Insurance: Economic loss doctrine bars policyholder’s tort claim

Where a policyholder asserted a tort claim in a coverage dispute over a business fire, but it failed to establish an “independent injury” separate from any potential damages it could recover under its breach of contract theory, the tort claim was dismissed.

Background

This case involves an insurance property coverage dispute following a fire at plaintiff 3210 Grace Street Property LLC’s property. Hartford Insurance Company has filed a motion to dismiss Counts Two and Three.

Economic loss doctrine

Under the economic loss doctrine, “a plaintiff who suffers only pecuniary injury as a result of the conduct of another cannot recover those losses in tort.” Accordingly, any tort claim associated with a breach of contract must allege “an independent injury over and above the mere disappointment of plaintiff’s hope to receive [her] contracted for benefit.”

Here, plaintiff’s allegations fail to establish an “independent injury” separate from any potential damages it could recover under its breach of contract theory. Both plaintiff’s contract-based claim and tort-based claim are based on its allegations as to Hartford’s potential liability under the policy. Plaintiff’s “breach of contract [claim] would reach … the damages suffered by the tort.” This court therefore finds that plaintiff has failed to state an independent claim for intentional interference with contractual relations.

Declaratory judgment

Federal courts only have jurisdiction over “cases” and “controversies.” Here, plaintiff has failed to allege an “actual controversy” because plaintiff admits that it “cannot enforce [its] right [to an appraisal] at this time.” Plaintiff is therefore asking this court to consider the hypothetical availability of such relief, which this court lacks jurisdiction to do. A declaratory judgment is therefore not a “proper vehicle for protecting and preserving that right to appraise,” because such a judgment would force this Court to render an impermissible advisory opinion.

Damages

Plaintiff appears to base its claim for attorney’s fees and extra-contractual damages on its allegations of bad faith. But “[t]he District of Columbia does not recognize an independent tort for bad faith breach of an insurance contract.” Nor does the District of Columbia permit the recovery of attorney’s fees and extra-contractual damages in breach of contract claims. Accordingly, plaintiff has failed to state a claim for such damages.

Defendant’s partial motion to dismiss granted.

3210 Grace Street Property LLC v. Hartford Underwriters Insurance Company, Case No. 1:24-cv-01402, Oct. 15, 2024. EDVA at Alexandria (Nachmanoff). VLW 024-3-561. 6 pp.