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Calloway v. City of Reno2/29/2000
e "citadel of privity" was eradicated. Id. In other words, although recovery was based on warranty, which was intimately connected to contract law, the existence of a contract was not necessary for recovery.
Since such liability far exceeded traditional contractual liability and created confusion between the law of contracts and torts, as well as complications with the Uniform Commercial Code, courts eventually abandoned the doctrine in favor of strict liability in tort. Id. § 99, at 692-94 (citing Greenman v. Yuba Power Products, Inc., 377 P.2d 897 (Cal. 1963)).
Because of this doctrinal development, and the resulting confusion created between tort and warranty theories, the economic loss doctrine gained recognition and support. The doctrine serves to distinguish between tort, or duty-based recovery, and contract, or promise-based recovery, and clarifies that economic losses cannot be recovered under a tort theory. See Seely v. White Motor Company, 403 P.2d 145 (Cal. 1965)(concluding that if a defective product causes purely economic harm, tort liability is precluded, in order to preserve the law of warranty). As noted by the United States Supreme Court, " roducts liability grew out of a public policy judgment that people need more protection from dangerous products than is afforded by the law of warranty. It is clear, however, that if this development were allowed to progress too far, contract law would drown in a sea of tort." East River S.S. Corp. v. Transamerica Delaval, 476 U.S. 858, 866 (1986) (citations omitted). The Supreme Court recognized that maintaining the distinction between contract and tort is consistent with the different purposes behind these theories of recovery:
" he distinction that the law has drawn between tort recovery for physical injuries and warranty recovery for economic loss is not arbitrary and does not rest on the 'luck' of one plaintiff in having an accident causing physical injury . The distinction rests, rather, on an understanding of the nature of the responsibility a manufacturer must undertake in distributing his products." . . .
The tort concern with safety is reduced when an injury is only to the product itself. . . .
Damage to a product itself is most naturally understood as a warranty claim. Such damage means simply that the product has not met the customer's expectations, or, in other words, that the customer has received "insufficient product value."
Id. at 871-72 (quoting Seely, 403 P.2d at 151) (other citations omitted).
This court, along with most other jurisdictions, has applied the economic loss doctrine in products liability actions and has recognized the economic loss doctrine's distinction between tort and warranty: "It is true that a plaintiff may not recover economic loss under theories of strict products liability or negligence. However, purely economic loss may be recovered under a breach of warranty theory." Central Bit Supply v. Waldrop Drilling, 102 Nev. 139, 140-41, 717 P.2d 35, 36-37 (1986) (citation omitted); see generally Arco Prods. Co. v. May, 113 Nev. 1295, 948 P.2d 263 (1997); Nat'l Union Fire Ins. v. Pratt and Whitney, 107 Nev. 535, 815 P.2d 601 (1991); Bernard, 103 Nev. at 135, 734 P.2d at 1240; American Law of Products Liability (3d) § 60:39, at 70.
We have also applied or discussed the economic loss doctrine in other contexts as well. For instance, in Local Joint Executive Board v. Stern, 98 Nev. 409, 651 P.2d 637 (1982), we determined that employees of the MGM Grand Hotel could not recover, under theories of negligence and strict liability, economic losses in the form of lost wages and employment benefits. Later, in Oak Grove Investors v. Bell
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