GENERAL CONTRACTOR’S PROFESSIONAL MALPRACTICE / NEGLIGENCE CLAIM AGAINST DESIGN PROFESSIONAL

Posted on November 23, 2017November 23, 2017 by Edward Garber

A recent case supports a professional malpractice (negligence) claim by a general contractor against a design professional by reversing a trial court’s entry of summary judgment in favor of the design professional and finding a question of fact remained as to an architect’s role in the renovation of a public construction project. By the appellate court finding that a question of fact remained, the appellate court was finding that it was a triable issue, which is exactly what the general contractor wanted in this case. Getting this issue and the facts to the jury is the leverage the general contractor presumably wanted.

In Perez-Gurri Corp. v. Mcleod, 42 Fla. L. Weekly D2487c (Fla. 3d DCA 2017), a general contractor was hired by Miami to renovate a public project. Miami’s prime consultant subcontracted with an architectural firm to prepare the design documents for the renovation. The construction of the project was delayed and the general contractor filed suit against the architectural firm and other design professionals for professional negligence. The general contractor’s theory was that the design professional’s professional negligence delayed construction thereby causing the general contractor to incur increased costs (such as extended general conditions).

Architectural Role or Services

The architect claimed it played no role in the project. It is uncertain from the opinion whether the architect was claiming it literally played no role in the project or whether its position was that its role was so limited that a duty was not owed to the general contractor. Either way, the court was focused on the role the architect played in the renovation of the project and held a question of fact remained as to the services or role the architect played in the construction of the project. This is a pretty loose standard because it presumably allows the jury to determine (i) whether the architect rendered services or performed a role on the project and, if so, (ii) whether the role or services caused a delay in the construction of the project. The reason this standard appears loose is because there isn’t any discussion as to the type of professional services or role that the architect must play for a duty to be extended to the general contractor. (For there to be a professional negligence claim against the architect, the architect must be deemed to owe a duty to the general contractor with respect to the services or role it is performing.)

No-Damage-For-Delay Provision

This case also had a discussion regarding the no-damage-for-delay provision in the general contractor’s contract with the City. The trial court held that the architect was protected by this provision. (A no-damage-for-delay provision provides that a contractor’s exclusive remedy for delay is an extension of time, and it is not entitled to damages.) The appellate court reversed maintaining nothing in the no-damage-for-delay provision extended to the architect. And, the contract further provided there are no third party beneficiaries to the contract.

Considerations

This recent opinion leads to a few important points.

First, as a general contractor, you ideally do not want to extend a no-damage-for-delay provision to anyone but the owner that hires you. From an owner’s perspective, if you want the no-damage-for-delay provision to benefit your consultants, you want to ensure that protection is clearly articulated in the no-damage-for-delay provision with a carve-out in the provision that references there are no third party beneficiaries.

Second, no-damage-for-delay provisions are not absolute, meaning there are exceptions to a no-damage-for-delay provision. There was no discussion as to the applicability of those exceptions here. Perhaps that is because the facts did not warrant the applicability of an exception or there was no need to go into such discussion since the no-damage-for-delay provision did not extend to the architect, or any design professional for that matter. But, the applicability of an exception could also raise a question of fact.

Third, and mentioned above, there is no discussion as to the role or services the architect must perform for a duty to be extended to the general contractor. Thus, even if the architect played a role or performed services, the case does not go into detail as to whether such role or services would even rise up to a level of the architect owing a duty to the general contractor. This is important since the issue of duty is typically a question of law for the court to decide.

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

NEGLIGENCE OF PROPERTY APPRAISER

Posted on September 27, 2017September 27, 2017 by Edward Garber

A new appellate decision came out discussing the statute of limitations associated with a negligence claim against a property appraiser. In this case, Llano Financing Group, LLC v. Petit, 42 Fla. L. Weekly D2071a (Fla. 1^st DCA 2017), the court held that the four year statute of limitations for negligence claims commences when the lender relied on the appraisal to fund the loan. The statute of limitations does not commence years later when the property is ultimately sold at a loss. Oh no. Once the lender receives the appraisal and funds the loan, the statute of limitations for the negligence claim begins. Applying this rationale in other contexts, the statute of limitations to sue a property appraiser in negligence would commence once an appraisal is received and relied on. This is best explained by the following hypothetical footnoted by the court:

Consider this example: An appraiser negligently appraises a $100,000 house at $150,000. A buyer reasonably relies on that negligent appraisal and buys the $100,000 house for $150,000. The buyer’s damages ($50,000) are easily determined immediately after the sale. Those damages would be the same whether the buyer promptly sold the home at a loss, lived in it forever, or sold it for $200,000 after decades of market appreciation.

