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Sharyland Water Supply Corp. v. City of Alton

Supreme Court of Texas
354 S.W.3d 407 (2011)


Facts

The City of Alton (defendant) conveyed its water-supply system to Sharyland Water Supply Corp. (plaintiff), under a contract that required Sharyland to maintain the system and supply drinking water to residents. Sometime thereafter, Alton hired other contractors to install a sanitary sewer system. In some locations where the sewer main ran parallel, the contractors installed stub-out connections that crossed the water main. Sharyland sued Alton and the contractors because the stub-out connections violated state regulations and industry standards, although no contamination had yet occurred. The evidence showed that Sharyland experienced 100-150 leaks annually, with any break in the line threatening contamination due to the proximity of the sewer stub-outs. The jury found the contractors’ negligence injured Sharyland and awarded remediation costs necessary to relocate or encase its water lines at some 340 locations. The appellate court reversed, holding that the economic-loss rule barred recovery in negligence. Sharyland further appealed to the Texas Supreme Court.

Rule of Law

Issue

Holding and Reasoning (Jefferson, C.J.)

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