LEGAL LIABILITY 101 FOR DESIGN PROFESSIONALS
By: Attorney Robert A. Mich, Jr.
By: Attorney Robert A. Mich, Jr.
Disclaimer: The information contained on this page is not legal advice. The information provided on this website is for general informational purposes and is not necessarily updated to account for changes in the law. You should consult with an attorney for legal advice regarding your individual circumstances.
A design professional’s work product will not only impact the client who procured the design professional’s services, but in many cases, other parties to the project and eventual users of the structure being constructed. That being the case, there are a number of different circumstances which can expose a design professional to legal liability. This bulletin will provide a general overview of general legal standards which will apply to a design professional’s work.
In general, a claim against a design professional will require proof of each of the following four elements to be viable: (1) existence of a duty, (2) a breach of that duty, (3) the breach of duty causing some kind of injury to another party, and (4) damages arising from the injury. The first element of duty can arise in many different ways. The most common duty will arise from the architect’s contract with an owner, contractor, or another design professional. A well-drafted contract will typically specify the scope of services to be performed and the standard to which the design professional will be held. For example, a contract may require the design professional’s work product to meet all state and local code requirements. Generally speaking, the terms of a contract, including any duties imposed by a contract, will be enforced as long as the contract meets certain minimal requirements. Such requirements would include having legal authority to enter into the agreement, a mutual “meeting of the minds” as to the work to be performed, and an exchange of consideration (which can be anything of value, including a mutual exchange of promises).
Note that parties can also assume liability by contract for the work of other contractors or entities. For example, design professionals will often be asked to hold a client harmless from any damages caused by a subcontractor of the design professional, or any other firm with which the design professional is working in partnership or as a joint venture. Of course, a firm that employs multiple design professionals would also be liable in contract for any errors or omissions by the firm’s individual employees. In governmental and other complex projects involving many tiers of contractors, a contract may also incorporate by reference obligations imposed on upper- or lower-tier contractors, any of which may expand the design professional’s obligations beyond the basic terms of their own contract.
In addition to parties with whom a design professional may have a connection through contract, liability may also arise through a duty imposed under tort law. A tort generally constitutes any kind of invasion of the business or property interests of another party outside of contract. In construction cases, the typical type of claim that would be asserted would be negligence. Negligence is generally described as failing to exercise that degree of skill and care which a reasonable person would have exercised under the same or similar circumstances. The most commonly recognized duty in the negligence inquiry is to avoid causing harm or injury to any party that is foreseeable. In other words, would the average person anticipate that the injury was likely to result knowing what the allegedly negligent person knew or should have known at the time they worked on the project.
In some instances, a court will preclude a negligence claim on grounds of public policy. For example, a claim may be barred if the injury is too remote from the negligence, the injury is out of proportion to the culpability of the negligent party, or allowing the recovery would likely open the door to fraudulent claims. In some jurisdictions, the “economic loss doctrine” will prohibit a party from bringing a tort claim in negligence if the parties have an existing contract. The rationale behind the economic loss doctrine is that parties who are in contract are in the best position to determine the circumstances of recovery before any loss occurs, and therefore they should be limited to their claims for breach of contract.
Another type of tort claim that could be brought against a design professional is for an intentional act. Intentional acts are often excluded from insurance coverage because they are not accidental in nature. This type of claim would only arise in situations where a person causes some kind of injury by deliberate sabotage or with full knowledge that their action is likely to cause injury to another party.
Another type of tort liability arises through “strict liability.” These types of claims involve situations where courts have determined the actions are so likely to cause injury such that the injured party does not need to prove any kind of negligence or intent by the wrongdoer. Strict liability claims will occur most often in the context of product liability or activities that are inherently unreasonably dangerous. A warranty may be considered a strict liability type of claim insofar as the warranty provider is guaranteeing a result or quality of performance and the defect is required to be fixed, regardless of fault.
Regardless of the type of theory on which the claim is based, the claimant will need to show a breach of a duty and that such breach has caused damage. In contract cases, the contract will typically specify the legal standards or codes which will be the applicable standard of care. In tort cases, the nature of the duty will usually be determined by statutory law or common law. Statutory law refers to statutes imposed by legislative bodies, and regulations promulgated by agencies and professional committees. Common law refers to the general rulings which courts have made over time to be applicable under a particular set of circumstances. Statutes and court rulings will vary by state, and therefore each state will have its own standard of care for a design professional in a tort claim. Whether a breach of a duty has occurred and caused damage to another party is typically a very fact-intensive inquiry and often requires analysis from expert witnesses. Consequently, it is often difficult to achieve dismissal short of trial where the parties and their experts have different views as to the applicable standard of care.
