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Court: No Duty to Businesses for Economic Loss From Gas Leak

By William Vogeler, Esq. on December 20, 2017 | Last updated on February 06, 2023

Judge John Wiley, Jr. gets rave reviews for being a "very thorough," intelligent," "gentleman and a scholar." So it was with respect when an appeals court reviewed the judge's invitation to review his ruling in the Southern California Gas Company Gas Leak Cases. After all, it was about a leak of 190,000 metric tons of methane that put 15,000 residents out of their homes. "The legal issue here -- the existence of a duty of care -- is significant and of widespread interest," said the California Second District Court of Appeal.

No Duty of Care

The gas company took care of the residents, paying for relocation services and other claims related to the leaks between October 2015 and February 2016. But the company would not pay claims by nearby businesses. A realtor, a camera shop, a gas station, a day care center, a podiatrist and two sports facilities sued for their economic losses. They said the evacuation of customers crippled their businesses, and they wanted damages. Wiley, however, ruled the gas company had no duty of care for their economic losses. He then certified the question to the appeals court. As the issue rose through the system, he also denied separate requests to stop the gas facility from restarting certain operations.

Economic Losses

On a writ for extraordinary relief, the Second District said it was important to resolve the duty issue to prevent expensive and time-consuming litigation for the businesses. "Generally, a defendant owes no duty to prevent purely economic loss to third parties under any negligence theory," the appeals court said, citing Quelimane Co. v. Stewart Title Guaranty Co. The judges said where alleged negligence has caused economic loss -- but no personal injury or property damage -- duty is not presumed. Foreseeability is always "the key component necessary to establish liability," Judge Kim Dunning wrote for the court. In dissent, Judge Lamar W. Baker said he agreed with the majority's reasoning. However, he said they should have allowed the case to move forward for a better record on appeal. Related Resources:
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