Understanding Economic Losses Versus Intangible Economic Losses Under Michigan Common Law

The common law in Michigan imposes a duty on every person engaged in an undertaking an obligation to use due care or avoid unreasonably endangering the person or property of others. Clark v. Dalman, 379 Mich 251, 261.

This includes a general duty owed to the public. Id. However, a defendant’s general common law duty of care does not extend to ‘intangible economic losses.’ Rinaldo’s Contr Corp v. Mich Bell Tel Co 454 Mich 65, 84. But what are ‘intangible economic losses?’ In a recent unpublished Michigan Court of Appeals decision, we are given clues as to what they are not.??

In HDI Glob. SE v. Magnesium Prod. of Am., Inc., No. 360385, 2023 WL 2938557, at *1 (Mich. Ct. App. Apr. 13, 2023), the defendant had a contract with a vendor of Daimler to supply cross-car beams manufactured with equipment owned by Daimler. A fire broke out at the defendant’s facility and Daimler’s equipment was damaged. As a result, the defendant failed to produce the cross-car beams and Daimler suffered business interruptions and lost profits.

The court upheld the dismissal of the plaintiff’s common law negligence claim, finding the damages described are “intangible economic losses” and, therefore, not recoverable. The complaint described the damages are “business interruption,” the “loss of business income,” and “lost profits.” This means that unless the damages are for specific harm suffered by a person or to their property, they are not recoverable in a general common law duty of care action.

In practice, absent a contractual duty, property owners are not entitled to lost profits or income from a subcontractor, resulting from the negligent performance of its work. Manufacturers are not entitled to damages resulting from interruptions caused by downstream suppliers with whom they are not in contractual privity. Homeowners are not entitled to lost income at a rental property resulting from the manufacturer's negligent assembly of a hot water tank, and so on.

Knowing which damages are recoverable under which causes of action can substantially reduce the plaintiff’s damages claim long before trial. This can close the gap between the parties during mediation and prevent the over-reserving of a file. While the plaintiff's counsel may blackboard excessive damages pre-litigation, knowing which damages they are entitled to will allow for the resolution of claims at or near their real value.?

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