Florida's Economic Loss Rule: What Business Owners Should Know

October 24 2026

Matthew Fornaro

Business Litigation Attorney · Coral Springs, FL

Matthew Fornaro is a Florida business law attorney serving Coral Springs, Parkland, and Broward County. He represents small businesses in commercial litigation, contract disputes, and business torts. Schedule a consultation →

Key Takeaways

Florida business law protects companies from unfair competition, contract breaches, and partner disputes.
Acting early saves time, money, and business relationships.
An experienced business attorney helps you assess risk and choose the right legal strategy.

Florida’s economic loss rule no longer blocks a tort claim just because you and the other side signed a contract. Since 2013, the rule applies only in products liability cases. If you are in a business dispute, that opens a door, but a narrow one. A negligence or fiduciary duty claim still has to stand on its own facts, and a detailed contract can make that hard.

Many articles, older court opinions and even some lawyers still describe the rule as a broad wall between contract and tort. That description is out of date. Below we explain what the rule was, what the Florida Supreme Court did to it, and how that changes the way a South Florida business should plan a dispute.

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TL;DR

Since Tiara Condominium Ass’n v. Marsh & McLennan Cos. (2013), Florida’s economic loss rule applies only to products liability cases.
A contract between the parties no longer bars a tort claim by itself, but you must still prove duty, breach and proximate cause.
Related rules often matter more in practice: the 50 percent comparative fault bar, the 2021 summary judgment standard and the seven-year statute of repose for construction claims.
Decide early whether your case is really a contract claim, a tort claim or both, because that choice shapes your evidence, your damages and your strategy.

What the economic loss rule was meant to do
What Tiara changed in 2013
Where the rule still applies
What this means for a business dispute
The 50 percent rule and your tort claim
Summary judgment arrives earlier now
Construction and real property: watch the clock
A practical checklist before you sue or respond
Our perspective
When to bring in a business litigation lawyer
FAQ
Sources

What the economic loss rule was meant to do

The economic loss rule is a court-made doctrine. It limits tort recovery when the only harm is financial: lost profits, repair costs, a deal that fell through. The idea was to keep contract law and tort law in separate lanes. If two businesses allocate risk in a contract, a court should not let one of them rewrite that deal by suing in negligence.

Over the years, Florida courts stretched the idea well past its origin in product defects. The rule came to be applied in many situations where the parties had a contract, a doctrine often called the contractual privity branch. A client who hired a consultant, an insurance broker or a contractor could find a negligence claim thrown out simply because a contract existed, even when the defendant’s conduct looked a lot like a separate wrong.

That expansion is what the Florida Supreme Court reversed.

What Tiara changed in 2013

In March 2013 the Florida Supreme Court decided Tiara Condominium Ass’n v. Marsh & McLennan Cos.. The case reached the court as a certified question from the federal Eleventh Circuit, and it involved a condominium association suing an insurance broker. The court held that the economic loss rule applies only in the products liability context. In doing so, it receded from earlier decisions that had extended the rule to bar tort claims between parties in contractual privity.

Three practical points follow from that decision:

A contract is no longer a shield by itself. A defendant cannot get a negligence or breach of fiduciary duty claim dismissed just because the parties had an agreement and the loss is financial.
Products liability is the exception. Where a product damages only itself and no other property or person is harmed, the rule still limits tort recovery.
The court warned against stretching the rule. The opinion cautions against the unprincipled extension of the doctrine, which is why older cases applying it outside products liability should be read with great care.

If you read an article that treats the rule as a general bar on tort claims in contract cases, check its date.

Where the rule still applies

The rule survives in its original home: products liability. In general terms, a buyer whose product malfunctions and damages only itself is pushed toward contract and warranty remedies rather than negligence or strict liability. If the product also damages other property or injures someone, the analysis changes.

For a small business, this matters if you manufacture, distribute or buy equipment and components. A failed commercial refrigeration unit that spoils only itself is a different problem from one that ruins your inventory. Your lawyer will want to look at what was damaged, who sold what to whom, and what the warranty says before choosing between claims.

