Plaintiffs asserting purely economic losses in tort cases already face a significant hurdle in Illinois: the well-established economic loss rule, otherwise known as the Moorman doctrine. But those plaintiffs now face an additional challenge, because in Lewis v. Lead Industries Ass’n, 2020 IL 124107 (opinion filed May 21, 2020), the Illinois Supreme Court held that plaintiffs cannot rely on the collateral source rule to establish an injury in fact in economic loss tort cases.
The plaintiffs in Lewis filed a class-action lawsuit alleging a civil conspiracy claim against former manufacturers of white lead pigments. The plaintiffs alleged that the defendants fraudulently concealed the hazards of lead paint by, for example, suppressing research and regulation concerning the dangers of lead paint and misleading the public about the medical and scientific data indicating that lead paint was dangerous to children. The plaintiffs sought to recover the costs of blood-lead screening, which their children were required to undergo by law. The plaintiffs specifically excluded any claim for recovery of physical injury to their children.
The case was pending for nearly 20 years, during which the appellate court twice reversed judgment in favor of the defendants. The plaintiffs’ luck eventually ran out. In 2016, the circuit court granted summary judgment to the defendants, and the supreme court affirmed.
The defendants argued that they were entitled to summary judgment under the economic loss rule, commonly called the Moorman doctrine after the seminal Illinois case Moorman Manufacturing Co. v. National Tank Co., 91 Ill. 2d 69 (1982). Under the well-established Moorman doctrine, plaintiffs may not sue in tort to recover for a solely economic loss without any personal injury or property damage.
The court held that the plaintiffs’ claim was not automatically barred by the Moorman doctrine. The court acknowledged that the case involved only economic loss, but pointed out that there are exceptions to the Moorman doctrine, including where a plaintiff’s economic loss is caused by the defendant’s false representations. The court held that the plaintiffs sufficiently alleged that their damages were caused by the defendant’s false representations and, thus, that the plaintiffs could recover for their alleged economic loss notwithstanding the Moorman doctrine.
Nonetheless, the court held that plaintiffs’ claim failed as a matter of law because the plaintiffs did not actually suffer any economic loss at all. The undisputed facts showed that the plaintiffs were Medicaid recipients when their children were tested, that Medicaid paid the full costs of the children’s tests, and that no one sought reimbursement from the plaintiffs. Thus, the court held, the plaintiffs suffered no injury in fact.
The plaintiffs argued that the collateral source rule could satisfy their injury in fact requirement. The collateral source rule bars a tortfeasor from reducing a plaintiff’s compensatory damages by the amount the plaintiff receives from a source wholly independent of, and collateral to, the tortfeasor. The justification for the rule is that the tortfeasor should not benefit from or take advantage of contracts or other relations that may exist between the plaintiff and third persons. The rule has been applied in, for example, personal injury or product liability cases in which a plaintiff suffered physical harm as a result of the defendant’s negligence and the plaintiff’s insurance provider paid for the necessary medical care.
The court rejected the plaintiffs’ argument that the collateral source rule satisfied the injury element of their claim. The collateral source rule does not excuse a plaintiff from establishing an injury in fact, the court explained. Thus, the relevant threshold question is whether the plaintiffs could establish an injury at all. And, in purely economic loss cases, the dollars are not just damages – they are the injury itself.
Accordingly, the court held that the collateral source rule does not apply in tort cases alleging purely economic loss where the plaintiffs have, in fact, incurred no economic loss. The court cited a number of cases from other jurisdictions which similarly have rejected the notion that the collateral source rule may be invoked to establish an injury in economic loss tort cases. Applying the rule in such cases would allow plaintiffs who have suffered no actual injury to sue anywaya result that does not square with constitutional standing requirements.