ECONOMIC LOSS RULE BARS CLAIMS AGAINST MANUFACTURER

The economic loss rule lives to bar a claim against a product manufacturer in a real estate transaction.  In a products liability action, there needs to be personal injury or property damage, other than to the property itself, in order to recover economic damages.  Otherwise, the economic loss rule will bar the recovery of such economic losses when the economic losses deal to the product itself.  This is important to keep in mind in any product liability action against a manufacturer.

In a recent case, 2711 Hollywood Beach Condominium Ass’n, Inc., v. TRG Holiday, Ltd., 45 Fla. L. Weekly D2179a (Fla. 3d DCA 2020), a condominium association purchased the condominium from the developer.  Subsequently, it noticed leaks with the fire suppression system in the condominium and sued multiple parties for damages for repairs due to the leaks and the replacement of the fire suppression system.  One of the parties sued in negligence and strict liability was a manufacturer of pipe fittings used in the fire suppression system.  The manufacturer moved for summary judgment based on the economic loss rule and relying on the 1993 Florida Supreme Court opinion in Casa Clara Condominium Ass’n v. Charley Toppino & Sons, Inc., 620 So.2d 1244 (Fla. 1993), holding “the economic loss rule limited a defendant’s tort liability for allegedly defective products to injuries caused to persons or damage caused to property other than the defective product itself.”  2711 Hollywood Beach Conominium Ass’n, supra.  The trial court agreed with the manufacturer and granted summary judgment.  On appeal, the Third District affirmed based on the economic loss rule:

The Association bargained for, purchased and received a building; [the manufactuer’s] fittings were only a component of the FSS [fire suppression system], incorporated into the building. Applying the rule set forth in Casa Clara, the Association purchased a completed building from the developer. [The manufactuer’s] fittings were “an integral part of the finished product and, thus, did not injure ‘other’ property.”  Injury to the building itself is not injury to “other” property because the product purchased by the Association was the buildingSee Casa Clara, 620 So. 2d at 1247. The economic loss rule therefore bars the Association’s recovery as to [the manufacturer] to the extent that it sought damages to replace the FSS [fire suppression system] and repair damage to the building.

2711 Hollywood Beach Conominium Ass’n, supra (internal citations omitted).

Notably, in Casa Clara, homeowners sued a concrete supplier for supplying defective concrete that caused the reinforcing steel in the concrete in their homes to rust.  The concrete supplier, in an action that went up to the Florida Supreme Court, prevailed based on the economic loss rule because there was no personal injury or damage to property other than the property itself, which was the completed building.  As the Florida Supreme Court held:

The homeowners also argue that [the supplier’s] concrete damaged “other” property because the individual components and items of building material, not the homes themselves, are the products they purchased. We disagree. The character of a loss determines the appropriate remedies, and, to determine the character of a loss, one must look to the product purchased by the plaintiff, not the product sold by the defendant.  Generally, house buyers have little or no interest in how or where the individual components of a house are obtained. They are content to let the builder produce the finished product, i.e., a house. These homeowners bought finished products—dwellings—not the individual components of those dwellings. They bargained for the finished products, not their various components. The concrete became an integral part of the finished product and, thus, did not injure “other” property.

We also disagree with the homeowners that the mere possibility that the exploding concrete will cause physical injury is sufficient reason to abrogate the economic loss rule. This argument goes completely against the principle that injury must occur before a negligence action exists. Because an injury has not occurred, its extent and the identity of injured persons is completely speculative. Thus, the degree of risk is indeterminate, with no guarantee that damages will be reasonably related to the risk of injury, and with no possibility for the producer of a product to structure its business behavior to cover that risk. Agreeing with the homeowners’ argument would make it difficult “to maintain a realistic limitation on damages.”

Casa Clara, supra, at 1247 (internal citations omitted)

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.

 

COMPARATIVE FAULT APPLIED IN OWNER’S LAWSUIT AGAINST CONTRACTOR AND ENGINEER

There is nothing like a good old-fashioned dispute between an owner and its general contractor and design professional relating to construction and design defects where both parties have a role in the owner’s damages.  There are arguments that both the general contractor and design professional substantially contributed to the defects and damages.  Are the contractor and design professional jointly and severally liable for the owner’s damages?  Or, does comparative fault apply where the trial of fact allocates the contractor’s and engineer’s percentage of fault for the defects and damage?    A recent case found that comparative fault applied such that the trier of fact, in this case the judge, could allocate damages based the judge’s finding of the parties’ percentage of fault.  (For more information in comparative fault, please check this article.).  Comparative fault is not what an owner ideally wants because joint and several liability would be preferred.  However, this is what the contractor and engineer would want since their liability for damages is predicated on their percentage of responsibility as opposed to being liable for all of the damages.

