In Pulver v. Kane, 2022 WL 17327182 (D. Nev. Nov. 29, 2022), a Federal District Court in Nevada upheld the economic loss doctrine to preclude a contractor from asserting tort claims against design professionals in suits seeking to recover solely economic losses arising from residential construction. Pulver Construction Company (“Pulver”) contracted with the homeowners to construct a residential home and ultimately sued the homeowners for unpaid fees.
The homeowners filed a counterclaim for construction defects, so Pulver responded by filing third-party complaints against A&E Architects, P.C. (“A&E”) and Reno Tahoe Geo Associates, Inc. (“RTGA”), a geotechnical engineer, asserting claims for breach of contract, indemnity, negligence, breach of implied warranties, and contribution. The third-party defendants moved to dismiss each of the tort claims on the basis of the economic loss doctrine.
Nevada’s economic loss doctrine holds that tort claims cannot be pursued to recover solely economic losses. Stated another way, economic losses that are incurred without personal injury or damage to the property cannot be pursued. Notably, the Supreme Court of Nevada has previously upheld the economic loss doctrine in a commercial construction context, but never in a residential context. Calloway v. City of Reno, 993 P.2d 1259 (Nev. 2000).
Pulver argued that an exception to the economic loss doctrine for claims brought by homeowners applies to claims brought by contractors as well. In Olson v. Richard, 89 P.3d 31 (Nev. 2004), the Nevada Supreme Court recognized a homeowners’ exception to the economic loss doctrine and allowed homeowners to pursue claims for economic losses for alleged defective residential construction against design professionals. The District Court acknowledged the Olson ruling, but distinguished it from the present case by noting the Olson exception applied only to homeowners, not contractors like Pulver.
Pulver next argued the tort claims should stand because the economic loss doctrine does not apply in the context of residential construction projects, but only in commercial projects, and therefore, the tort claims should be pursuable for this residential project. In considering this argument, the Court did recognize that the Nevada Supreme Court left this issue open. The Court referred to Terracon Consultants W., Inc. v. Mandalay Resort Grp., 206 P.3d 81 (Nev. 2009), which held that the economic loss doctrine precludes tort claims seeking to recover solely economic losses against construction companies and design professionals in commercial construction defect cases. The District Court found no policy distinction for commercial as opposed to residential construction, though admittedly stated that this was a prediction of the position the Nevada Supreme Court would take on this issue.
The District Court held that that the economic loss rule precluded Pulver from pursuing claims for implied indemnity and contribution because these claims sounded in tort, as they sought to recover for the design professionals’ alleged negligence. The District Court’s decision extends the reach of the economic loss doctrine in Nevada, and it will be interesting in the future to see if the Nevada Supreme Court upholds this ruling or instead limits the economic loss doctrine to commercial projects only.