Negligent misrepresentation in Minnesota is defined in state law. Commonly litigated issues arise over whether defendants owe a duty of care. Defenses to the claim include primary assumption of risk and comparative negligence. Recovery for a negligent misrepresentation claim is limited to compensatory damages.
RULE OF LAW
A. Elements of a Claim
A person is liable for negligent misrepresentation when in the course of business, employment or profession, or in any other transaction in which he has a financial interest he:
- Supplies false information to another person to guide them in that person’s own business transactions
- Fails to use reasonable care or competence in obtaining the information or communicating it to that person
- The other person relied on the information
- The other person was justified in relying on that information
- The other person was financially harmed by relying on the information
However, liability is limited to loss suffered:
- By the person or one of a limited group of persons for whose benefit and guidance he intends to supply the information or knows that the recipient intends to supply it
- Through reliance upon it in a transaction that he intends the information to influence or knows that the recipient so intends or in a substantially similar transaction
There are two common defenses applicable to a negligent misrepresentation claim. First, defendants can claim primary assumption of risk as a total defense to liability, which is premised on the defendant not owing a duty of care. Second, a defendant who does indeed owe a duty of care can claim comparative negligence in order to reduce liability.
C. Pleading and Statute of Limitations
Negligent misrepresentation claims are subject to heightened pleading standard. This means that plaintiffs must plead their claim of negligent misrepresentation specific facts underlying each element of the negligent misrepresentation claim. The statute of limitations for negligent misrepresentation is six years.
The third element of negligent misrepresentation, duty of care, is frequently litigated. In particular, questions arise over whether or not the defendant owed the plaintiff a duty of care. Minnesota courts have “recognized a duty exists in professional relationships such as an accountant/client and attorney/client, and in certain fiduciary relationships involving, for example, guardians, executors, and directors of corporations.”
Yet, courts have refused to find a duty of care is owed in the context of commercial arm’s length transactions and prospective government transactions. As a result, parties to arm’s length commercial transactions cannot successfully win a negligent misrepresentation claim. Consequently, most claims are brought against service professionals such as accountants, attorneys, and others owing fiduciary duties. As a result, the outcome of negligent misrepresentation claims often hinge on the precise nature of the parties’ relationship.