Affiliated Fm Ins. Co. v. Ltk Consulting Services, Inc

243 P.3d 521 (2010)

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Nature of the Case

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Facts

The city of Seattle (City) entered a monorail concession agreement with SMS. The agreement granted rights to SMS related to the operation of the monorail along with the concession right and privilege to maintain and exclusively operate the Monorail System including the facilities, personal property and equipment, together with the right to use and occupy the areas, described in this section, all subject to the conditions and requirements set forth in this Agreement. SMS bore the responsibility for emergency maintenance. The agreement required SMS to grant the City “access to the Monorail System at all reasonable times to inspect the same and to make any repair, improvement, alteration or addition thereto of any property owned by or under control of the City.” The agreement also required SMS to carry an insurance “policy for fire and extended coverage, upset, collision and overturn, vandalism, malicious mischief, and other perils commonly included in the special coverage form,” with the City designated as the loss payee. The City contracted with D in 1999 “to examine the Monorail system and recommend repairs.” D completed its contractual obligations by 2002. SMS was not a party to the contract. A fire erupted in the monorail system for Seattle. P wanted to sue D in tort based on its contractual relationship for work done on the monorail. D removed the suit to federal court and moved for summary judgment. D argues that SMS's losses were purely economic and that it was not liable in tort for economic losses, at least in this circumstance where it was not in contractual privity with SMS. The federal district court concluded that SMS's injury was “outside the bounds of tort recovery” because it was “strictly economic-i.e., business interruption and the cost of repairing the damaged train. The court granted D’s motion for summary judgment and P appealed and a question was certified.