Inside this Issue

A1 - Design Professional Duty to Mitigate Against Storm and Flood damage
A2 - An Engineering Intern Could not be Liable for Professional Negligence
A3 - Suit Limited to Breach of Contract/Warranty – Negligence Count was Duplicative and Dismissed
A4 - Contractor May Sue Construction Manager for Losses Due to Alleged Poor Project Oversight and Interference with Contractor’s Work
A5 - Contractor Entitled to Summary Judgment against Project Owner’s Negligence Claim where Contractor had no Design Responsibility for Disc Filter Equipment Provided by its Vendor pursuant to the Project Specifications
A6 - Contractor can’t be Sued for Damages Contribution by Engineer Where Contractor has no Possible Tort Liability to Injured Parties

Article 1

Design Professional Duty to Mitigate Against Storm and Flood damage

See similar articles: Extreme Weather | Standard of Care | Storm and Flood Damage | Weather Briefing Paper

Extreme weather events, such as hurricanes and excessive rains causing severe flooding, seem to be increasingly in the news and on the public’s mind. This briefing addresses the legal and ethical responsibilities that design professionals must consider with respect to climate volatility when designing projects. Is resiliency such an important obligation that a design professional must design for it based on current science – and the evidence and facts at hand – even if the law, regulations and government agencies do not require it? This paper concludes that complying with code may not be sufficient and that designers may have an enhanced standard of care to design against the extreme weather events that are increasingly foreseeable.

Read the paper here.

This article is published in ConstructionRisk.com Report, Vol. 20, No. 9 (Oct 2018).
Copyright 2018, ConstructionRisk, LLC

Article 2

An Engineering Intern Could not be Liable for Professional Negligence

See similar articles: Engineer Intern | Florida 558.0035 | Individual Liability | licensed Professional | Negligence

A developer filed suit against an engineering firm, two licensed engineers and one engineer intern. The intern was dismissed from the suit on the basis that as an intern the individual was immune from suit because he was an intern being supervised by licensed engineers and did not himself sign and seal relevant plans, or otherwise use any professional designation in connection with the project. The court does not discuss the merits of the suit against the two licensed individuals but it should be noted that in Florida, to protect individual engineers against liability it is important to include in the contract the following sentence, in all capital letters, and 5 font sizes larger than the text in the balance of the contract. “PURSUANT TO FLA.STAT.ANN. § 558.0035, AN INDIVIDUAL EMPLOYEE OR AGENT MAY NOT BE HELD INDIVIDUALLY LIABLE FOR NEGLIGENCE.”

Sunset Beach Investments, LLC v. Kimley-Horn and Associates, Inc., 207 So.3d 1012 (Fla. App. 2017).

The engineer intern moved for summary judgment on be basis of immunity from suit because he was not a licensed professional and was merely an employee of Kimley-Horn. His affidavit stated he had never been a professional engineer licensed in any state and is not subject to regulation in the State of Florida.

Under Florida common law, “where the negligent party is a professional, the law imposes a duty to perform the requested services in accordance with the standard of care used by similar professionals in the community under similar circumstances.” The issue in this appeal said the court, turns on the definition of “professional” and specifically whether an engineer intern is a “professional” for purposes of a professional negligence claim.

The appellate court concluded: “We conclude that a licensed engineer could be subject to a claim for professional negligence, as engineering is a profession which requires special education, training, skill. But [the intern] did not satisfy the requirements to be a licensed engineer. Instead, he was an engineer intern, which the legislature classifies differently from a licensed engineer.”

The plaintiff attempted to get around the requirement that the individual must have “special education” by arguing that this was a subjective determination to be made by the court. The court explained that that test would require courts to decide what qualifies as “special education,” what qualifies as “training,” and what is acceptable “experience.” At a minimum, concluded the court, “in a profession where a license exists, the existence of a license is a valid barometer for determining whether a person is classified as a professional.”

The Florida legislature did not include “engineer intern” within the definition of “engineer.” The statutory definitions, said the court, “clearly indicate that being an ‘engineer intern’ does not make a person an engineer.”

For these reasons, the court concluded that the intern was immune from suit.

Comment: As stated in the introductory paragraph of this article, the court didn’t discuss the merits of the suit against the two licensed individuals. In Florida, to protect individual engineers against individual liability it is important to include in the contract the following sentence, in all capital letters, and 5 font sizes larger than the text in the balance of the contract. “PURSUANT TO FLA.STAT.ANN. § 558.0035, AN INDIVIDUAL EMPLOYEE OR AGENT MAY NOT BE HELD INDIVIDUALLY LIABLE FOR NEGLIGENCE.”

This is necessary because previous Florida court decisions have found that the individual engineers may owe an independent duty of care to the client and third parties. One problem that can create is that if the engineering corporation has a good contract with reasonable allocation of risk, including a limitation of liability clause, that might not apply to the individual employee that is sued by the client for breach of an independent duty of care.

