A defendant who has breached his duty of care to avoid the risk of economic injury to particularly foreseeable plaintiffs may be held liable for actual economic losses that are proximately caused by its breach of duty. In this context, those economic losses are recoverable as damages when they are the natural and probable consequence of a defendant's negligence in the sense that they are reasonably to be anticipated in view of defendant's capacity to have foreseen that the particular plaintiff or identifiable class of plaintiffs is demonstrably within the risk created by defendant's negligence.
A fire began in defendant railroad’s freight yard when ethylene oxide manufactured by defendant company escaped from a tank car and ignited. Plaintiff's airline business was evacuated for 12 hours as a result of defendants' alleged negligence. Plaintiff claimed damages for economic losses resulting from the evacuation. The trial court granted defendants’ summary judgment motions on the ground that absent property damage or personal injury, economic loss was not recoverable in tort. The appellate court reversed the trial court’s judgment. On defendants’ appeal, the state supreme court modified and affirmed.
Was defendant's negligent conduct that resulted in purely economic losses, unaccompanied by property damage or personal injury, compensable in tort?
A cause of action had been established considering the proximity of plaintiff’s business to defendant railroad’s freight yard; the obvious nature of plaintiff's operations and foreseeability of economic losses resulting from an accident and evacuation; defendants' actual or constructive knowledge of the volatile properties of ethylene oxide; and the existence of an emergency response plan prepared by some of defendants. The recovery of economic damages was well-grounded in traditional tort principles and flowed from well-established exceptional cases that were philosophically compatible with the decision.