The final element for legal liability is proof of damages. Even if a party has engaged in a breach of contract or performed some negligent act, the aggrieved party may not necessarily prevail unless they show they have experienced some kind of personal injury or property damage arising from that conduct. In contract cases, the contract may prescribe the nature and types of damages that may be recovered resulting from a breach. Because certain types of damages are difficult to prove, a contract may call for the recovery of certain liquidated damages, which are specific amounts identified in the contract which will be deemed to be the natural result of any breach. Liquidated damages provisions will usually be enforced if they are reasonably related to the injury, arise in circumstances where damages are difficult to establish, and are not so outlandish that they become a penalty rather than a compensatory type of damage. Because of the broad nature of potential damages that may otherwise be available, a contract will sometimes include a waiver of a right to recover consequential damages, which are the damages not directly caused by an accident but which are an indirect consequence of the accident.
In most tort cases, the damages will be the value of any personal injury or property damage that reasonably flows from the breach. In personal injury cases, the damages will typically include pain and suffering, past and future medical expenses, lost wages and loss of future earning capacity, and loss of consortium damages for affected spouses or family members. In property damage cases, the typical damages may include the cost of repairing any deficiencies, any diminished value to any unrepairable damage, delay damages, and material and labor cost increases.
If a claim is being brought pursuant to a statute, the statute may specify a particular damage for a claim. For example, some states may award double or triple damages for certain kinds of injuries to discourage parties on a construction contract from cutting corners. In particularly egregious cases, a jurisdiction may also permit an injured party to recover punitive damages, which are designed to punish the wrongdoer from engaging in conduct that is perceived to be socially reprehensible. The standard for punitive damages will vary by state, but usually requires a showing that the wrongdoer acted in an intentional or reckless manner from which it was known or reasonably likely to be known that injury would occur as a result of the wrongdoer’s conduct.
Proof of damages must be reasonably clear so as to avoid speculation. In cases where the evidence would require a judge or jury to guess on a damages award, those damages will usually be denied. The usual standard for proving damages is the “preponderance of the evidence” standard, which means that the claimant’s proof is more likely than not to be credible. For some types of statutory damages, including punitive damages, a jurisdiction may require a higher degree of proof. One such elevated standard is the “clear and convincing” standard of proof, which requires a showing that exceeds the preponderance of the evidence standard, but is not as substantial as the “beyond a reasonable doubt” standard that would apply in a criminal case.
If a design professional is sued by a claimant, there are a number of defenses which can be raised to defeat or reduce a potential claim. Perhaps the most frequent defense used in construction cases is the statute of limitations defense. The statute of limitations is the period of time in which a particular state authorizes a suit to be brought. The period of time (usually a specified number of years) will vary depending on the particular jurisdiction and the nature of the claim being brought. In a case where a particular claim would be barred in a certain jurisdiction, a savvy plaintiff may attempt to bring the claim elsewhere where the statute of limitations has not yet expired. Depending on the jurisdiction, there may be certain discovery rules that extend the statute of limitation from when the claim first arose to account for the inability of the claimant’s earlier opportunity to discover the claim. Note that legislatures often amend statutes of limitation, so it will be important to closely examine applicable state law in effect at the time a claim arises.
Most states have a special kind of statute of limitations for construction projects, referred to as a statute of repose. A statute of repose is a set period of years in which a party may bring a claim arising from some construction deficiency, regardless of any discovery rule. The statute of repose will typically be longer than the general statute of limitations that would otherwise apply, and is intended to effectively bar claims which are so stale and distant such that the parties who worked on the original project may no longer have records or relevant eyewitness testimony to defend the claim, making it unfair to have the claim brought at such a late date.
Another defense available to design professionals is contributory negligence. Contributory negligence refers to negligent conduct by the claimant which on its own or in tandem with other parties’ negligence caused the claimant’s injury. In cases where more than one party acted negligently, a court will permit a jury to compare the parties’ negligence on a percentage basis, so that the allocation can fairly take into account each party’s conduct. Depending on the percentage of contributory and/or comparative negligence assigned to the claimant, the damages awarded may be proportionately reduced or denied altogether.
Another frequent defense in design/construction cases is the concept of betterment. In the design professional context, betterment refers to a situation where a design omits some necessary element, and the owner seeks to recover the cost of that element from the design professional for that omission, even though the owner would have had to pay the cost of that element if the design was not defective. Although the law generally holds a party liable for paying expenses another party had to incur as a result of a negligent mistake or a breach of contract, the fact that a party made such a mistake does not entitle the innocent party to benefit from that wrongful conduct by being put into a better position than if no mistake had occurred. In those situations, the claim could be denied as the claimant would be receiving more than they are reasonably entitled to receive.