About the author: Article written by J. Kent Holland, Jr., a construction lawyer located in Tysons Corner, Virginia, with a national practice (formerly with Wickwire Gavin, P.C. and now with Construction Risk Counsel, PLLC) representing design professionals, contractors and project owners. He is founder and president of a consulting firm, ConstructionRisk, LLC, providing consulting services to owners, design professionals, contractors and attorneys on construction projects. He is publisher of ConstructionRisk.com Report and may be reached at Kent@ConstructionRisk.com or by calling 703-623-1932. This article is published in ConstructionRisk.com Report, Vol. 20, No. 9 (Oct 2018).

Article 3

Suit Limited to Breach of Contract/Warranty – Negligence Count was Duplicative and Dismissed

Breach of contract limited warranty was the only legal theory homeowner could pursue against builder. The negligence count was dismissed by the court as being duplicative of the breach of contract count and based on the exact same facts as what constituted the breach of contract claim. The risk allocation clauses of the contract including a limitation of liability and waiver of consequential clause were enforceable under the contract and could not be gotten around by filing a negligence claim seeking punitive damages where there was no independent duty owed to the homeowner outside of the contractual obligations. Millet v. Kamen, 2018 NY Slip Op. 28181 (N.Y. Sup. Ct. 2018).

The action arose out of the construction and sale to the plaintiffs of a new single family house. The developer/builder was a licensed architect. The parties had a contract of sale that included a limited warranty that replaced all other warranties that might otherwise arise. After the plaintiffs took possession of the house, and during the applicable warranty periods, they discovered latent defects that resulted from defective installation of plumbing, HVAC and electrical systems.

The plaintiffs filed suit initially for breach of contract and unjust enrichment. Subsequently, they amended the complaint to assert a negligence claim against the defendants and also a “malpractice” claim against the architect individually, and this included a demand for punitive damages. Defendants filed a motion for summary judgment on the basis that the claims for negligence and malpractice duplicated the breach of contract claim.

The negligence claim alleged that the defendants owed a duty to build, construct, alter, repair, maintain or oversee the building and construction in a safe and reasonable manner and to a standard of good and reasonable workmanship and craftsmanship. The complaint alleged twenty-two specifically enumerated defects.

The court found that the allegations in the “malpractice” claim were virtually identical to the negligence claim, including the dollar amount of the damages claimed. The malpractice claim also included a demand for $3.5 million in punitive damages based on what the plaintiffs’ claimed was negligence to the level of “exceptional/or outrageous conduct.”

Defendants moved to dismiss the negligence and malpractice claims on the grounds that they merely restate and replicate the breach of contract claim and are based on the identical set of facts. With regard to the punitive damages, the defendants argued that dismissal was warranted because punitive damages are not available for a mere breach of contract as it only involves a private wrong and not a public right. The express terms of the “Limited Warranty” provision of the contract excluded “special” damages.

In its analysis of the case, the court quoted case precedent for the proposition that “It is a well-settled principle that a simple breach of contract is not to be considered a tort unless a legal duty independent of the contract itself has been violated,” and “Merely alleging that the breach of a contract duty arose from a lack of due care will not transform a simple breach of contract into a tort.”

How is it decided if there is a duty independent of the contractual duty?

The court stated that in determining whether a legal duty independent of a contractual obligation should be imposed, courts look to the nature of the services performed and the parties’ relationship as well as the nature of the injury. Quoting case precedent, the court stated that, “Where plaintiff is essentially seeking enforcement of the bargain, the action should proceed under a contract theory.”

In this case the court found that nothing in the contract or complaint suggested that the architect was retained to provide architectural services or design a home “specifically for the Plaintiffs herein.” Rather, the court found that although the architect was involved in the design and construction, the nature of the parties’ relations was in contract.

The court stated, “The parties contemplated that [Architect’s] responsibility for defects and damages resulting from defective workmanship, materials, or design by [Architect] … and addressed it in the contract terms. The unambiguous terms detailed in the Limited Warranty were bargained for by the parties and determine the rights and obligations of the parties” including agreement to “limit [Architect’s] total liability to $500,000; and exclude all consequential, special, and indirect damages. The court sees no reason to disturb the parties’ clear and unequivocal agreement.”

In its concluding remarks the court found that “the damages alleged fall squarely within the contemplation of the parties under the contract” and “Since the plaintiffs ostensibly seek economic damages recoverable under a breach of contract theory, the Plaintiffs’ negligence claims must be dismissed as duplicative of their breach of contract claim.”

Comment: This is a good decision for explaining the importance of respecting and honoring the contract terms for which the parties bargained (including any risk allocation clauses) and not permitting a plaintiff to get out from under the contractual bargain by asserting a separate claims for negligence or malpractice. This decision does not discuss the economic loss doctrine but the principles discussed here support the reasoning for enforcing the economic loss doctrine to prevent negligence complaints when the parties are in a contractual relationship with each other.

Article 4

Contractor May Sue Construction Manager for Losses Due to Alleged Poor Project Oversight and Interference with Contractor’s Work

Contractor sued its client, the project owner, and sued the construction manager (CM) that was under contract to the owner – alleging that the CM failed in its obligation and duty to oversee and administer the project according to industry standards thereby impeding the contractor’s performance and adding extra costs and delay to its work. A trial court granted the CM summary judgment – finding the CM owed no independent duty of care to the contractor. This was reversed on appeal with a detailed analysis explaining that a CM with no contractual privity with the contractor can nevertheless be held liable because it has a high degree of control and power and knows its services will benefit the contractor as well as the project owner – and therefore owed a duty of care. Lathan Company v. State of Louisiana, 237 So 3d 1 (Louisiana App. 2017).

