Pennsylvania Supreme Court clarifies “Gist of the Case Doctrine” and application of Certificate of Merit law to professional liability claims.

In Bruno v. Erie Insurance, the Pennsylvania Supreme Court analyzed the “gist of the case” doctrine, which limits plaintiffs from recasting breach of contract claims as tort claims.  Typically, if the tort claim is wholly dependent upon the terms of the contract, then it will fail.  In other words, if the defendant has no duty to the plaintiff except for those created by the contract, the gist of the case is contractual.  For a negligence claim to be successful in the context of a contract, the allegations of negligence must fall outside the terms of the contract.

The Brunos purchased a home and acquired a homeowner’s insurance policy from Erie Insurance, which provided a rider covering physical loss to the property caused by mold.  This rider obligated Erie to pay the Brunos up to $5,000 for “[d]irect physical loss” to the property caused by mold, or any “[n]ecessary increase in costs” they incurred to maintain their “normal standard of living” should their residence be rendered uninhabitable as the result of mold.  The rider also required Erie to pay the cost of testing the air and any part of the covered property in order “to confirm the absence, presence or level of” mold “to the extent there is a reason to believe” mold was present, and, if mold was present, it obligated Erie to pay for the cost of its removal, including the cost of tearing out any part of the property needed to gain access to the mold.

The Brunos detected mold during renovations and filed a claim for policy limits with Erie to test the mold.  Erie assigned a claims representative to investigate the claim, who in turn retained a private engineer (Rudick), to assist in the investigation.  Upon completion of the investigation, the claims adjuster and Rudick advised the Brunos that the mold was harmless; that the Brunos could continue with their demolition and renovations; and, that the claim was being denied on that basis.

Relying upon the representations of Erie and Rudick, the Brunos continued with the home improvements; and, soon thereafter, developed respiratory problems, particularly Mrs. Bruno.  The Brunos tested the mold at their own expense and determined that the mold was toxic and a health hazard.  They reiterated their demand for the $5,000.00 policy limit, which was ultimately tendered by Erie.  Later, Mrs. Bruno was diagnosed with cancer, which health care professionals related to her exposure to the toxic mold.  Concerned for their safety, the Brunos subsequently vacated the house, which they were later forced to demolish, as the mold could not be eradicated.

The Brunos sued Erie and Rudick alleging negligence and professional negligence for failing to recognize the nature and severity of the mold problem at the premises; misleading them regarding the nature and extent of the mold problem; minimizing the dangers and consequences of the mold infestation when it knew or should have known otherwise; and the creation or exacerbation of a dangerous condition.  The Brunos did not file a certificate of merit in support of their claims of professional negligence against Rudick.  The Brunos were seeking contractual damages as well as damages for pain and suffering, inconvenience, embarrassment and loss of enjoyment of life’s pleasures.

Both Erie and Rudick filed preliminary objections in the nature of a demurrer. The basis of Erie’s demurrer was that the Brunos’ negligence claim against it was barred by the “gist of the action” doctrine.  Rudick grounded its demurrer on the contention that the Brunos’ claim for professional negligence should be stricken due to their failure to file a certificate of merit within 60 days of the filing of their complaint, as required by Pa.R.C.P. 1042.3(a).

The trial court sustained Erie’s preliminary objections, noting that, under the Superior Court’s formulation of the gist of the action doctrine, the critical distinction between a breach of contract action and a tort action is that “the former arises out of ‘breaches of duties imposed by mutual consensus agreements between particular individuals,’ while the latter arises out of ‘breaches of duties imposed by law as a matter of social policy.’”   The trial court reasoned that “[b]ut for the insurance policy, Erie would owe [the Brunos] no obligation as defined by larger social policies embodied by tort laws,” and, thus, it dismissed the Brunos’ negligence claim against Erie.

The trial court also granted Rudick’s preliminary objections, holding that privity of contract was not a prerequisite for maintaining a negligence action against the private engineer.   Therefore, the Brunos were required to file a certificate of merit supporting their professional liability claims against Rudick; and, because they failed to do so, their claims were dismissed. The intermediate appellate court, the Pennsylvania Superior Court, affirmed the trial court on both accounts; however, the Supreme Court of Pennsylvania reversed.

In analyzing the gist of the case doctrine, the Supreme Court held that the general governing principle as to whether the claim is solely one of contract concerns the nature of the duty alleged to have been breached.  In this regard, the substance of the allegations comprising a claim in a plaintiff’s complaint are of paramount importance, and, thus, the mere labeling by the plaintiff of a claim as being in tort, e.g., for negligence, is not controlling. If the facts of a particular claim establish that the duty breached is one created by the parties by the terms of their contract — i.e., a specific promise to do something that a party would not ordinarily have been obligated to do but for the existence of the contract — then the claim is to be viewed as one for breach of contract. If, however, the facts establish that the claim involves the defendant’s violation of a broader social duty owed to all individuals, which is imposed by the law of torts and, hence, exists regardless of the contract, then it must be regarded as a tort.

Consequently, a negligence claim based on the actions of a contracting party in performing contractual obligations is not viewed as an action on the underlying contract itself, since it is not founded on the breach of any of the specific executory promises, which comprise the contract. Instead, the contract is regarded merely as the vehicle, or mechanism, which established the relationship between the parties, during which the tort of negligence was committed.  Thus, the court determined that the homeowner’s policy was nothing more than a vehicle, which established the relationship between the parties, during which the Brunos alleged a breach of a general social duty.

The Pennsylvania Supreme Court also reversed the decision regarding the requirement of the Brunos to file a certificate of merit pursuant to Pa.R.C.P. 1042.3(a).  The court relied on the strict language of the statute that only required the filing of certificates of merit when the professional defendant has a patient/client relationship with the plaintiff.

The decision is an important decision for plaintiffs to the extent that had the Brunos’ negligence claim been dismissed, they would not have been able to recover for the damages associated with their injuries and damages associated with toxic mold exposure.

 

In Bruno v. Erie Insurance, the Pennsylvania Supreme Court analyzed the �gist of the case� doctrine, which limits plaintiffs from recasting breach of contract claims as tort claims. Typically, if the tort claim is wholly dependent upon the terms of the contract, then it will fail. In other words, if the defendant has no duty to the plaintiff except for those created by the contract, the gist of the case is contractual. For a negligence claim to be successful in the context of a contract, the allegations of negligence must fall outside the terms of the contract.

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