What is the “economic loss” rule in defective products law?

The “economic loss” rule in defective products law states that a consumer is not entitled to compensation for an economic loss due to a defective product in New York. An economic loss means that the consumer has lost money, property, or services due to a malfunctioning or defective product. This rule creates a distinction between economic loss and physical injury. A consumer cannot receive compensation for the former, but they may be entitled to compensation if the product caused a physical injury. The rationale behind the economic loss rule lies in protecting a seller (or manufacturer) from being held liable for all the consequences of a defective product. If products could be held liable for all economic losses, this could prove to be financially catastrophic for the seller (or manufacturer). The economic loss rule does not apply in all circumstances. For example, if a product is defectively designed such that it is unreasonably dangerous, then the economic loss rule may not apply in that case. In addition, the economic loss rule doesn’t apply to certain consumer contracts, such as those that involve services or items that are deemed to be of special importance to the consumer. In summary, the economic loss rule in defective products law in New York states that a consumer is not entitled to compensation for an economic loss resulting from a defective product, unless that defect results in a physical injury. This rule is designed to protect sellers and manufacturers from being liable for all consequences of a defective product.

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What is the “economic loss” rule in defective products law?

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