Llano Financing Group, supra, n. 3.

If you feel like you suffered a loss at the hands of a negligent appraisal, make sure you consult counsel. Based on the court’s decision in this case, the lender’s statute of limitations expired. Make sure this does not happen to you.

NEGLIGENT PROCUREMENT OF INSURANCE

Posted on May 13, 2017May 13, 2017 by Edward Garber

As you know, insurance is an important part of risk assessment for many, many business needs. Oftentimes, an insured relies on an insurance broker or agent to procure specific insurance to meet its express business objectives and risks. Notably, there is a potential negligence claim associated with an insurance agent or broker’s negligent procurement of insurance for an insured. While this is not the easiest claim to prove, a recent Third District case explained this standard:

It is well settled that “where an insurance agent or broker undertakes to obtain insurance coverage for another person and fails to do so, he may be held liable for resulting damages for . . . negligence. More specifically, and as applicable here, “[a]n agent is required to use reasonable skill and diligence, and liability may result from a negligent failure to obtain coverage which is specifically requested or clearly warranted by the insured’s expressed needs.” As explained by our sister court, “[t]his general duty requires the agent to exercise due care in correctly advising the insured of the existence and availability of particular insurance, including the availability and desirability of obtaining higher limits, depending on the scope of the agents undertaking.”

Kendall South Medical Center, Inc. v. Consolidated Ins. Nation, Inc., 42 Fla. L. Weekly D1071a (Fla. 3d DCA 2017) (internal quotations omitted).

In this case, a leak occurred on commercial leased premises. The commercial tenant had a property insurance policy that provided $100,000 of coverage for the physical improvements and contents of the property. However, there was a 90% coinsurance provision. A coinsurance provision shifts risk to the insured when the insured purchases less coverage than the value of the property.

As a result of the coinsurance provision, the insured only received a fraction of its damages, and less than the $100,000 in coverage. The insured, however, claimed it was under the belief it would recover $100,000 in insurance proceeds as that was what it told its agent it needed. The insured sued its insurance agent claiming the agent’s failure to advise it that the procured policy did not address its expressed insurance needs. “[W]hen an insured alleges that it specifically communicated its insurance needs to an agent who then undertook to procure a policy addressing such needs, the insured states a cause of action for negligent procurement where it also alleges that, without providing an explanation that different coverage was required, the agent procured a policy not meeting those expressed needs.” Kendall South Medical Center, supra.

Perhaps this could have been avoided had the insured reviewed the specific terms of the insurance policy. Perhaps there are e-mails or other records where the insurance agent explained that the coverage the insured was seeking could not be procured without a coinsurance provision that shifted the risk to the insured. Know your insurance and know the risks and coverage afforded to you!

DESIGN PROFESSIONAL NEEDS A LICENSE TO BE SUED FOR PROFESSIONAL NEGLIGENCE

Posted on January 6, 2017November 8, 2024 by Edward Garber

“With regard to claims for professional negligence, the Florida Supreme Court has explained that ‘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.’” Sunset Beach Investments, LLC v. Kimley-Horn and Associates, 42 Fla. L. Weekly D130a (Fla. 4^th DCA 2017) quoting Moransais v. Heathman, 744 So.2d 973, 975-76 (Fla. 1999).

When it comes to professional negligence, two things are important:

1) the person being sued is a professional under the law (person has special education, training, experience, and skill) and

2) the standard of care for that professional (e.g, licensed, professional engineer).

In a recent case, an engineering intern—not, a licensed, professional engineer–was sued for professional negligence. The Fourth District Court of Appeal held that an engineering intern is not a person that can be sued for professional negligence, unlike a licensed, professional engineer. Sunset Beach Investments, supra.

The Fourth District explained that an engineering intern, by way of example, is not a professional because an engineering intern does not maintain a license. If the court treated an engineering intern as a professional than it would be walking down a slippery slope when it came to who is a professional and who is not. Instead of walking down that slippery slope, the court stated: “At a minimum, 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. “ Sunset Beach Investments, supra.

