The Institutes

Idaho Federal Court Rejects Suit Against Defective Water Supply Line Manufacturer Based On Economic Loss Doctrine

 Friday, September 9, 2022

 Matthiesen, Wickert & Lehrer, S.C.

Chief District Judge David C. Nye boasts an interesting and unique political distinction associated with his nomination and appointment to the federal bench in Idaho -- Nye was sworn in as a U.S. District Judge for the District of Idaho on August 1, 2017, after having been nominated by both President Barack Obama and President Donald Trump. But this distinction is not the only thing making Judge Nye unique.

On August 4, 2022, he issued an order which creates significant subrogation obstacles when defective products are involved and breaks from the majority rule followed across the country that a strict product liability cause of action is allowed when a defect in one component part of a home causes damage to other component parts of the residence without damaging persons or property separate from the structure.

The Economic Loss Doctrine (ELD) is a court-developed doctrine that has been adopted by a majority of U.S. states and jurisdictions. In its traditional form, it bars recovery in tort for strictly economic losses arising from a contract.

When two parties have a contractual relationship, the ELD prevents one party from bringing a negligence action against the other over the first party’s failed expectations.

The classic application of the ELD involves a claim for loss of the value of a product (e.g., automobile, agricultural tractor, industrial machine, etc.) which has been destroyed or seriously damaged due to the failure of the product itself (including a defect in design or manufacture).