A similar defense would be the claimant’s failure to mitigate their damages. A claimant has the obligation to do what is reasonably necessary under the circumstances to minimize its losses, such as taking prompt action to obtain repairs, purchasing additional materials or labor, etc. If an element of damages could have been avoided had the claimant acted reasonably but they failed to do so, the mitigation of damages defense could preclude some or all of their damages claim.
When a claim is presented to a design professional, or in circumstances where a design professional believes a claim may be brought, the design professional should immediately contact his or her insurance carrier to notify them of the potential claim. Many claims are able to be resolved without a lawsuit being filed or any monies being paid. Timely notification to the insurer protects both the design professional and the insurance company by permitting a prompt investigation of the claims, and enabling appropriate action to be taken to address the claim, which may result in litigation being avoided altogether.
In general, a claim against a design professional will require proof of each of the following four elements to be viable: (1) existence of a duty, (2) a breach of that duty, (3) the breach of duty causing some kind of injury to another party, and (4) damages arising from the injury. The first element of duty can arise in many different ways. The most common duty will arise from the architect’s contract with an owner, contractor, or another design professional. A well-drafted contract will typically specify the scope of services to be performed and the standard to which the design professional will be held. For example, a contract may require the design professional’s work product to meet all state and local code requirements. Generally speaking, the terms of a contract, including any duties imposed by a contract, will be enforced as long as the contract meets certain minimal requirements. Such requirements would include having legal authority to enter into the agreement, a mutual “meeting of the minds” as to the work to be performed, and an exchange of consideration (which can be anything of value, including a mutual exchange of promises).
Note that parties can also assume liability by contract for the work of other contractors or entities. For example, design professionals will often be asked to hold a client harmless from any damages caused by a subcontractor of the design professional, or any other firm with which the design professional is working in partnership or as a joint venture. Of course, a firm that employs multiple design professionals would also be liable in contract for any errors or omissions by the firm’s individual employees. In governmental and other complex projects involving many tiers of contractors, a contract may also incorporate by reference obligations imposed on upper- or lower-tier contractors, any of which may expand the design professional’s obligations beyond the basic terms of their own contract.
In addition to parties with whom a design professional may have a connection through contract, liability may also arise through a duty imposed under tort law. A tort generally constitutes any kind of invasion of the business or property interests of another party outside of contract. In construction cases, the typical type of claim that would be asserted would be negligence. Negligence is generally described as failing to exercise that degree of skill and care which a reasonable person would have exercised under the same or similar circumstances. The most commonly recognized duty in the negligence inquiry is to avoid causing harm or injury to any party that is foreseeable. In other words, would the average person anticipate that the injury was likely to result knowing what the allegedly negligent person knew or should have known at the time they worked on the project.
In some instances, a court will preclude a negligence claim on grounds of public policy. For example, a claim may be barred if the injury is too remote from the negligence, the injury is out of proportion to the culpability of the negligent party, or allowing the recovery would likely open the door to fraudulent claims. In some jurisdictions, the “economic loss doctrine” will prohibit a party from bringing a tort claim in negligence if the parties have an existing contract. The rationale behind the economic loss doctrine is that parties who are in contract are in the best position to determine the circumstances of recovery before any loss occurs, and therefore they should be limited to their claims for breach of contract.
Another type of tort claim that could be brought against a design professional is for an intentional act. Intentional acts are often excluded from insurance coverage because they are not accidental in nature. This type of claim would only arise in situations where a person causes some kind of injury by deliberate sabotage or with full knowledge that their action is likely to cause injury to another party.
Another type of tort liability arises through “strict liability.” These types of claims involve situations where courts have determined the actions are so likely to cause injury such that the injured party does not need to prove any kind of negligence or intent by the wrongdoer. Strict liability claims will occur most often in the context of product liability or activities that are inherently unreasonably dangerous. A warranty may be considered a strict liability type of claim insofar as the warranty provider is guaranteeing a result or quality of performance and the defect is required to be fixed, regardless of fault.
Regardless of the type of theory on which the claim is based, the claimant will need to show a breach of a duty and that such breach has caused damage. In contract cases, the contract will typically specify the legal standards or codes which will be the applicable standard of care. In tort cases, the nature of the duty will usually be determined by statutory law or common law. Statutory law refers to statutes imposed by legislative bodies, and regulations promulgated by agencies and professional committees. Common law refers to the general rulings which courts have made over time to be applicable under a particular set of circumstances. Statutes and court rulings will vary by state, and therefore each state will have its own standard of care for a design professional in a tort claim. Whether a breach of a duty has occurred and caused damage to another party is typically a very fact-intensive inquiry and often requires analysis from expert witnesses. Consequently, it is often difficult to achieve dismissal short of trial where the parties and their experts have different views as to the applicable standard of care.
