Business Law Articles
Written By: Darryl J. Horowitt
Coleman & Horowitt, LLP
Construction defect cases have been around for some time. In those actions, all contractors, sub-contractors, and suppliers are named as parties, but architects and design professionals are not, on the basis that architects generally would not have liability to third parties for negligence in their design work. Recently, however, the Court of Appeal in Beacon Residential Community Association v. Skidmore, Owings & Merrill LLP (2012) 211 Cal.App.4th 1301, has determined that under certain circumstances, architects may have liability for negligence in the performance of their duties.
In Beacon Residential Community Association v. Skidmore, Owings & Merrill LLP, supra, two architectual firms, Skidmore, Owings & Merrill LLP and HKS Architects, Inc., provided design and construction supervision services for the 595-unit condominium project known as ABeacon Residential Condominiums,@ managed by the Beacon Residential Community Association (AAssociation@). After the condominium project was occupied, multiple defects were found to exist, including water infiltration, inadequate fire separations, structural cracks, and other life safety hazards. Residents also experienced a Asolar heat gain@ that made some of the units too hot to live in. In addition, several of the design deficiencies violated the statutory building standards for construction. The Association thus brought action against the architects, who demurred, claiming that they have no liability to third parties, but only to the owner and original hiring party.
The court sustained the demurrer and the Association appealed. On appeal, the court found that under the allegations presented, which were to be taken as true, the Association had stated a cause of action against the architects. It found that under existing common law, it has long been held that design professionals could be held liable to third parties under appropriate circumstances. The court noted that under long established precedent, including the law relied upon by the architects in bringing their demurrer (Bili v. Arthur Young & Co. (1992) 3 Cal.4th 370, and Weseloh Family Ltd. Partnership v. K.L. Wessel Construction Co., Inc. (2004) 125 Cal.App.4th 152), before determining whether or not the design professional might be liable, the court must evaluate the factors first espoused in Biakanja v. Irving (1958) 49 Cal.2d 647, 650-651, including (1) the extent to which the transaction was intended to affect the plaintiff; (2) the foreseeability of harm to the plaintiff; (3) the degree of certainty that the plaintiff suffered injury; (4) the closeness of the connection between defendant=s conduct and the injury suffered; (5) the moral blame attached to the defendant=s conduct; and (6) the policy of preventing future harm.
The court then evaluated each of these factors. In doing so, the court came to the conclusion that under the facts alleged, a cause of action had been stated under which the architect might be found liable even though the architect was not in privity with the third party defendants and, further, even though the contract between the architect and owner expressly excluded any liability to third parties.
The court did note that its holding may expand the potential for architects being held liable to third parties and that their liability may be found to be out of proportion to the actual fault. It is, therefore, possible that the Appellate Court=s decision is not the final word and that this matter may be taken up to the Supreme Court.
Regardless of whether or not this case is appealed to the Supreme Court, it serves notice to architects that the exculpatory language in their contracts may not be enough to protect themselves. It is therefore more important than ever to make sure that if you are a design professional, you have adequate errors and omissions insurance that would cover any claim that might arise that is in proportion to the projects accepted.
This article was prepared by Darryl J. Horowitt, a litigation partner at Coleman & Horowitt, LLP, emphasizing complex business, construction and real estate litigation, commercial collections, casualty insurance defense, insurance coverage, and alternative dispute resolution. He is a member of the Fresno County Bar Association, Los Angeles County Bar Association, American Bar Association, Association of Business Trial Lawyers, California Creditors Bar Association, NARCA, and the Commercial Law League of America. If you have any questions regarding the subject of this article, please contact Mr. Horowitt at 559.389.7559 or by e-mail at email@example.com.
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