People Express Airlines, Inc. v. Consolidated Rail Corp.

495 A.2d 107 (N.J. 1985)


A chemical spill from a tank car, punctured during a coupling operation with another rail car, caused a fire in defendant’s freight yard.  Because of the risk of an explosion, and based on defendant’s emergency response plan, municipal authorities evacuated the area within a one-mile radius, which included a terminal of Newark Airport where the plaintiff airline company operated.  Plaintiff’s employees were prohibited from using the terminal for twelve hours.  Plaintiff contended that it suffered business-interruption losses due to the evacuation, consisting of cancelled flights, lost reservations, and fixed operation expenses incurred during the evacuation period.  No physical damage or personal injuries resulted from the fire.

Procedural History

The trial court granted summary judgment to defendant on the ground that no property damage or personal injury accompanied plaintiff’s economic losses.  The Appellate Division reversed and remanded.


Can a plaintiff recover damages in tort for defendant’s negligent conduct that interfered with plaintiff’s business resulting in purely economic losses?

Holding / Rule

Yes.  Modified and affirmed.  A “defendant owes a duty of care to take reasonable measures to avoid the risk of causing economic damages, aside from physical injury, to particular plaintiffs or plaintiffs comprising an identifiable class with respect to whom defendant knows or has reason to know are likely to suffer such damages from its conduct.”  An identifiable class of plaintiffs “must be particularly foreseeable in terms of the type of persons or entities comprising the class, the certainty or predictability of their presence, the approximate numbers of those in the class, as well as the type of economic expectations disrupted.”


Concerns about mass litigation and limitless liability that would result from allowing recovery for purely economic injury justify not a per se rule barring such recovery, but confining it to an identifiable class of plaintiffs.  The requirement that physical harm accompany the economic injury “showers compensation along the path of physical destruction, regardless of the status or circumstances of individual claimants” while “purely economic losses are borne by innocent victims, who may not be able to absorb their losses.”  An identifiable class of plaintiffs does not include individuals whose general presence in the area is foreseeable but fortuitous (e.g., members of the general public at a plaintiff’s business premises)—the type of economic injury that might be suffered by such plaintiffs is too unpredictable.  The standard established here ensures recovery for economic losses that are “reasonably to be anticipated in view of defendant’s capacity to have foreseen that the particular plaintiff or identifiable class of plaintiffs is demonstrably within the risk created by defendant’s negligence.”

Here, the facts are sufficient to create a cause of action—the terminal and freight yard were in close proximity, the nature of plaintiff’s operations and the foreseeability of economic losses resulting from an accident or evacuation were obvious, and defendant had actual or constructive knowledge of the volatility of the chemical involved and had an emergency response plan in place.

Comments are closed.