Today, in many instances, the design/bid/build project delivery system has been modified through the use of construction managers (either at-risk or advisors) and owner’s representatives, or has been entirely usurped by a design-build arrangement. However, there are still many projects constructed using the traditional approach, where an owner first contracts with a design professional (either an engineer or an architect); the design professional then prepares a complete set of construction documents that the prospective general contractors rely upon to submit their bids; and the owner awards the contract for the project’s construction to the successful general contractor. The general contractor, in turn, hires various subcontractors and suppliers who then hire their sub-subcontractors and suppliers. As a result, there are a great number of individuals and entities relying upon the design professional’s work. The question is whether all these individuals and entities may hold the design professional liable for its negligence.
This blog post will focus on the traditional design/bid/build approach, but the principles stated herein can be applied to other delivery methods.
Under the traditional approach, one may expect that the owner could hold the design professional liable for any damages it incurs arising from defective plans and specifications by virtue of their contractual relationship but that is not the case. “In United States v. Spearin, 248 U.S. 132, 39 S. Ct. 59, 63 L. Ed. 166, 54 Ct. Cl. 187 (1918), the Supreme Court recognized that when a contractor is ‘bound to build according to plans and specifications prepared by the owner, the contractor will not be responsible for the consequences of defects in the plans and specifications.’” Thomas & Marker Constr., Co. v. Wal-Mart Stores, Inc., 2008 U.S. Dist. LEXIS 79072, *51 (S.D. Ohio Sept. 15, 2008). However the “Spearin Doctrine” creates a gap of liability for the owner.
Even though the owner guarantees the plans and specifications to its contractor, the design professional generally does not have the same obligation to the owner. “Traditionally, architects, along with other professionals such as doctors and lawyers, do not promise a certain result. The professional is usually employed to exercise the customary or reasonable skills of his profession for a particular job.” State ex rel. Risk Management Div. of Fin. & Admin. v. Gathman-Matotan Architects & Planners, 98 N.M. 790, 793 (N.M. Ct. App. 1982).
Architects, doctors, engineers, attorneys, and others deal in somewhat inexact sciences and are continually called upon to exercise their skilled judgment in order to anticipate and provide for random factors which are incapable of precise measurement. The indeterminate nature of these factors makes it impossible for professional service people to gauge them with complete accuracy in every instance. … Because of the inescapable possibility of error which inheres in these services, the law has traditionally required, not perfect results, but rather the exercise of that skill and judgment which can be reasonably expected from similarly situated professionals.
Mounds View v. Walijarvi, 263 N.W.2d 420, 424, (Minn. 1978). Only “[a] minority of four jurisdictions have held that professional engineers and architects impliedly warrant reasonable fitness for an intended use.” Cruet v. Carroll, 2001 Conn. Super. LEXIS 3336, *7-8, 2001 WL 1570228 (Conn. Super. Ct. Nov. 27, 2001).
In light of the foregoing, an owner may find itself owing its general contractor additional compensation for defective plans and specifications, but may also be unable to recover that cost from its design professional that prepared the very construction documents at issue. One way an owner could avoid this liability gap is to require its design professionals to contractually warrant their designs and/or contractually agree to design to the “highest” applicable standard but there are practical reasons why that is not often done. Specifically, most design professionals will claim that professional malpractice insurance for such liability is not commercially available. Thus, most owners decide that having an insured risk is better than covering all risks (if there may not be funds available to cover all such risks).
If an owner that contracts with a design professional has difficulty holding the design professional liable, as one might expect, there are additional hurdles for those that wish to bring claims against a design professional solely based upon negligence. Namely, “[t]he economic loss rule [states] that, in the absence of privity of contract between the plaintiff and the defendant, or, in the absence of an injury to the plaintiff’s person or property, the plaintiff may not recover in tort for a purely economic loss.” Worldwide Pres. Servs. L.L.C. v. IVth Shea, L.L.C., 2001 Conn. Super. LEXIS 308, *6 (Conn. Super. Ct. Feb. 1, 2001). In plain English, the Economic Loss Rules means that a contractor or subcontractor that does not have a direct contractual relationship with a design professional cannot sue that design professional to recover additional costs incurred as a result of the design professional’s defective plans and/or specifications.
Notwithstanding the foregoing, the application of the rules pertaining to design professional liability are not uniformly applied. For example, “[a] review of decisions in Connecticut shows that the economic loss rule is not widely recognized in this state.” Shun Ichiro Karato v. Lavertu, 2009 Conn. Super. LEXIS 2061, *2 (Conn. Super. Ct. July 24, 2009). In Massachusetts, the courts have taken a more interesting approach: “An exception to this rule is found only in claims grounded in negligent misrepresentation where pecuniary loss is an essential element.” Anastasi Bros. Corp. v. Massachusetts Convention Ctr. Auth., 1993 Mass. Super. LEXIS 107, *5 (Mass. Super. Ct. Nov. 1, 1993). Of course, the “negligent misrepresentations” for which the courts are allowing recovery are errors in the plans and specifications. Thus, under the Massachusetts approach, the exception swallows the rule.
Beyond the issues with privity of contract and warranties, there are the matters of liability and damages. In most jurisdictions, a plaintiff making a claim against a design professional will need to offer the testimony of an expert witness in the same profession who is willing to testify that the architect or engineer failed to meet the applicable standard of care. In addition, the amount of damages that are recoverable may be limited by the theories of betterment and/or economic waste.
The bottom line is that claims against design professionals are complex matters. If you are contemplating such a claim or would like more information, please give me a call at (203) 640-8825.