In Broward County, Florida v. CH2M Hill, Inc., 45 Fla. L. Weekly D1736a (Fla. 4th DCA 2020), a public owner hired an engineer for airport improvements that included a taxiway to be designed and constructed in accordance with the Federal Aviation Administration’s design requirements.   The public owner also hired (i) a program manager to serve as its on-site representative and (ii) a separate engineering firm to provide materials testing and inspection services.  The public owner also hired a contractor to construct the taxiway.

Prior to substantial completion of the taxiway, the public owner discovered indentations in the surface of the taxiway (referred to as rutting).  This discovery prompted the public owner to investigate.  The public owner directed the contractor to mill away two inches of asphalt and install new asphalt.   The contractor achieved substantial completion in September 2008 and final completion in November 2008.  The contractor then submitted its final payment application to the public owner.  The public owner notified the contractor that it would retain money to deal with repairs associated with the indentations in the surface of the taxiway.  The public owner hired a new engineer to design the repairs.  The repair design was more robust (better) than the original engineer’s design because the repair engineer believed the new design was necessary to achieve a 20-year lifespan for the taxiway. A new contractor performed the repairs.

The contractor sued the public owner for nonpayment.  The contractor also sued the engineer for professional negligence in the design of the taxiway.    The pubic owner counter-sued the contractor for breach of contract and sued the engineer for breach of contract and indemnification.  The public owner asserted that the contractor performed defective construction and the engineer committed errors, omissions, and defects in the design and was obligated to indemnify the public owner for liability arising out of the design.  The public owner also sued its program manager (on-site representative) and testing engineer; these two parties settled prior to trial.

At trial, the public owner’s expert testified that both the contractor and engineer contributed to the indentations in the surface of the taxiway.  The expert testified that the engineer’s design deviated from the Federal Aviation Administration’s requirements and was doomed to fail such that if the contractor complied with the design, it would still fail.  The expert further testified that while the contractor contributed to the indentations as it failed to construct subgrade per the engineer’s design, it was to a lesser contributing factor than the engineer.

The engineer’s expert testified that the indentations were caused by undercompaction performed by the contractor.  The expert further testified that the public owner’s program manager violated its standard of care by allowing the contractor to deviate from the engineer’s original design in numerous ways.

The contractor’s expert testified that the indentations were caused by the design and undercompaction.

The trial court found that both the engineer and the contractor’s breaches were the proximate cause of the redesign of the taxiway.  The trial court also found that the public owner’s program manager, which had settled prior to trial, was also liable.  The trial court further found that public owner’s total damages were $6,2703,303 of which $725,000 was paid to the public owner pre-suit by the program manager and testing engineer.  After deducting this amount from the total damages, the trial court allocated damages as follows: (1) 60% was allocated to the non-party program manager (that had settled pre-suit); (2) 25% was allocated to the contractor; and (3) 15% was allocated to the engineer.   The public owner appealed the allocation in the final judgment.  The public owner argued that the trial court should not have apportioned liability at all because comparative fault does not apply in breach of contract cases.  Instead, the public owner contended that the trial court should have found that the engineer and contractor were jointly and severally liable for the damage (indentations) because their separate contractual breaches caused a single, indivisible injury.

The Fourth District Court of Appeal disagreed with the public owner concluding that Florida Statute s. 768.81 dealing with comparative fault authorized the trial court to allocate fault.  While comparative fault under s. 768.81 deals with negligence actions, it defines a negligence action as 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.”  Broward County, Florida, supra, quoting Fla. Stat. s. 768.81.

The public owner’s claim against the professional engineer was predicated on the engineer breaching a contractual standard of care that required it to design the taxiway pursuant to the Federal Aviation Administration’s standards.  Although the public owner’s claims against the engineer were couched as a breach of contract, it was based on a theory of professional negligence (violation of a standard of care) warranting the application of comparative fault.

