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The defendant gas company caused a gas leak that affected a residential neighborhood in Los Angeles. The plaintiffs, a class of businesses in the area, suffered no physical harm, but they lost a substantial amount of business and money due to the effects of the gas leak.
In cases of pure economic loss where no other physical injury has occurred, plaintiffs generally cannot recover.
In the northwestern corner of LA, Porter Ranch, a residential neighborhood, houses 30,000 people. The defendant stores vast amounts of natural gas in an underground facility in the hills surrounding the neighborhood. In October 2015, a gas leak occurred from that underground facility, releasing 55 tons of natural gas every hour at its peak. Residents of Porter Ranch reported bad odors, headaches, dizziness, and respiratory problems. The Los Angles County health department directed the defendant to relocate affected residents, and about 15,000 people were relocated away from the leak. Plaintiffs allege that the defendant’s negligence caused the gas leak, devastating the local economy by depriving businesses of customers.
Can the local businesses recover for lost income due to the gas leak despite suffering no physical injury?
No. The appellate court judgement is affirmed.
The general rule in California is that people owe a duty of care to avoid harming others, but the presumption of duty is not universal. Situations where pure economic loss and no other injury has occurred usually do not allow plaintiffs to recover. Exceptions to this rule include situations where the parties have a special relationship, but that does not apply here. Holding the defendant liable here would create line-drawing issues in determining who is eligible to recover geographically. The defendant is facing a number of other suits for property damage, so it will be properly deterred from acting negligently in the future.