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State v. United States Steel Corp.6/24/1996
d [453,] 462, 150 P.2d [436,] 441 [(1944)] (opinion Concurring in judgment). In contrast, when a product injures itself, the commercial user stands to lose the value of the product, risks the displeasure of its customers who find that the product does not meet their needs, or, as in this case, experiences increased costs in performing a service. Losses like these can be insured. See 10A G. Couch, Cyclopedia of Insurance Law §§ 42:385-42:401, 42:414-417 (2d ed. 1982); 7 E. Benedict, Admiralty, Form No. 1.16-7, p. 1-239 (7th ed. 1985); 5A J. Appleman & J. Appleman, Insurance Law & Practice § 3252 (1970). Society need not presume that a customer needs special protection. The increased cost to the public that would result from holding a manufacturer liable in tort for injury to the product itself is not justified. Cf. United States v. Carroll Towing Co., 159 F.2d 169, 173 (CA2 1947).
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." See J. White and R. Summers, Uniform Commercial Code 406 (2d ed. 1980). The maintenance of product value and quality is precisely the purpose of express and implied warranties. See UCC § 2-313 (express warranty), § 2-314 (implied warranty of merchantability), and § 2-315 (warranty of fitness for a particular purpose). Therefore, a claim of a nonworking product can be brought as a breach-of-warranty action. Or, if the customer prefers, it can reject the product or revoke its acceptance and sue for breach of contract. See UCC §§ 2-601, 2-608, 2-612.
Id. at 871-72 (footnote omitted).
The "economic loss" doctrine is accepted by a majority of jurisdictions that have had occasion to consider it, see 4A American Law of Products Liability, §§ 60:36 - 60:60 (3d ed. 1991 and Supp. 1995); Annotation, Strict Products Liability: Recovery for Damage to Product Alone, 72 A.L.R.4th 12 (1985 and Supp. 1995), and we take this opportunity to adopt it insofar as it applies to claims for relief based on a product liability or negligent design and/or manufacture theory.
However, this is not to say that we must apply the doctrine in the present case. The state argues that, although the damages sought by the state are admittedly purely economic, the cause of action founded on negligent misrepresentation is not precluded by the economic loss doctrine because the claim does not sound in products liability. We agree for three principal reasons.
First, the tort of negligent misrepresentation is founded on the breach of a duty separate and distinct from the duty abolished by the economic loss rule. In Chun v. Park, 51 Haw. 462, 462 P.2d 905 (1969), we adopted the tort of negligent misrepresentation in a case brought by purchasers of property and their lenders, involving the sellers' title company's negligent failure to report a recorded second mortgage on the property being purchased by the purchasers, and held that:
It is true that the order for the certificate [of title] was placed by a real estate broker representing the sellers; however, the order also informed the defendant that the plaintiffs were the buyers and that the Honolulu Savings and Loan Association was the lending institution.
The trial court found that the certificate of title search would be relied upon not only by the sellers, but also by the purchasers (plaintiffs) and the Honolulu Savings and Loan Association; and that in reliance of the certificate, the Honolulu Savings and Loan Association did make the loan to plaintiffs a
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