July 18, 2006

Delay Damages
Disallowed for
Breach of Contract

The Pennsylvania Supreme Court recently ruled in Touloumes v. E.S.C. Inc., decided on June 19, 2005, that delay damages under Pennsylvania Rule of Civil Procedure No. 238 are not recoverable in breach of contract actions involving property damage losses.

In Touloumes, the contract at issue involved a roofing services contract.  The contractor, E.S.C., agreed to make extensive improvements to the roof of a motel owned by the Plaintiffs.  Completing the contracted-for roofing work, the contractor warranted the labor and materials for ten years.

A subsequent snowstorm resulted in water infiltrating the roof, leaking into motel rooms and other rooms within the motel.  The water damaged ceilings, drywall, carpets, and motel room contents, leaving the motel uninhabitable.

The motel owners sought to have the contractor make repairs under its warranty agreement.  When the contractor refused, the motel owner repaired the unit at their own expense.

The motel owner sued the contractor for the cost of replacing the motel roof, totaling $29,855.00, and for damages of $47,762.00 for other losses.

A bench trial resulted in the Trial Judge concluding that the contractor had breached its contractual duty by failing to install a roof in a workmanlike manner, and the court awarded damages to the Plaintiff of roughly $35,000.00, about $42,000.00 less than what the Plaintiffs sought in their breach of contract action.

The Superior Court held that delay damages are not recoverable in breach of contract actions.

In the course of both parties pursuing post-trial motions, the trial Court denied the Plaintiffs’ request for delay damages under PRCP No. 238.  Cross appeals were then taken to the Superior Court.  The Superior Court held, in reliance upon prior decisions, including Hodges v. Rodriguez, 645 A.2d 1340 (Pa. Super. 1994) and Reliance Universal v. Ernest Renda Contracting, 454 A.2d 39 (Pa. Super. 1982), that delay damages are not recoverable in breach of contract actions.

Plaintiffs then filed a Petition for Allowance of Appeal with the Pennsylvania Supreme Court.  The Supreme Court granted allocatur to resolve contradictory decisions by the Superior and Commonwealth Courts on the issue of delay damages in breach of contract actions.

The Supreme Court concluded that Rule 238 only applies to monetary damages “owing as a result of a Defendant’s tort.”

Analyzing Rule 238, the Supreme Court concluded that delay damages are not recoverable in contract actions as it concluded that Rule 238 only applies to monetary damages “owing as a result of a Defendant’s tort.”

Moreover, the Court concluded that since contract actions permit the recovery of pre-judgment interest on a contract damages award, permitting the recovery of delay damages would be duplicative.

Questions concerning this decision, or any questions involving casualty litigation practice and procedures, can be directed to our general litigation department attorneys.

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