The Arizona Supreme Court applied the economic loss rule (the “ELR”) to bar a construction related claim for the first time last week.  Overly simplified, the ELR is a judge-made rule that bars many extra-contractual claims for design and construction defects when those claims seek only damages for the cost to repair or replace defective work, not damages for death, personal injury, or damage to other property.
In Flagstaff Affordable Housing Limited Partnership v. Design Alliance, Inc.  the Justices applied the ELR to deny an owner’s claim against their architect for negligent design of an affordable housing project in Flagstaff, Arizona.

Backstory of Flagstaff Affordable Housing Limited Partnership v. Design Alliance, Inc.

It started when an owner hired an architect to design an affordable housing project.  The United States Department of Housing and Urban Development (“HUD”) required the project to comply with accessibility guidelines established under the Fair Housing Act.  When the project failed to comply with those guidelines, HUD sued the owner.

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(Recent Court Decisions): An article from: Journal of Risk and InsuranceDanger lurks in construction defect market.(Red Flags): An article from: National Underwriter Property & Casualty-Risk & Benefits Management