The Law

"B class="lgbold">Plumber in the Hot Seat by Ron Davis An explosion at a shopping center in the Phoenix, AZ, area has put the plumbing contractor responsible for the calamity on the hot seat. The explosion occurred after the contractor performed gas-line work for one of the center’s tenants. Damaged in the explosion were significant portions of the shopping center structure. But no one was injured. The shopping center carried property and business-interruption insurance, and the insurer fully compensated the center’s owner by paying him $1.1 million for the damage that occurred. The insurer then sued the plumbing contractor, charging him with negligence and seeking to recover the amount paid to the center’s owner. The plumbing contractor responded by citing the “economic-loss rule.” That rule applies in cases where contracts are violated rather than in cases of wrongful deeds, or torts. And its application can offer some degree of protection against certain liability lawsuits. The insurer replied that the economic-loss rule does not pertain to this instance. That’s because, the insurer explained, the plumbing contractor’s negligence went beyond simply causing physical damage to the tenant’s gas lines. Instead, the insurer noted, the damage was spread over the entire shopping center, rather than merely damages confined to the premises leased to the tenant. An Arizona court decided in favor of the tenant, however, by applying the economic-loss rule. The judge explained that the damage to the shopping center building was not “qualifying property damage for the purpose of bringing a negligence claim.” The court based its finding on previous court rulings that bar compensation in a defective-construction context when neither personal injury nor damage to personal property occurs. The insurer appealed that decision. An Arizona court reversed the lower court, pointing out that the plumbing contractor had a duty, “separate from any contractually assumed obligation, to exercise reasonable care in any work undertaken. This duty included the specific duty to take precautions to avoid dangerous gas explosions. Insofar as [the plumbing contractor] breached that duty—a factual question that remains to be determined—it is liable for the actual damages that were caused.” (Valley Forge Insurance Co. v. Sam’s Plumbing, LLC, 2009 WL 723347 [Ariz.App.Div. 2]) Decision: April 2009 Published: April 2009