The court began its analysis by reviewing case precedent that has held an engineer that designed and supervised construction and prepared plans owed a duty to the general contractor’s surety to adequately supervise work to ensure completion in accordance with the contract plans and specifications (Calandro v. Butler, 249 So.2d 254 (1971). The court in that decision noted that a “third party who is not in privity may, nevertheless, have an action in tort against an architect or engineer [because] an engineer or architect must be deemed and held to know that his services are for the protection, not only of the interests of the owner” but also to third parties who must “rely on the architect or engineer to produce a completed project conformable with the contract plans and specifications.”

The court also cited a U.S. District Court decision from the Fifth Circuit that adopted a balancing test to be applied on a case-by-case basis in deterring whether a cause of action exists by a third party not in privity of contract. Factors include the extent to which the transaction was intended to affect the plaintiff, the foreseeability of harm to the plaintiff, the degree of certainty that the plaintiff suffered injury and the closeness of the connection between the defendant’s conduct and the injury.

In the current case, the contractor focuses on the management responsibilities and supervisory authority of the CM (Jacobs Project Management Company/CSRS Consortium). The court stated that although an affidavit may demonstrate that Jacobs didn’t draft the specifications or prepare design documents, there was evidence from the contractor establishing that Jacobs was to provide design management services, and document quality assurance/quality control reviews for schematic design, design development, and construction documents phases of the project.

The court concluded that the evidence submitted established that although Jacobs wasn’t responsible for signing change orders or construction change directives (CCDs), and was not required to respond to Requests for Information (RFIs), it was responsible for coordinating the management of invoices, contracts, and change orders. “Thus, if Jacobs improperly delayed the processing of invoices and RFIs, as alleged herein, it is foreseeable and to a degree certain that the project would be delayed, and thereby, adversely affect the work and profits of the general contractor….”

In conclusion, the court found, “Jacobs must be deemed and held to know that is services were not only for the protection or interests of the owner but also for third parties, including, specifically [construction contractor].” For these reasons, the court reversed the trial court’s grant of summary judgment and held that the contractor claim against the CM may go forward to trial.

Article 5

Contractor Entitled to Summary Judgment against Project Owner’s Negligence Claim where Contractor had no Design Responsibility for Disc Filter Equipment Provided by its Vendor pursuant to the Project Specifications

See similar articles: AECOM | Disc Filters | Economic Loss Doctrine | Expert Testimony | Penta

Where a town sued its general contractor (Penta Corporation) based on failure of its subontracted vendor/supplier’s equipment to perform as required by the project, the contractor was entitled to summary judgment because it did not design the equipment in question and it had no say in selecting the equipment – but instead purchased and installed what was required by the project plans and specifications contained in the bidding documents. Because the contractor had no design duties, it could’t, as a matter of law, be found to have breached any such duty. Penta Corporation v. Town of Newport v. AECOM v. WesTech Engineering (New Hampshire Super 2018, April 2018).

The Town’s assertion that the contractor had vicarious liability in tort for the failure of the equipment of its subcontractor was also rejected because the contractor could only be liable for the acts and omissions of its subcontractor in a breach of contract action. Even if the subcontractor was negligent, the court stated the prime could not be held liable in tort for the sub’s acts because it was an independent subcontractor over who’s work the prime contractor did not control.

Finally, the Town failed to present expert testimony to establish design duties of the contractor and this likewise entitled the contractor to summary judgment.

This decision also deals with numerous other issues concerning AECOM and arises out of the same project that we discussed in this newsletter over a year ago concerning indemnification obligations. Each subpart of the decision contains so many good lessons learned that we will likely write a series of separate case notes to address each of those subheadings in the decision. Look for this in an upcoming issue of ConstructionRisk.com Report.

Article 6

Contractor can’t be Sued for Damages Contribution by Engineer Where Contractor has no Possible Tort Liability to Injured Parties

See similar articles: AECOM | Contribution | Indemnification clause | Penta | Tort Liability

Based on a court’s dismissal of a town’s negligence claim against the prime contractor for failure of a vendor/supplier’s equipment to perform successfully, the contractor was granted summary judgment against a claim by AECOM, the project engineer, that was seeking contribution pursuant to a state statute, toward the town’s damages. The statute in question, like so many similar statutes around the country, specifically references contribution for “damages in tort” such as negligence. Penta Corp. v. Town of Newport v. AECOM v. WesTech (New Hampshire Super., 2018)

Contribution based on statutes such as this are not available in contract cases. In this matter, both AECOM and the construction contractor had different contracts with the town. Each party may defend itself against the town’s complaint on the ground that it did not breach its contract but that damages resulted from the breach by a different party of that party’s contract. As stated by the court, “Each party’s exposure is limited by the contract it made.”

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ConstructionRisk.com Report (October 2018)