DESIGN PROFESSIONAL’S DUTY OF CARE NOT EXTENDED TO SUBCONTRACTORS

Posted on January 8, 2015November 8, 2024 by Edward Garber

In construction defect lawsuits, subcontractors responsible for the alleged deficient work or damage are third-partied into the lawsuit by the general contractor that hired them. And, sometimes, an owner (or association) tries to assert a claim directly against responsible subcontractors. There are times where subcontractors have the defense that the deficiencies and damages complained of are the result of design errors and omissions. A question becomes whether a subcontractor can assert a negligence claim directly against that design professional as a way to flow any potential exposure to the design professional.

Unfortunately, there is case law that says that a supervising design professional does NOT owe any duty of care to a subcontractor. See Spancrete, Inc. v. Ronald E. Frazier & Associates, P.A., 630 So.2d 1197 (Fla. 3d DCA 1994) (duty of care that supervising architect owed to general contractor did not extend to subcontractors); McElvy, Jennewein, Stefany, Howard, Inc. v. Arlington Electric, Inc., 582 So.2d 47 (Fla. 2d DCA 1991) (trial court erred in allowing case to go to jury because architect’s duty of care could not have been extended to subcontractors); E.C. Goldman, Inc. v. A/R/C Associates, Inc., 543 So.2d 1268 (Fla. 5^th DCA 1989) (consulting engineering/expert firm hired by owner to inspect and advise owner about roof owed no duty of care to roofing subcontractor). Without this duty of care, a subcontractor would NOT be able to pursue a negligence claim against the design professional because this duty of care is the very first element required to prove a negligence claim. (In order to prove a negligence claim, a plaintiff needs to prove that 1) the defendant owed the plaintiff a duty of care, 2) the defendant breached that duty of care, 3) that breach proximately caused damages/injuries to the plaintiff, and 4) the plaintiff was damaged/injured.) This does mean the subcontractor cannot assert the design professional’s errors and omissions as a defense, it just means that it will be an uphill battle for a subcontractor to assert an affirmative claim against the design professional.

THE IMPORTANCE OF SAFETY

Posted on December 1, 2013November 8, 2024 by Edward Garber

Participants in construction NEED to have safety programs and protocols. Many contractors do in order to minimize injury and prevent death and many even employ a safety officer on their projects. Safety protocols are also important to ensure compliance with the Occupational Safety and Health Administration’s (OSHA) health and safety regulations. Safety programs and common contractual provisions require parties to keep their work environment clean and without debris. For example, section 3.15.1 of the AIA A201 General Conditions (2007) provides:

“The Contractor shall keep the premises and surrounding area free from accumulation of waste materials or rubbish caused by operations under the Contract. At completion of the Work, the Contractor shall remove waste materials, rubbish, the Contractor’s tools, construction equipment, machinery and surplus materials from and about the Project.”

Safety programs are not only important for contractors and subcontractors, but also for those invitees that are invited to the construction project. The case of Skala v. Lyons Heritage Corp., 38 Fla. L. Weekly D2485b (Fla. 2d DCA 2013), exemplifies what can happen if an invitee of a general contractor gets injured from construction debris. In this case, the general contractor on an ongoing residential project was interested in hiring a new tile installer for the project. There was an issue with the performance of the original tile installer. The new tile installer was asked to inspect the installed tile work in order to provide an estimate as to what it would cost to fix and complete the work. A contract was not executed and there was no confirmation that a price would even be reached. During the inspection, the new tile installer tripped and fell on known and obvious construction debris while entering the house and suffered fractures in both of this arms. The new tile installer sued the general contractor for negligence asserting that the contractor failed to maintain the premises in a safe condition. The trial court entered summary judgment in favor of the general contractor.

On appeal, the Second District found that the new tile installer was a business invitee (i.e., a person invited to property by the possessor of the property)–”because Mr. Skala [new tile installer] was a business invitee on the property, Lyons Heritage [general contractor], as the possessor of the premises, owed him a duty, as a matter of law, to maintain the premises in a reasonably safe condition.” Skala, supra (internal quotation omitted).