However, the public owner’s claims against the contractor were not based on a professional negligence theory.  Nonetheless, the Fourth District held that comparative fault did apply:

Applying a holistic approach to analyzing the complaint, we conclude that the contract action against [the contractor] fell under the umbrellas of the ‘negligence action’ against [the engineer], so that the circuit court’s allocation of fault was appropriate.  After all, [the contractor] was to perform the contract according to specifications designed by [the engineer], so the causes of action against each were necessarily intertwined.  To prove its case against [the contractor], the public owner was required to prove that [the contractor’s] ‘breach of its contractual responsibilities was a substantial factor in causing the [public owner’s] extensive damages.’   This is compatible with the concept of ‘fault’…and parallels the tort notion of a violation of a duty of care that is the proximate cause of damages.  Based on the evidence, the circuit court properly allocated fault among all actors whose conduct substantially contributed to the [public owner’s] damages.

 

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.

 

EXISTENCE OF “DUTY” IN NEGLIGENCE ACTION IS QUESTION OF LAW

shutterstock_523440886In a negligence action, the issue of whether a duty applies is a question of lawSee Limones v. School Dist. of Lee County, 161 So.3d 384, 389 (Fla. 2015) (“[T]he existence of a duty is a legal question because duty is the standard to which the jury compares the conduct of the defendant.”); McCain v. Florida Power Corp., 593 So.2d 500, 502 (Fla. 1992) (“Since duty is a question of law, an appellate court obviously could reverse based on its purely legal conclusion that no such duty existed.”).  Thus, the trial court determines, as a matter of law, whether a legal duty of care applies in a negligence action.

 

Florida law recognizes the following four sources of duty: (1) statutes or regulations; (2) common law interpretations of those statutes or regulations; (3) other sources in the common law; and (4) the general facts of the case.  

See id.  

 

Oftentimes it is the fourth source – the general facts of the case – that comes into play to determine whether the defendant owed the plaintiff a duty of care.  

 

To determine whether a defendant owed the plaintiff a duty under the general facts of the case, the issue becomes “whether the defendant’s conduct foreseeably created a broader ‘zone of risk’ that poses a general threat of harm to others.”  McCain, 593 So.2d at 502.  

 

For example, in White v. Ring Power Corp., a personal injury case discussed here regarding an expert’s qualifications, the trial court granted summary judgment (as a matter of law) finding that the lessor of a crane did NOT owe the plaintiff a duty to download certain crane overload data before renting the crane to the lessee.  The appellate court affirmed because nothing in the record established that the failure to download such data by the lessor before renting the crane created a broader zone of risk to the plaintiff.

 

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.

UNDERTAKER’S DOCTRINE IN NEGLIGENCE CLAIMS — NO GOOD DEED GOES UNPUNISHED?

shutterstock_1035445624There are many times the old adage, “No good deed goes unpunished,” rings true.  At one point in time, or more likely many points in time, we have all felt this why.  We undertook a good deed only to feel unappreciated or the good deed backfires.

 

In Florida, there is a legal doctrine known as the undertaker’s doctrine.   Just the name of the doctrine has a morbid undertone, right?  This doctrine applies in negligence scenarios because it establishes a duty that the undertaker owes to another, even if he undertook a service because he is a swell guy.  This undertaker’s doctrine has been described as follows:

 

Whenever one undertakes to provide a service to others, whether one does so gratuitously or by contract, the individual who undertakes to provide the service — i.e., the ‘undertaker’ — thereby assumes a duty to act carefully and to not put others at an undue risk of harm.  The undertaker is subject to liability if: (a) he or she fails to exercise reasonable care, which results in increased harm to the beneficiary; or (b) the beneficiary relies upon the undertaker and is harmed as a result.

 

Muchnick v. Goihman, 43 Fla.L.Weekly D986b (Fla. 3d DCA 2018 (internal citations and quotations omitted). 

 

An example of the application of the undertaker’s doctrine can be found in Muchnick where the appellate court held former tenants could assert a negligence claim against their real estate rental agent.   In this case, a real estate agent knew a family looking to rent another high-end apartment because they lived in the same building.  He worked for a real estate brokerage firm and he approached the family about renting another unit in the same building.  During the walk through of that unit, there were items the family wanted repaired and the agent assured the family they would be addressed prior to the family moving in.  The family rented the apartment and the brokerage firm was listed as the broker for the transaction.

 

When the family moved into the unit, the items they wanted repaired were not.  And, to make matters worse, the family discovered a serious water intrusion and damage problem that resulted in mold getting into to the apartment’s ventilation system.  The family communicated predominantly with the real estate agent regarding the issues as the owner of the unit lived abroad and the agent lived in the building.  During a deposition, the father claimed that the agent told him that since he lived in the same building he would be the go-to-guy to address any issues with the apartment and undertake repairs.  The issues did not get resolved which impacted the children’s health and they were forced to terminate the lease early and relocate.

