The Concept of a Negligent Breach of Contract Can Be a Source of Confusion

Rick Dane Moore & Associates Law Firm, PLLC makes a distinction between contracts and torts, or civil wrongs. Contract actions are made to enforce the intentions of the parties to the agreement if tort law is primarily designed to vindicate “social policy.”

There is also a difference in the measure of damages for breach of contract actions and actions in tort like a lawsuit seeking damages for negligence. Contract damages are usually limited to those within the contemplation of the parties if the contract was entered into or at least reasonably foreseeable by them at that time; consequential damages beyond the expectation of the parties are not recoverable. By contrast, tort damages allow for compensation for all injuries flowing and as a direct result of the negligence or another tort. Consequently, tort damages are far broader and more extensive than contract damages. Because tort damages exceed what is allowed under a breach of contract, we often see parties filing lawsuits seeking damages for a negligent breach of contract. The concept of a negligent performance or negligent breach of contract is not new.

Stop Loss procured expressly precluded coverage of any preexisting claim not disclosed by Regents. The Regents signed a binder that purported to disclose all reportable claims, but unbeknownst to them, the binder did not include a disclosure of the claim made by a plan member. When the patient had his claim rejected, Regents sued Stop Loss for breach of contract and negligence. The complaint alleged that Stop Loss breached its contractual agreement with Regents and also breached its professional duty of care as the insurance broker, causing Regents to suffer an economic loss of over $1 million in unreimbursed expenses for the claim. By adding a cause of action for professional negligence in performing the contractual obligations, Regents sought to increase the number of damages it could recover.

When confronted with issues involving a breach of contract it is wise to see what type of damages are alleged. If the party is seeking emotional distress damages you can challenge those damages.

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