The general contractor, however, would not be liable for injuries caused by known or obvious dangers, such as the known and obvious construction debris, unless it should have anticipated the injuries despite the known or obvious nature of the dangers. This is referred to as the obvious nature doctrine: “The obvious danger doctrine provides that an owner or possessor of land is not liable for injuries to an invitee caused by a dangerous condition on the premises when the danger is known or obvious to the injured party, unless the owner or possessor should anticipate the harm despite the fact that the dangerous condition is open and obvious.” Skala, supra, quoting DeCruz-Haymer v. Festival Food Mkt., Inc., 117 So. 3d 885, 888 (Fla. 4th DCA 2013). Stated differently, the possessor of the property can be held liable for the obvious dangerous condition if he can reasonably foresee that the condition will cause harm and will be encountered by the invitee. Id. quoting Ahl v. Stone Sw., Inc., 666 So. 2d 922, 925 (Fla. 1st DCA 1995) (“A reasonable probability to expect harm to an invitee from known and obvious dangers may arise . . . if the landowner may expect that the invitee will encounter the known or obvious danger, because, to a reasonable person in the invitee’s position, the advantages of [facing the danger] would outweigh the apparent risk.”)

The Second District reversed the summary judgment finding an issue of fact existed as to whether the exception to the obvious danger doctrine applied, that being that the general contractor should have anticipated that the new tile installer would encounter the known and obvious construction debris because, to a reasonable person in the installer’s position, the advantages of facing the construction debris would outweigh the risk.

If the construction debris was not known and obvious to the new tile installer, the general contractor would have also been sued in negligence under a theory that it breached its duty of warning the new tile installer of a latent dangerous condition. See Skala, supra, n. 3 (finding that the general contractor had the duty to warn the new tile installer / invitee of latent dangerous conditions).

This case illustrates one example of the importance of safety. Safety programs should not be taken lightly! Sometimes, with business invitees, it is good practice to have them provide a release before they enter the property to the owner, contractor, and applicable parties.

As an aside, the Concrete Construction Magazine in November 2013 tweeted an interesting 2010 statistic from the United States Department of Labor (the OSHA agency falls within the Department of Labor) itemizing the most common OSHA violations in 2010 were for scaffolding, fall protection, stairways and ladders, personal protective equipment, electrical, health hazards, general provisions, and trenching.

CONTRIBUTION CLAIMS TO PASS-THROUGH LIABILITY

Posted on October 7, 2013November 8, 2024 by Edward Garber

In lawsuits, there are times the defendant elects to sue a third-party defendant to pass-through its liability to the plaintiff to the third-party defendant. For example, in a construction defect scenario where the owner sues the general contractor, the general contractor will often sue subcontractors (third-party defendants) in order to pass-through its liability to the owner to subcontractors that performed the scopes of work at-issue. In other situations, a defendant may assert a cross-claim against another defendant to, among other things, pass-through any liability it has to the plaintiff to the other defendant. For example, in a construction defect scenario where the owner sues both the general contractor and subcontractors, the general contractor will often assert a cross-claim against the subcontractors to pass through its liability to the subcontractors.

A claim for contribution used to be a common claim asserted to pass-through liability in negligence-related actions. Contribution claims were routine in negligence actions when there used to be joint and several liability, i.e., a party could be responsible for all of the plaintiff’s damages irrespective of its percentage of fault with other defendants. “To state a claim for contribution, the claimant must allege a common liability to the injured party [plaintiff].” Horowitz v. Laske, 855 So.2d 169, 174(Fla. 5th DCA 2003). In other words, the defendant and third-party defendant must be jointly liable / negligent to the plaintiff for the injuries the plaintiff sustained. Therefore, by asserting a contribution claim, the defendant ensures that fault is allocated to another party that is jointly liable for the damages sustained by the plaintiff.

However, Florida abolished joint and several liability in negligence actions and, now, a defendant can only be liable based on its determined percentage of fault. See Fla. Stat. s. 768.81; see also T&S Enterprises Handicap Accessibility, Inc. v. Wink Indus. Maintenance & Repair, Inc., 11 So.3d 411 (Fla. 2d DCA 2009) (affirming dismissal of defendant’s third party claim for contribution in underlying negligence action due to abolishment of joint and several liability). Because of this, third-party defendants or cross-claim defendants that are sued for contribution should argue that the contribution claim is moot because the party suing it can only be held liable for its percentage of fault or negligence. Some judges will dismiss a contribution claim for this reason on a motion to dismiss, but others will still allow the claim to proceed beyond a motion to dismiss for judicial efficiency and economy since it is easier to wrap up a dispute in one litigation instead of many (considering contribution claims have been routine claims to pass-through liability).