 

Initially, the real estate agent argued that his firm, and not him personally, should have been sued, because he was acting in the scope of his employment as a real estate agent in dealing with the family.  The appellate court rejected this argument stating:

 

[J]ust because Goihman [agent] was acting in the scope of his employment when he rented the apartment, promised to fix it, and managed the repairs, doesn’t mean that he was shielded from personal liability under all circumstances.   [O]fficers or agents of corporations may be individually liable in tort if they commit or participate in a tort, even if their acts are within the course and scope of their employment. All that needs to be alleged is that the agent or officer personally participated in the tort, even if the complained of action was because of and entirely within the scope of his or her employment.

 

Muchnick, supra (internal citations and quotations omitted).

 

Next, the real estate agent argued that since he did not own the apartment unit, he did not owe a duty to the family that was renting the unit to fix and manage the repairs.  The appellate court rejected this argument too…because of the undertaker’s doctrine.  Once the real estate agent volunteered, even if gratuitously, to fix the problems and manage the repairs, he assumed a duty to exercise reasonable care in performing those services.  

 

It is great to be a swell guy.  But, when you agree to undertake a service, even if that service is nothing but a good deed you are performing, you have a duty to use reasonable care in performing that service to prevent harm to the beneficiary of that service.

 

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.

 

THERE ARE TIMES AN EQUITABLE SUBROGATION CLAIM IS THE MOST PRACTICAL RECOURSE FOR REIMBURSEMENT

shutterstock_627721505Equitable subrogation is a claim that can be pursued when a party (referred to as the subrogee) pays for damages to protect its interest–perhaps to mitigate its own exposure–seeks reimbursement from another party primarily liable for the damages.  There are times a party seeking reimbursement for purely economic losses is best able to pursue an equitable subrogation claim, as opposed to a common law indemnification or negligence claim.

 

Equitable subrogation is generally appropriate where: (1) the subrogee made the payment to protect [its] own interest, (2) the subrogee did not act as a volunteer, (3) the subrogee was not primarily liable for the debt, (4) the subrogee paid off the entire debt, and (5) subrogation would not work any injustice to the rights of a third party.

Tank Tech, Inc. v. Valley Tank Testing, L.L.C., 43 Fla.L.Weekly D868a (Fla. 2d DCA 2018) quoting Dade Cty. Sch. Bd. v. Radio Station WQBA, 731 So.2d 638, 646 (Fla. 1999).

 

Equitable subrogation is not dependent on a contract—it is simply an “equitable remedy for restitution to one [the subrogee] who in the performance of some duty has discharged a legal obligation which should have been met, either wholly or partially, by another.”  Tank Tech, Inc., supra, quoting W. Am. Ins. Co. v. Yellow Cab Co. of Orlando, Inc., 495 So.2d 204, 206 (Fla. 5th DCA 1986).

 

As shown in the recent decision below, there are times an equitable subrogation claim will generate more traction for purposes of a reimbursement claim than a negligence claim or common law indemnification claim, because an equitable subrogation claim does not require the party seeking reimbursement to show a duty is owed to it by the party it is seeking reimbursement from.

  

The recent decision of Tank Tech, Inc. involved damage to underground petroleum storage tanks at Circle K locations.  Company “A,” the subrogee, had been hired by Circle K to retrofit existing tanks by adding an interior wall inside of the tanks.  Company “B” was separately hired by Circle K to test the interstitial space between the new interior wall installed by Company “A” and the existing tank wall.  There was no contractual relationship between Company “A” and Company “B.”

 

After the tanks were retrofitted, Circle K notified Company “A” that the modified tanks were damaged and failing.  Although Company’s “A” investigation revealed the failure was the result of Company’s “B’s” testing methodology, Company “A” nevertheless repaired the damage to the tanks because its contract with Circle K required it to do so regardless of whether the damage was caused by a third party, such as Company “B.”

