Limitations on Liability for Economic Loss Caused by Negligence: A Pragmatic Appraisal

Abstract

Under the prevailing rule in America, a plaintiff may not recover for his economic loss resulting from bodily harm to another or from physical damage to property in which he has no proprietary interest. Similarly, a plaintiff may not recover for economic loss caused by his reliance on a negligent misrepresentation that was not made directly to him or specifically on his behalf. Thus, the insurer of A's life has no action against one who negligently causes A's premature death; the employer has no action for sums that he has had to pay because defendant has negligently injured his employee; a ship's time charterer has no action for loss of the ship's use while it is laid up for repairs necessitated by defendant's negligence; and a workman has no action for loss of wages during a layoff resulting from damage negligently caused to his employer's plant. Turning to the field of misrepresentation, we find that an accountant who prepares an audit for his client is not liable to one who advances credit to the client in reliance on the audit and suffers loss because the accountant negligently represents the client's financial position to be far better than it is.