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At least in cases involving traditionally compensable forms of injury - like physical harm to person or property - the court presumes the defendant owed the plaintiff a duty of care and then asks whether the circumstances justify a departure from that usual presumption. In Rowland v. Christian, the California Supreme Court identified several factors that, among others, may bear on that question: (1) the foreseeability of harm to the plaintiff, (2) the degree of certainty that the plaintiff suffered injury, (3) the closeness of the connection between the defendant's conduct and the injury suffered, (4) the moral blame attached to the defendant's conduct, (5) the policy of preventing future harm, (6) the extent of the burden to the defendant and consequences to the community of imposing a duty to exercise care with resulting liability for breach, and (7) the availability, cost, and prevalence of insurance for the risk involved. At core, though, the inquiry hinges not on mere rote application of these separate so-called Rowland factors, but instead on a comprehensive look at the sum total of the considerations at play in the context before the court.
Plaintiff businesses brought a negligence claim against Southern California Gas Company (SoCalGas) for purely economic loss resulting from a massive, months-long natural gas leak. The trial court overruled SoCalGas’ demurrer. The Court of Appeal granted SoCalGas’ petition for a writ of mandate and directed the trial court to sustain SoCalGas’ demurrer without leave to amend. The Court of Appeal concluded that without a special relationship between the parties arising from a transaction, California law did not permit recovery for the purely economic losses sought by plaintiffs.
Did the Court of Appeal err in finding that without a special relationship between the parties arising from a transaction, California law did not permit recovery for the purely economic losses sought by plaintiffs?
The Supreme Court concluded that a proper assessment of competing considerations in light of its precedent suggests, and the extent of consensus across other jurisdictions confirms, that claims for purely economic losses suffered from mere proximity to an industrial accident create intractable line-drawing problems for courts. So such claims are best not treated as compensable in negligence. Liability in negligence for purely economic losses is the exception, not the rule. The Supreme Court saw no workable way to limit geographically who may recover purely economic losses. Without one, the dangers of indeterminate liability, over-deterrence, and endless litigation are at their apex.