 

Company “A” then sued Company “B” for reimbursement of its repair costs under various claims, one of which was equitable subrogation.  Each party had expert opinions that pointed to the other for the cause of the tanks’ failure and damage.  The trial court granted a motion for summary judgment in favor of Company “B” finding that equitable subrogation did not apply.  This summary judgment was reversed on appeal as the Second District maintained that there were factual issues supporting the basis of the equitable subrogation claim:

 

Tank Tech’s [Company “A”] contract with Circle K obligated it to repair damages to the USTs [tanks]. But Tank Tech’s contractual obligation to Circle K did not convert Tank Tech into a “volunteer” to pay for damages caused by a third party and thus did not prevent the application of the equitable subrogation doctrine. Instead, Tank Tech was merely fulfilling its legal obligation to Circle K which was a necessary means of protecting itself from liability to Circle K. And Tank Tech, by virtue of Dr. Cignatta’s affidavit [expert opinion establishing Company “B” caused failure to tanks], established a genuine issue of material fact regarding whether Tank Tech or Valley Tank [Company “B”] was primarily liable for the damages. If Tank Tech is ultimately successful in proving that Valley Tank caused the damage to the USTs, then it would be entitled to seek any damages it incurred as a result of having to repair the damaged USTs.  To hold that Tank Tech is precluded from pursuing a claim for subrogation would leave Tank Tech without a remedy, a “most unfair and inequitable result.” 

Tank Tech, Inc., supra (internal citations omitted).

 

Negligence and Common Law Indemnification

 

Relatedly, Company “A” also sued Company “B” for negligence and common law indemnification for repairing tanks it claimed were caused by Company “B’s” testing methodology.  The trial court also granted summary judgment in favor of Company “B” on these claims.  Unlike the equitable subrogation claim, the Second District affirmed the summary judgment in favor of Company “B” on these claims. 

 

For Company “A” to sustain a negligence claim, it would have to establish that Company “B” owed it a duty.  Without a duty owed, there is no negligence claim.  Whether there is a duty is a question of law for the court.   In this case, when dealing with only economic losses, the relationship between the parties—Company “A” and Company “B”—needs to be examined to determine whether a special relationship exists to warrant creating a duty to protect the economic interests of another.  “[I]n order to proceed on a common law negligence claim based solely on economic loss, there must be some sort of link between the parties or some other extraordinary circumstance that justifies recognition of such a claim.”  Tank Tech, Inc., supra.   Here, the Second District agreed that Company “B” did not owe Company “A” a duty to support a negligence claim:

 

The reason why the negligence claim fails here is because there is neither a special relationship between Valley Tank [Company “B”] and Tank Tech [Company “A”] nor any extraordinary circumstance that would require imposition of a duty. Tank Tech’s injury did not flow from Valley Tank’s testing of the USTs [tanks]. Instead, Tank Tech seeks to recover the money it spent in repairing the USTs, an expense that was the result of a negotiated contract between Tank Tech and Circle K. There was no contract between Valley Tank and Tank Tech obligating Valley Tank to repair any USTs it damaged during testing or otherwise obligating Valley Tank to repay Tank Tech for the expenses incurred pursuant to Tank Tech’s contract with Circle K. And Valley Tank’s testing did not cause any personal injury or property damage to Tank Tech, the types of injuries for which the common law of negligence has historically permitted recovery.

***

This is simply a case of a party attempting to bring a tort claim to recover monies that it spent as a result of a contractual obligation to a third party. But negligence claims cannot proceed based on a party’s desire to relieve itself from a bad bargain.

Tank Tech, Inc., supra.

 

 

Likewise, regarding the common law indemnification claim, “actions for indemnity have been restricted to situations involving either a duty, an express contract, or the existence of active and passive negligence.”  Tank Tech, Inc., supra, quoting Hiller Grp., Inc. v. Redwing Carriers, Inc., 779 So.2d 602, 603 (Fla. 2d DCA 2001).  Since the Second District already agreed there was no special relationship between Company “A” and Company “B” and, thus, no duty owed, the common law indemnification claim failed for the same reasons as the negligence claim.

 

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.

SUING A PUBLIC ENTITY FOR NEGLIGENT MISREPRESENTATION …NOT SO FAST

 

shutterstock_111122411Suing a public entity for negligent misrepresentation…let’s just say, is not that easy.  Not that easy at all!  Putting aside the doctrine of sovereign immunity (the doctrine that the king can do no wrong), a public entity does not have an affirmative duty to necessarily convey accurate information, no matter how fair or unfair this may sound.  And, a negligence claim fails without the defendant (in this case, public entity) owing the plaintiff a duty of care.  