The opinion in Martinez v. Miami-Dade County, 2013 WL 5434159 (S.D.Fla. 2013) is a non-construction case that illustrates how a claim for contribution can proceed. In this case, a plaintiff sued Miami-Dade County and a bar for injuries the plaintiff sustained by off-duty police officers providing security for the bar. The claims against Miami-Dade Couty were sounded in intentional tort theories and not negligence theories. Miami-Dade County asserted a cross-claim against the bar and included a claim for contribution. The bar moved to dismiss the contribution claim arguing that contribution claims are obsolete under Florida law since there is no more joint and several liability. The Southern District Court disagreed expressing that because the plaintiff’s theories against Miami-Dade County were sounded in intentional tort and not negligence, section 768.81 did not apply. (Notably, section 768.81 section does not apply to intentional tort theories of liability.)

Under section 768.81, a negligence action means “without limitation, a civil action for damages based upon a theory of negligence, strict liability, products liability, professional malpractice whether couched in terms of contract or tort, or breach of warranty and like theories. The substance of an action, not conclusory terms used by a party, determines whether an action is a negligence action.” Fla. Stat. s. 768.81(1)(c). Therefore, even if the claims asserted are not labeled negligence claims, this section still applies to bar joint and several liability to ensure a party is only liable for their percentage of fault. It is designed so that substance over form is analyzed to determine whether the plaintiff’s underlying action is a negligence action even if it is not labeled as such.

This opinion in Martinez, however, could support the argument that a contribution claim could be asserted outside of a negligence claim such as a breach of contract action (since, in the case, a contribution claim was still allowed to proceed in an intentional tort action). And, even though section 768.81 shifts the focus from the label of the plaintiff’s claims to the actual substance underlying the claims, the objective is to argue that plaintiff’s claims are not based in negligence, but based in a material breach of a contractual provision. For example, in a construction defect setting, when the general contractor is sued for breach of contract, there may be strategic reasons why the general contractor would want to attempt to assert a contribution claim in addition to an indemnification claim against subcontractors to pass-through liability. The general contractor would argue that the plaintiff’s claims are not based in negligence but based in contract since the plaintiff is asserting that the project was not constructed per the contract documents (or in a workmanlike manner) per contractual provisions.

Finally, if a general contractor elects to assert a contribution claim, it is important to remember that the claim will only survive if it asserts and can establish that it and the subcontractor(s) share a common liability to the owner. This is challenging.

In Helmet House Corp. v. Stoddard, 861 So.2d 1178 (Fla. 4th DCA 2003), a contractor was sued by an owner for breach of contract and breach of warranty for defective construction of a roof. The contractor asserted a third party party complaint against its roofing subcontractor for contribution. The Fourth District held that the contractor could not pursue a contribution claim against its subcontractor because the subcontractor did not share a common obligation / liability to the owner. The Fourth District found that parties share a common liability if they are joint tortfeasors or co-obligors on an obligation. Importantly, many subcontracts contain flow-down provisions that bind the subcontractor to the general contractor to the same extent the general contractor is bound to the owner. Flow-down provisions attempt to impose the exact same liability on the subcontractor that the general contractor assumes towards the owner. With this type of provision, or an alternative provision that would make the owner an intended third-party beneficiary of the subcontract, there may be an argument that subcontractors do indeed share a common liability to the owner with the general contractor for defects with their scopes of work. From the general contractor’s perspective, the objective is to pass-through liability for defective construction with arguments based on the plaintiff’s allegations in the complaint.

