismissal under the economic loss rule, finding that Clayton's fraud allegations were inseparable from the contract's core terms.
The court held that the economic loss rule bars Clayton's fraud in the inducement and breach of fiduciary duty claims because her allegations of pre-contract misrepresentation are inseparable from the alleged breach of the contract itself, and therefore do not constitute an independent tort action.
[1] The economic loss rule bars tort claims between parties to a contract when the alleged damages are not independent of the breach of contract.
[2] Fraudulent inducement claims are barred by the economic loss rule when the alleged misrepresentation is inseparable from the essence of the parties' agreement.
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Join FLexlaw to unlock all legal intelligence“The economic loss rule bars causes of actions in tort between parties to a contract unless there is proof of personal injury or property damage independent of a breach of the contract.”
States the foundational principle of the economic loss rule that applies to bar tort claims between contracting parties.
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Join FLexlaw to unlock all legal intelligenceClayton purchased an insurance policy from State Farm based on pre-contract representations that insured vehicles damaged in accidents would be repair…
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FLETCHER, Judge.
“Ruthe L. Clayton [Clayton], plaintiff in the trial court, appeals the dismissal of her claims for fraud in the inducement and breach of fiduciary duty against State Farm Mutual Automobile Insurance Company and State Farm Fire and Casualty Company [State Farm]. We affirm.
Clayton’s lawsuit challenges State Farm’s practice of specifying the use of replacement parts manufactured by sources other than the original vehicle manufacturer in the repair of insured vehicles damaged in automobile accidents. Her six-count complaint, which included inter alia counts for breach of contract, fraud in the inducement and breach of fiduciary duty, alleges that she was induced into purchasing a State Farm policy by pre-contract representations made by State Farm to its insureds that their vehicles would be repaired with parts of “like kind and quality” to those that were damaged, thereby restoring their automobiles to their condition prior to the damage. Clayton claims that notwithstanding these representations State Farm never intended to use original equipment manufacturer (OEM) parts in the repair of insured vehicles, but instead intended to defraud the insureds by requiring the use of inferior quality non-OEM parts. She further contends that State Farm’s agents breached a fiduciary duty owed to the insureds by their failure to advise them of State Farm’s intentional misrepresentations regarding the use of inferior replacement parts. The trial court granted State Farm’s motion to dismiss the counts for fraud in the inducement and breach of fiduciary duty on the ground that they were barred by the economic loss rule.
The economic loss rule bars causes of actions in tort between parties to a contract unless there is proof 'of personal injury or property damage independent of a breach of the contract. See Casa Clara Condominium Ass’n v. Charley Toppino & Sons, Inc., 620 So. 2d 1244 (Fla.1993); AFM Corp. v. Southern Bell Tel. & Tel. Co., 515 So. 2d 180 (Fla.1987); Florida Power & Light Co. v. Westinghouse Elec. Corp., 510 So. 2d 899 (Fla.1987). Clayton is correct that an exception has been made for causes of actions based on torts which are independent of the contractual breach, such as fraudulent inducement. However, where the alleged fraudulent misrepresentation is inseparable from the essence of the parties’ agreement, the economic loss rule still applies. See Straub Capital Corp. v. L. Frank Chopin, P.A., 724 So. 2d 577 (Fla. 4th DCA 1998); Hotels of Key Largo, Inc. v. RHI Hotels, Inc., 694 So. 2d 74 (Fla. 3d DCA), rev. denied, 700 So. 2d 685 (Fla.1997). Clayton’s allegations of pre-contract misrepresentation here are directly related to the alleged breach (State Farm’s failure to use parts of “like kind and quality” as required by the contract), and, therefore, do not support an independent tort action.
Affirmed.
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Reese v. JPMorgan Chase & Co., 686 F. Supp. 2d 1291 (S.D. Fla. 2009)
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Excess Risk Underwriters, Inc. v. Lafayette Life Ins., 208 F. Supp. 2d 1310 (S.D. Fla. 2002)
Previewing 3 of 6 citing cases — full citator treatment, depth of discussion, and citing context are member features.
Join FLexlaw to unlock all legal intelligenceAuthorities Cited
- AFM Corp. v. S. Bell Tel. & Tel. Co., 515 So. 2d 180 (Fla. 1987)
- CASA Clara Condo. Ass'n, Inc. v. Charley Toppino & Sons, Inc., 620 So. 2d 1244 (Fla. 1993)
- Fla. Power & Light Co. v. Westinghouse Elec. Corp., 510 So. 2d 899 (Fla. 1987)
- Hotels OF KEY Largo, Inc. v. RHI Hotels, Inc., 694 So. 2d 74 (Fla. 3d DCA 1997)
- Straub Cap. Corp. v. L. Frank Chopin, P.A., 724 So. 2d 577 (Fla. 4th DCA 1998)