 

For example, in City of Dunedin v. Pirate’s Treasure, Inc., 43 Fla. L. Weekly D783a (Fla. 2d DCA 2018), a commercial owner wanted to renovate its property to accommodate a refurbished marina and a new restaurant.  The owner met with the city to review its preliminary conceptual site plan.  Based on this meeting, the owner prepared a costly site plan to comply with the City’s development code for the restaurant and marina.  The City’s engineering department approved the site plan.  However, the City then informed the owner that it had concerns with the restaurant’s square footage and parking.  The owner and City agreed that the site plan for the marina and restaurant would be separated, as the owner did not want to ruffle any feathers.  The City then approved the separate site plan for the marina but told the owner that the site plan approval for the restaurant was terminated as the owner needed to submit a brand-new application and comply with the updated development code. The owner filed suit against the City claiming, among other things, the City made misrepresentations about the site plan approval only to engage in a bait-and-switch tactic where the misrepresentations were made to induce the development of the marina, without the accompanying restaurant. 

 

The City moved to dismiss the negligent misrepresentation claim on sovereign immunity grounds.  The trial court denied the City’s motion finding as a matter of law the City was not entitled to sovereign immunity and the City appealed. 

 

Interestingly, the appellate court rejected the City’s sovereign immunity argument but still reversed the trial court’s holding that the City is not liable to the owner for negligent misrepresentation.  The court based its reversal on its determination that the City did now owe the owner a duty of care, hence the negligent misrepresentation claim failed as a matter of law. 

 

A duty of care analysis is different from the analysis whether the City is sovereignly immune from the suit. If there is no duty owed, there is no reason to delve into whether sovereign immunity applies.   Here, the Court found no duty was owed because the City “does not owe a duty to convey accurate information concerning whether Pirate’s Treasure’s [owner] site plan complied with the City’s development code.”  City of Dunedin, supra.

 

The owner in this case could have been 100% correct.  It had assurances from the City and acted on those assurances in devoting the money and time in finalizing its site plan based on the current development code.  It then submitted separate plans at the behest of the City (to appease the City) only for the City to approve the marina (the project it wanted) while terminating the site plan for the restaurant (the project it really did not want).  But, assuming this is all true, it does not matter because the court found that the City never owed an affirmative duty to the owner to convey accurate information, i.e., in this case, whether the owner’s site plan complied with the development code. 

 

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 AGAINST A CONSTRUCTION MANAGER-AGENT

shutterstock_463586495Can a construction manager-agent / owner’s representative hired directly by the owner be liable to the general contractor in negligence?  An argument likely posited by many general contractors on projects gone awry where there is a separate construction manager.  Well, here is an interesting case out of Louisiana that supports a negligence claim against a construction manager-agent.

 

In Lathan Company, Inc. v. State, Department of Education, Recovery School District, 2017 WL 6032333 (La.App. 1st Cir. 2017), a general contractor entered into a contract with a public owner to renovate a school.  The public owner hired a separate construction manager (as the owner’s agent) for the project.  The general contractor claimed that the construction manager was negligent through its: unreasonable refusal to approve payment applications; delayed responses to submittals and questions; refusal to recommend substantial completion; refusal to properly manage construction oversight; and its interference with the progress of the project.   The contractor claimed, in particular, that given the scope of the construction manager’s supervisory and management responsibilities for the project, the construction manager owed a duty to exercise its responsibilities in a professional manner (akin to a professional negligence claim).  These factual assertions are not unusual facts asserted by a general contractor on a problematic project with a separate construction manager / owner’s representative.

 

The trial court granted summary judgment in favor of the construction manager on the negligence claim. But, the appellate court reversed finding that the construction manager did owe a duty to the general contractor:

 

Accordingly, after careful review of the record herein, we find that although Jacobs [construction manager] was not in direct contractual privity with Lathan [contractor], Jacobs must be deemed and held to know that its services were not only for the protection or interests of the owner but also third parties, including, specifically, Lathan, who was acting as the general contractor on the project. As outlined above, it was foreseeable and to a degree certain that Lathan would suffer economic harm if Jacobs failed to perform, or negligently performed, many of its professional duties.  Moreover, as outlined above, there is a close connection between Jacobs’s alleged failure to act according to industry standards, and the alleged economic harm suffered by Lathan. 

***

Thus, after carefully considering the record herein, and applying the balancing test enunciated in the jurisprudence noted above, we are unable to find any reason why the courts’ rationale in such prior jurisprudence, extending the liability of architects and engineers, should not likewise apply to a project management professional, under the facts of this case.

 

 

Lathan Company, supra, at *13-14 (internal citations omitted).

 

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

shutterstock_431491873A 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. 1st 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.

 

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.

NEGLIGENT PROCUREMENT OF INSURANCE

shutterstock_540587629As 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!

 

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.

DESIGN PROFESSIONAL NEEDS A LICENSE TO BE SUED FOR PROFESSIONAL NEGLIGENCE

imagesWith 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. 4th 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.

 

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.