For some claims, the economic loss doctrine can be a roadblock to subrogation. Exploring exceptions to the doctrine can provide subrogation professionals with the tools to navigate their way to recovery. An economic loss refers to a financial loss and damages suffered by a person or entity, which arise from a defect in the qualitative nature of a product, service or improvement. Generally, an economic loss is observed on assets rather than physical injury to a person or entity.

Illinois economic loss doctrine or the Moorman doctrine

The doctrine sets out to bar recovery in tort for purely contractual losses or frustrated economic expectations between two contracting parties. Under the economic loss doctrine or the Moorman doctrine as it is known in Illinois, recovery for solely economic losses in relation to a product may not be had upon the tort theories of negligence or strict liability.

In Moorman, the plaintiff discovered a crack in a grain storage tank manufactured by the defendant. The damages were limited to the storage tank itself, and the plaintiff sought recovery in tort for the cost of repair and loss of use of the tank. The Illinois Supreme Court affirmed the dismissal of the tort claim, holding that a plaintiff may not recover in tort for solely economic losses.

The basic rationale behind the holding in Moorman and numerous courts since is that contract law is designed to remedy losses relating to “disappointed expectations due to deterioration, internal breakdown or non-accidental cause, whereas causes of action in tort are suited for personal injury or property damage resulting from a sudden or dangerous occurrence…”