Lian Skaf | The Subrogation Strategist
The economic loss doctrine (ELD) has been a thorn in the side of subrogation practitioners for some time. Particularly in states that enforce it strictly, an adverse ruling based on the doctrine can sometimes be an unexpected pull of the rug from under what would otherwise be a strong subrogation case. Because of the harsh consequences that such a ruling can have, it is crucial to be aware of how the state you are handling a case in deals with the ELD and what the effects are on potential recoverability.
In Sierra Summit, LLC vs. Humphreys & Partners Architects, Nev., LLC, No. 3:25-cv-00511-MMD-CLB, 2026 U.S. Dist. LEXIS 58866 (D. Nevada), the United States District Court of the District of Nevada (District Court) addressed the effects that the ELD had on the plaintiff’s tort claims. The case involved construction of a multi-family, luxury apartment complex in Reno. Sierra Summitt, LLC (Sierra Summit) retained Humphrey & Partners Architects, Nevada, LLC (HPA) to construct the complex. Sierra Summitt claims that HPA failed to properly coordinate with contractors and timely integrate plans, which led to considerable delays in construction. The delay in construction allegedly caused significant economic harm to Sierra Summit.
Sierra Summitt filed suit against HPA in District Court, citing only economic damages based on HPA’s failure to provide services pursuant to the parties’ contract. Sierra Summit asserted claims for breach of contract, breach of implied covenant of good faith and fair dealing, negligence and gross negligence. HPA subsequently filed a motion for judgment on the pleadings for the plaintiff’s claims for breach of implied covenant, negligence and gross negligence. The court granted the defendant’s motion, holding that the ELD barred both tort claims and the claim for breach of the implied convent. The court, however, allowed the plaintiff to amend its complaint to allege its contract-based claims
Under Nevada law, non-intentional tort claims are barred if there is no personal injury or “other property” damage involved. In its motion, HPA argued that since the plaintiff only alleged economic loss with no injury or damage to other property, the ELD applies. The plaintiff countered by citing a separate duty of care owed by HPA to Sierra Summitt that should allow for negligence and gross negligence claims. It also argued that its breach of implied covenant claim was contractual in nature and, thus, proper under the ELD.
The court first dismissed the plaintiff’s arguments as to the tort claims. Although the plaintiff asserted otherwise, the court held that the damages at issue were purely economic. Furthermore, it found that the duties and obligations the plaintiff alleged were “sufficiently intertwined” with those found in their contract. Thus, the losses were properly remediable in contract and fell squarely within the rubric of the ELD.
The analysis for the plaintiff’s breach of the implied covenant of good faith and fair dealing claim was more nuanced. Although the court granted the defendant’s motion, it did so based on the manner in which the plaintiff pled the claim, rather than dismissing the claim outright. Specifically, the court looked to the plaintiff’s language of “negligence breaches” and “negligent” conduct to find that while the plaintiff labeled the claim as a contractual one, the plaintiff’s implied covenant claim it was really a tort claim cloaked as a contract claim. The court, however, allowed the plaintiff the opportunity to amend its complaint.
This case illustrates how consequential the ELD can be in a state that strictly interprets it. Because Sierra Summit only has economic damages here, they are limited to their contractual remedies. Although its entire case was not dismissed, depending on the terms of the contract, dismissal of the claim may be the ultimate impact. While there is nothing a subrogation practitioner can do to change the nature of the damages they are dealing with or the applicable law, being aware of their effects is important. Properly informing clients of these circumstances early on can save considerable time and money.
When one of your cases is in need of a construction expert, estimates, insurance appraisal or umpire services in defect or insurance disputes – please call Advise & Consult, Inc. at 801.641.8304, or email experts@adviseandconsult.net.