Wade Clark Mulcahy LLP

For construction defect actions in Pennsylvania, the Economic Loss Doctrine and Gist of the Action Doctrine are often brought as defenses against tort claims. The Economic Loss Doctrine bars Plaintiffs from attempting to recover for a tort theory such as negligence when a contract action is perfectly suited to provide an adequate recovery for loss. So, contractors would have a defense to Plaintiffs’ claims by stating that the claims were better suited for a breach of contract claim than a negligence claim. Prior to Johnson v. Toll Brothers, Plaintiffs had a consistent rebuttal, as Pennsylvania will not find that the economic loss doctrine barred claims if damage occurred to “other property”, other than the product at issue. For construction cases, Plaintiffs would argue that defective items in a home, such as a door, would cause damage to other parts of a house, by say the door allowing in water damaging the floorboards.

But, in Johnson v. Toll Brothers, the Superior Court evaluated a case in which defective windows caused water to leak into the house, damaging the interior of the home. The water damaged the floor, drywall, and nearby doorframes. The owners of the home, Lee and Victoria Johnson brought claims against the builders of the home, Toll Brothers Inc. and their subcontractors, including the window subcontractor Andersen Windows, alleging negligence and products liability claims. The Windows moved for summary judgement on the economic loss doctrine, stating that the claim was better suited for breach of contract claims. The Johnsons countered stating that the windows leaking caused damage to “other property”, specifically the other parts of the home.

The Superior Court held that a residence “is akin to a single product that is the sum of its component parts”. When a home is sold, it is sold as one product to the purchaser. So, any damage caused by a part of the home solely damages the home itself, and that additional damage does not count as “other property” to avoid the economic loss doctrine.  Therefore, this common defense from Plaintiffs is significantly less effective, resulting in greater success with an economic loss doctrine, making claims by a subcontractor being more likely to be dismissed.