A common misconception among attorneys practicing law in Iowa after the Thompson v. Kaczinski, 774 N.W.2d 829, 834 (Iowa 2009) is that there is a “general duty of care” that applies in all circumstances. The Thompson case does include discussion of a general duty of care, but that general duty of care is limited to the prevention of physical harm. The Thompson decision, as it has played out over the last decade, is not invitation to turn every “harm” or claim for damages in to a negligence action.
This issue commonly arises in situations where other tort actions have failed. A party making a claim of fraud realizes that there is no evidence of fraudulent intent (i.e. knowledge and scienter) and turns to a negligence action as a last line of defense for their claim. A party that suffers only emotional harm seeks to use the negligence action to evade the requirement of intentional infliction of emotional distress.
The issue also arises when a plaintiff’s attorney is attempting to implicate insurance coverage. Most insurance policies have exclusions that prevent coverage for intentional conduct including fraud, intentional infliction of emotional distress and other intentional torts that do not include physical harm. A clever plaintiff’s attorney will attempt to implicate insurance coverage by tacking on a negligence claim.
The Iowa Supreme Court and the Restatement (Third) of Torts specifically address these issues. Iowa law does not impose a general duty of care for financial harm. The Iowa Supreme Court did adopt a general duty of care for circumstances involving physical harm. Hoyt v. Gutterz Bowl & Lounge L.L.C., 829 N.W2d 772, 775 (Iowa 2013). This decision is based on an adoption Restatement (Third) of Torts § 7. A comment to Restatement (Third) of Torts explains that “[t]he general duty contained in this Section is conditioned on the actor having engaged in conduct that creates a risk of physical harm.” Restatement (Third) of Torts § 7, comment l. The comment makes clear that “[i]n the absence of conduct creating a risk of harm to others, an actor ordinarily has no duty of care to another.” Restatement (Third) of Torts § 7, comment l.
Iowa law does not support the imposition of a duty of care to prevent financial harm in the absence of a special relationship between the parties. A party may have a special duty of care if they are a paid advisor or professional. A party may have a special duty of care under other circumstances where their affirmative action dictates they must exercise reasonable care.
In short, absent a special relationship between the parties there is no duty to prevent financial harm to another. Otherwise every individual would be obligated to point out any potential financial pitfalls to everyone else. People would have to post warning about betting on certain teams in sporting events. It would be incumbent upon everyone to point out a better deal to someone purchasing goods at the super market. The law does not extend such an intrusive duty into the lives of ordinary individuals.
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