A GENERAL CONTRACTOR NEEDS TO UNDERSTAND CERTAIN LEGAL DOCTRINES BEFORE SUING A STATE (INCLUDING AGENCY OR SUBDIVISION) AND DESIGN PROFESSIONAL THAT IT DID NOT HIRE

Posted on June 18, 2013November 8, 2024 by Edward Garber

The recent Florida district court case, Posen Construction, Inc. v. Lee County, et al., 2013 WL 375430 (M.D.Fla. 2013), ruling on various motions to dismiss, is an interesting case that discusses two important doctrines. In this case, a roadway contractor constructing a road project for Lee County sued Lee County and Lee County’s design professionals (hired by the County) for delays and additional costs it incurred in the performance of its work. This case, among other things, discusses a state’s (inclusive of a state agency or subdivision) sovereign immunity for claims for additional work (absent a change order) and the duty of care for purposes of a negligence claim that a design professional owes to a general contractor (when the general contractor did not hire the design professional).

The first doctrine is known as the Miorelli doctrine which refers to a state’s (or its agencies or subdivisions) soverign immunity for extra-contractual work claims that arise on a construction project. The Miorelli doctrine is based on the Florida Supreme Court case, County of Brevard v. Miorelli Engineering, Inc., 703 So.2d 1049 (1998). The Miorelli doctrine, as maintained by the Posen court, has evolved into the following doctrine: “A claim for damages predicated on work ‘totally outside the terms of the contract’ is barred by the doctrine of sovereign immunity [unless memorialized in a written executed change order], whereas damages caused by extra work done at the state’s behest and in furtherance of contractual covenants (express or implied) are potentially recoverable.” Posen Construction, supra at *3 citing Miorelli, 703 So.2d at 1051. In applying the Miorelli doctrine, the Posen court expressed:

“To be clear, if Posen’s [contractor] claim is predicated on work ‘totally outside the terms of the contract’ it will fail by application of the Miorelli decision. On the other hand, claims for damages caused by additional work performed in furtherance of either express or implied covenants of the written contract fall within Florida’s implied waiver of sovereign immunity…”

If a contractor is suing a state (or a state agency or subdivision) for additional costs that are not memorialized in a written executed change order, it is important that the contractor is aware of the Miorelli doctrine in order to best craft arguments to potentially recover the additional costs. The reason being is that the contractor can almost be certain that the state will raise the Miorelli doctrine through the motion to dismiss and/or summary judgment stages to establish that the state has sovereign immunity for such claims and damages. The key is that the argument should center on the additional costs being covered by the expansive scope of work set forth in the contractor’s contract with the state versus constituting work that is materially different than what the contractor bargained for.

The second doctrine is known as the A.R. Moyer doctrine which refers to a design professional’s duty of care to a general contractor on a construction project (when there is no contractual privity between the contractor and design professional). The A.R. Moyer doctrine is based on the Florida Supreme Court case, A.R. Moyer v. Graham, 285 So.2d 397 (Fla. 1973). In A.R. Moyer, a contractor sued a supervising architect in negligence. The Florida Supreme Court in A.R. Moyer maintained:

“Each of the [following] conditions would present a cause of action [in negligence against a supervising architect or engineer]: (a) supervising architect or engineer is negligent is preparation of plans and specifications; (b) the supervising architect or engineer negligently causes delays in preparation of corrected plans and specifications; (c) the supervising architect or engineer negligently prepared and negligently supervised corrected plans and specifications; (d) the supervising architect or engineer failed to award an architect’s certificate of completion of the project; (e) the architect or engineer was negligent in exercise of supervision and control of contractor…” Posen Construction, supra, citing A.R. Moyer, 285 So.2d at 402.

Stated differently, the design professional must have a supervisory role or element of control (also referred to as a close nexus to the contractor) in order for the design professional to owe a legal duty to the contractor. The Posen court clarified that “supervising architects and engineers are liable for the foreseeable injuries to general contractors proximately caused by their negligent conduct even where there is an absence of contractual privity, whereas nonsupervising engineers and architects—irrespective of when they are hired—will not be.” Posen Construction, supra, at *12.

If a contractor is suing a design professional in negligence, it is important for the contractor to understand the A.R. Moyer doctrine and that the required legal element of “duty” is based on the supervisory status of the architect or engineer. This will allow the contractor to best phrase legal theories knowing that the design professional will raise this doctrine at the motion to dismiss and/or motion for summary judgment stages. However, absent this supervisory status or close nexus between the design professional and general contractor, the design professional will not be deemed to owe a legal duty to the contractor.

