Sams Hotel Grp., LLC v. Environs, Inc., No. 12-2979 (7th Cir. 2013)Annotate this Case
SAMS contracted with Environs to provide architectural services for construction of a Homewood Suites hotel in Fort Wayne. Environs was to be paid a flat fee of $70,000. The contract stated: The Owner [SAMS] agrees that to the fullest extent permitted by law, Environs Architects/Planners, Inc. total liability to the Owner shall not exceed the amount of the total lump sum fee due to negligence, errors, omissions, strict liability, breach of contract or breach of warranty. The hotel was nearly complete when serious structural defects were discovered. The building department condemned the structure. Attempts to remedy failed; the hotel was demolished without opening. SAMS estimated its loss at more than $4.2 million. While SAMS’s suit against Environs was pending, the Indiana Supreme Court held that the “economic loss rule” applies to construction contracts under Indiana law: a party to a contract cannot be liable under a tort theory for any purely economic loss caused by negligent performance of the contract, absent any personal injury or damage to other property. The district court applied the rule to grant summary judgment rejecting SAMS’s negligence claim and held that SAMS’s recovery on its breach of contract claim would be limited to $70,000. The Seventh Circuit affirmed.