Economic-loss rule no defense in professional-liability cases

By Alison H. Grennan

The economic-loss rule does not apply to claims of professional negligence, the Washington Court of Appeals recently held, in a decision that could expand malpractice liability of a wide range of professionals.

In Jackowski v. Borchelt, no. 36944-3-II (June 16, 2009), Tim and Eri Jackowski bought a waterfront home from David and Robin Borchelt. Hawkins Poe, a real estate brokerage, represented the Jackowskis in the purchase. The sale was contingent on an inspection of the property, which included a “soils/stability inspection.” Hawkins Poe also obtained a copy of a letter from the local county’s Department of Community Development that showed that the property was in a “Landslide Hazard Area.” The Jackowskis nevertheless did not have the property’s soils or stability inspected, and they closed on their purchase.

Later, after heavy rains, the house slid, causing major structural damage. The Jackowskis sued Hawkins Poe, the Borchelts, and Windermere, the Borchelts’ real estate brokers. Against Hawkins Poe, the Jackowskis alleged negligent misrepresentation and violation of RCW 18.86, Washington’s real estate agency statute. RCW 18.86.050(1)(c) generally requires a real estate agent to advise buyer-clients seek expert advice on matters that are beyond the agent’s expertise. The Jackowskis alleged that Hawkins Poe should have advised them to have a soils engineer inspect the property during the inspection contingency. The Jackowskis alleged fraud and fraudulent concealment against the sellers and their real estate broker, because they allegedly knew that there was fill on the property that contributed to the landslide and withheld that material fact from the Jackowskis.