THE SLOW OR NOT SO SLOW DEATH OF THE ECONOMIC LOSS RULE

Posted on March 9, 2013November 8, 2024 by Edward Garber

What is the economic loss rule in Florida? The answer — who really knows anymore.

The economic loss rule was a rule that applied in two scenarios. Under the first scenario, the economic loss rule said that if parties were in contractual privity, one party cannot sue the other party under tort theories (such as negligence) for damages that arise out of the contract. In other words, a party cannot get around the contractual remedies and damages by suing for tort instead of for breach of contract. However, over the years, this scenario has been watered down by various exceptions that allows a party to sue in tort if their damages were independent from the contract (such as damages from being fraudulently induced into the contract, etc.) or the party they were suing was a professional (such as an architect, engineer, etc.). Nevertheless, the rule still applied to prevent a majority of contracting parties from suing in tort instead of for breach of a contract, thereby maintaining the integrity of contract law.

The second scenario the economic loss rule applied was in the products liability context. Under this scenario, a manufacturer cannot be sued by a non-contracting party, in particular, for a defect in a product unless that product causes personal injury or damage to other property. However, if the product just damages itself (in other words, the product is simply defective), then the economic loss rule could apply to bar a tort claim against a manufacturer.

Confusing? Yes! To add confusion, the Florida Supreme Court in Tiara Condominium Association, Inc. v. Marsh & Mclennan Companies, Inc., 38 F. L. Weekly S151a (Fla. 2013), eliminated the the first scenario in which the economic loss rule applied. In this case and in eliminating the first scenario, the Florida Supreme Court maintained that an insured’s tort claims (negligence and breach of fiduciary duty) against its insurance broker that it was in contractual privity with was not barred by the economic loss rule.

What exactly does this ruling mean? Ultimately, it means that parties that are in contractual privity could sue each other under tort theories such as negligence to potentially recoup damages in excess of the recoverable breach of contract damages and/or to get around contractual provisions and remedies. Thus, tort claims are now available, and quite frankly, will be pursued and argued, against contracting parties. If the Florida Supreme Court finds that tort claims between an insured and the insured’s broker (where the parties were in contractual privity) are permissible, then just think of the arguments and tort claims that could be made to dilute contract law.

INTERFERING, EXISTING UNDERGROUND UTILITIES

Posted on October 27, 2012November 8, 2024 by Edward Garber

Horizontal projects (public roadway projects and other infrastructure improvements, etc.) often require the identification and relocation of existing underground utilities. The underground utility company / owner is typically notified of the project (and the plans for the project) so that it can identify and relocate existing utilities if they interfere with the project’s plans.

The recent case of Florida Power & Light Co. v. Russell Engineering, Inc., 96 So.3d 1016 (Fla. 4th DCA 2012), dealt with a utility company that did not properly locate an underground utility. This meant that the contractor installing underground drainage piping had to incur additional costs because the existing utility interfered with the planned path of the drainage piping.

The public owner assigned its rights against the utility company to the contractor that installed the drainage piping to recoup the additional costs. The utility company argued that under Florida statutory law (particularly Florida Statute sections 337.403 and 337.404) the public owner has an exclusive remedy of requiring the owner of the interfering utility to relocate or remove the utility before it can legally incur any damages. The trial court disagreed and damages were awarded to the contractor. On appeal, the Fourth District Court of Appeal affirmed the trial court’s ruling focusing on the following italicized language in section 337.403:

“(1) Whenever it shall become necessary for the authority to remove or relocate any utility as provided in the preceding section, the [utility company] shall be given notice of such removal or relocation and an order requiring the payment of the cost thereof, and shall be given reasonable time, which shall not be less than 20 nor more than 30 days, in which to appear before the authority to contest the reasonableness of the order . . . .”

The Fourth District found that this language was important because in the instant case it was not necessary for the existing, interfering underground utility to be removed or relocated because the contractor simply worked around the utility resulting in its costs to increase.

This case supports a negligence argument against a utility owner in the event additional costs are incurred due to the utility company failing to property locate an existing utility. (This was the situation in the discussed case because the drainage piping was simply redesigned to bypass the interfering, existing utility.) However, it would seem that a public owner and contractor would have to work around the existing utility (through a redesign, etc.). On the other hand, if the existing utility could not be worked around, then the statutory procedures set forth in sections 337.403 and 337.404 (not discussed in this posting) would apply.