People also search for the exceptions to the rule. After Tiara the better question is whether the case is a products liability case at all. If it is not, you do not need an exception, because the rule is not in play.

What this means for a business dispute

Most small business fights are not product defect cases. They involve a vendor who did not deliver, a partner who took money, an advisor who gave bad guidance, a contractor who cut corners. For those, the economic loss rule is generally off the table, and the real question is what claim fits the facts.

A tort claim must still be proven

Removing the rule does not create a tort claim. A plaintiff must still establish every element of the claim, including duty, breach and proximate cause. In a commercial setting covered by a detailed written contract, the duty part is often the hurdle. If the only obligation the defendant had is the one written in the contract, a court may see the dispute as a contract case in tort clothing. Where the defendant owed a separate duty, such as a fiduciary or professional duty, the tort claim has a firmer footing.

We cover how courts separate the two in breach of contract vs. business tort. For the two most common separate-duty claims, see our guides on breach of fiduciary duty and professional negligence.

Why the choice of claim matters

Pleading both contract and tort claims is common. But each carries different proof, different defenses and different consequences:

Question	Contract claim	Tort claim
What defines the duty?	The agreement’s terms	A duty the law imposes, such as professional or fiduciary duty
What do you must show?	A valid contract, a breach and damages	Duty, breach, proximate cause and damages
Does comparative fault matter?	Not under the negligence statute, which governs negligence actions	Yes, in negligence actions
Where does the contract hurt you?	Its limits, notice terms and deadlines apply	It may be argued to define, and narrow, the duty owed

That table is a framework, not a prediction. The right mix depends on your documents, your facts and the specific defendant. Your contract’s remedies clauses, notice provisions and any arbitration clause should be read before anything is filed. Our overview of common causes of contract disputes for small businesses shows where these problems typically start, and the Florida contract dispute FAQ answers the basics.

The 50 percent rule and your tort claim

If you do bring a negligence claim, Florida’s comparative fault statute applies. Under section 768.81 of the Florida Statutes, a claimant found more than 50 percent at fault for his or her own harm is barred from recovering damages in most negligence actions. Medical negligence claims under Chapter 766 are carved out. This is the “51 percent rule” people search for: at 51 percent fault you recover nothing, and at 50 percent or less your recovery is reduced by your share.

The statute also directs the court to enter judgment against each party according to its percentage of fault, rather than making one defendant pay the whole loss in most negligence actions. For a business this has two consequences:

Your own conduct will be examined. Late payments, missed inspections or ignored warnings can be argued as your share of the fault.
Nonparties matter. If a vendor, subcontractor or other third party contributed to the loss, fault can be assigned to them, so the evidence about who else did what needs to be developed early.

The Florida Bar Journal has discussed the causation theory behind apportioning fault if you want the policy background. Read the statute’s definitions and exceptions closely, because they decide when the apportionment rules apply.

Summary judgment arrives earlier now

Losing the economic loss rule as a defense does not mean a tort case will sail to a jury. Effective May 1, 2021, Florida amended Rule 1.510 to follow the federal summary judgment standard. A court must grant the motion when the movant shows there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law, and it must state its reasons on the record. The rule also sets a response deadline: a non-movant must serve a response with its supporting factual positions no later than 40 days after the motion is served.

The practical effect is that a party who cannot point to evidence for its claim or defense can lose before trial. For a business plaintiff, that means your emails, invoices, change orders and witness statements need to be organized before you file, not after the defendant moves. We explain the timeline in how to use the 40 day rule to win summary judgment.

Construction and real property: watch the clock

Construction disputes are where economic loss questions come up most often, because a building defect usually produces financial damage and a chain of contracts. Two cautions apply.

First, the claim may be a contract claim, a negligence claim or a statutory claim, and the right choice depends on who you contracted with. A property owner, a general contractor and a subcontractor each have different relationships.

