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June 25, 2021

NY Appellate Court Dismisses Claim for Purely Economic Losses Arising From Motor Vehicle Accident

In a negligence case, economic damages generally cannot be recovered unless the plaintiff can show that the damages were a foreseeable consequence of the defendant’s alleged negligence and can be ascertained with certainty. Recently, the Appellate Division, Fourth Department issued a decision dismissing a claim for purely economic losses brought by a plaintiff alleging negligent maintenance of a vehicle.

The case, Able Med. Transp. v. Paragon Envtl. Constr., arose from a motor vehicle accident involving one vehicle driven by an employee of a medical transportation company and a second vehicle, a dump truck, driven by an employee of a construction company. The accident occurred when the driver of the dump truck pulled the vehicle to the side of the road because two wheels had fallen off of it. The transportation company’s van struck one of the wheels and then struck the driver of the dump truck, causing significant injuries.

The dump truck driver sued the transportation company, which resulted in a settlement of $900,000. The transportation company then sued the construction company, alleging that its negligent failure to maintain its vehicle in a safe condition caused the accident and that the settlement resulted in an increase in insurance premiums, which caused the company to close its business.

The construction company moved for summary judgment on the ground that the alleged economic damages were not proximately caused by its alleged negligence. The trial court denied the motion. On appeal, the Fourth Department reversed and granted the motion. The court found the transportation company’s alleged economic losses were not a foreseeable consequence of the construction company’s alleged negligent failure to maintain the dump truck. More particularly, the court held, the company’s theory of causation that the failure to maintain the truck resulted in the wheels to fall off, which resulted in the accident, lawsuit, and settlement, which then resulted in an increase in premiums and the closing of the business was too tenuous and remote to permit recovery. As such, the construction company was entitled to summary judgment dismissing the lawsuit.

The Able Med. Transp. decision is a reminder that in a negligence case, the plaintiff must prove that the alleged injuries and damages are proximately caused by the defendant’s alleged negligence. If the plaintiff cannot show that the damages were a foreseeable consequence of the alleged negligence, the claim will not be sustainable.

If you have any questions regarding the content of this alert, please contact Sanjeev Devabhakthuni, counsel, at sdevabha@barclaydamon.com, or another member of the firm’s Torts & Products Liability Defense Practice Area.

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