A backhoe operator employed by Construction Co. negligently ruptures a municipal water main. Water service to a nearby bakery is shut off for 12 hours while the city makes repairs. The bakery sustains no physical damage, but it must close for the day and loses $10,000 in profits. The bakery sues Construction Co. in negligence seeking to recover its lost profits. Under the prevailing rule in most U.S. jurisdictions, is the bakery likely to recover its economic losses?
No. The economic-loss rule bars recovery for purely financial loss that is not accompanied by personal injury or property damage to the plaintiff.
No, unless the bakery can prove that Construction Co. owed it a special duty arising from a specific contractual or professional relationship, which is not shown here.
Yes. Lost profits are consequential damages flowing from the damage to the city's water main and are therefore recoverable in negligence.
Yes. A negligent defendant is liable for all foreseeable harms, including economic losses, so Construction Co. must compensate the bakery.
The bakery is unlikely to recover. Under the economic-loss rule, a plaintiff that suffers purely financial harm unaccompanied by personal injury or damage to its own property generally cannot recover in tort for negligence. The rule is intended to prevent potentially limitless liability to an indeterminate class of economic victims. Because the bakery experienced only lost profits and no physical injury or property damage of its own, its claim is barred. Liability might exist if a statutory duty or a special relationship imposed a specific obligation to protect the bakery's economic interests, but no such relationship is suggested by these facts.
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