Second, Florida’s statute of repose can end a claim regardless of when you find the problem. Under section 95.11(3)(b), actions based on the design, planning or construction of an improvement to real property must be started within seven years after the earliest of the certificate of occupancy, certificate of completion or abandonment of construction. That is a hard outer limit, not a discovery window, in most situations. People often search for the “7 year property law in Florida” and mean this rule. Statutes change, so have a lawyer confirm the version that applies to your project and dates.

A practical checklist before you sue or respond

Gather the contract and every amendment. Look for limitation of liability clauses, notice and cure periods, attorney’s fee provisions and arbitration or venue clauses.
Identify any duty beyond the contract. Was the other side a fiduciary, a licensed professional or someone who held your money or confidences?
Map the money. Separate direct losses from consequential ones, and note whether any property other than the item in dispute was damaged.
List everyone who contributed to the loss. This includes vendors, contractors and advisors, because fault can be apportioned in negligence cases.
Calendar the deadlines. Limitations periods, repose periods and contractual notice windows can differ.
Preserve evidence. Emails, texts, photos, invoices and project logs will carry a summary judgment motion or defeat one.
Consider the forum. Litigation, arbitration and mediation each have different costs and speed.

Our perspective

When clients call us about this issue, the first thing we do is stop them from asking whether the economic loss rule applies. In most commercial cases it does not, and the better question is what story the documents tell. A client with a clean contract and a clear breach is usually best served by a focused contract claim. Adding a tort count because it sounds stronger can raise the cost, invite a motion and distract from the best facts.

We add tort or fiduciary claims when the facts show a duty that exists outside the four corners of the agreement: a partner who diverted funds, an advisor who gave advice in a professional capacity, a party who misrepresented what it was selling. Those claims can matter, and after 2013 they are not automatically dead on arrival.

We also push clients to prepare as if summary judgment will be filed early, because under the current rule it can be. A dispute that is organized from day one is cheaper to run, easier to settle and more credible in front of a judge. And sometimes the best business answer is mediation or arbitration, so we say so early.

— Matthew

When to bring in a business litigation lawyer

Talk to counsel before you send a demand letter, sign a settlement, or answer a complaint. Choosing between contract and tort theories, and between court and arbitration, is hard to undo later. Our business litigation practice represents South Florida small businesses and entrepreneurs in these disputes, and we also handle arbitration and mediation when a negotiated outcome serves you better. If the dispute involves a building project, see our construction litigation page. Fees depend on the scope and complexity of the matter, and we can discuss billing structure when we talk.

FAQ

Does the economic loss rule still exist in Florida?

Yes, but only in products liability cases. The Florida Supreme Court limited it to that setting in its 2013 Tiara decision. Outside products liability, it does not bar a tort claim simply because the parties had a contract or the loss was purely financial.

Can I sue in tort and for breach of contract at the same time?

Often you can plead both, but each claim must be supported by its own facts. A tort claim needs a duty, a breach and proximate cause. If the only duty is the one written in your contract, the tort count may not survive. A lawyer should review your documents before you decide.

What is the 51 percent rule in Florida?

It is the common name for the modified comparative fault bar in section 768.81. In most negligence actions, a claimant found more than 50 percent at fault for his or her own harm recovers nothing. Medical negligence claims under Chapter 766 are excluded.

What is the new summary judgment rule in Florida?

Since May 1, 2021, Florida courts apply the federal summary judgment standard under Rule 1.510. A court must grant the motion if there is no genuine dispute of material fact and the movant is entitled to judgment as a matter of law. A non-movant’s response is due no later than 40 days after the motion is served.

Does the economic loss rule apply to construction defect claims?

Not as a general matter, since the rule is limited to products liability. Construction claims turn instead on your contracts, the duties each party owed, and deadlines such as the seven-year statute of repose in section 95.11(3)(b). Have a lawyer check which version of the statute covers your project.