The final element for legal liability is proof of damages. Even if a party has engaged in a breach of contract or performed some negligent act, the aggrieved party may not necessarily prevail unless they show they have experienced some kind of personal injury or property damage arising from that conduct. In contract cases, the contract may prescribe the nature and types of damages that may be recovered resulting from a breach. Because certain types of damages are difficult to prove, a contract may call for the recovery of certain liquidated damages, which are specific amounts identified in the contract which will be deemed to be the natural result of any breach. Liquidated damages provisions will usually be enforced if they are reasonably related to the injury, arise in circumstances where damages are difficult to establish, and are not so outlandish that they become a penalty rather than a compensatory type of damage. Because of the broad nature of potential damages that may otherwise be available, a contract will sometimes include a waiver of a right to recover consequential damages, which are the damages not directly caused by an accident but which are an indirect consequence of the accident.
In most tort cases, the damages will be the value of any personal injury or property damage that reasonably flows from the breach. In personal injury cases, the damages will typically include pain and suffering, past and future medical expenses, lost wages and loss of future earning capacity, and loss of consortium damages for affected spouses or family members. In property damage cases, the typical damages may include the cost of repairing any deficiencies, any diminished value to any unrepairable damage, delay damages, and material and labor cost increases.
If a claim is being brought pursuant to a statute, the statute may specify a particular damage for a claim. For example, some states may award double or triple damages for certain kinds of injuries to discourage parties on a construction contract from cutting corners. In particularly egregious cases, a jurisdiction may also permit an injured party to recover punitive damages, which are designed to punish the wrongdoer from engaging in conduct that is perceived to be socially reprehensible. The standard for punitive damages will vary by state, but usually requires a showing that the wrongdoer acted in an intentional or reckless manner from which it was known or reasonably likely to be known that injury would occur as a result of the wrongdoer’s conduct.
Proof of damages must be reasonably clear so as to avoid speculation. In cases where the evidence would require a judge or jury to guess on a damages award, those damages will usually be denied. The usual standard for proving damages is the “preponderance of the evidence” standard, which means that the claimant’s proof is more likely than not to be credible. For some types of statutory damages, including punitive damages, a jurisdiction may require a higher degree of proof. One such elevated standard is the “clear and convincing” standard of proof, which requires a showing that exceeds the preponderance of the evidence standard, but is not as substantial as the “beyond a reasonable doubt” standard that would apply in a criminal case.
If a design professional is sued by a claimant, there are a number of defenses which can be raised to defeat or reduce a potential claim. Perhaps the most frequent defense used in construction cases is the statute of limitations defense. The statute of limitations is the period of time in which a particular state authorizes a suit to be brought. The period of time (usually a specified number of years) will vary depending on the particular jurisdiction and the nature of the claim being brought. In a case where a particular claim would be barred in a certain jurisdiction, a savvy plaintiff may attempt to bring the claim elsewhere where the statute of limitations has not yet expired. Depending on the jurisdiction, there may be certain discovery rules that extend the statute of limitation from when the claim first arose to account for the inability of the claimant’s earlier opportunity to discover the claim. Note that legislatures often amend statutes of limitation, so it will be important to closely examine applicable state law in effect at the time a claim arises.
Most states have a special kind of statute of limitations for construction projects, referred to as a statute of repose. A statute of repose is a set period of years in which a party may bring a claim arising from some construction deficiency, regardless of any discovery rule. The statute of repose will typically be longer than the general statute of limitations that would otherwise apply, and is intended to effectively bar claims which are so stale and distant such that the parties who worked on the original project may no longer have records or relevant eyewitness testimony to defend the claim, making it unfair to have the claim brought at such a late date.
Another defense available to design professionals is contributory negligence. Contributory negligence refers to negligent conduct by the claimant which on its own or in tandem with other parties’ negligence caused the claimant’s injury. In cases where more than one party acted negligently, a court will permit a jury to compare the parties’ negligence on a percentage basis, so that the allocation can fairly take into account each party’s conduct. Depending on the percentage of contributory and/or comparative negligence assigned to the claimant, the damages awarded may be proportionately reduced or denied altogether.
Another frequent defense in design/construction cases is the concept of betterment. In the design professional context, betterment refers to a situation where a design omits some necessary element, and the owner seeks to recover the cost of that element from the design professional for that omission, even though the owner would have had to pay the cost of that element if the design was not defective. Although the law generally holds a party liable for paying expenses another party had to incur as a result of a negligent mistake or a breach of contract, the fact that a party made such a mistake does not entitle the innocent party to benefit from that wrongful conduct by being put into a better position than if no mistake had occurred. In those situations, the claim could be denied as the claimant would be receiving more than they are reasonably entitled to receive.
A similar defense would be the claimant’s failure to mitigate their damages. A claimant has the obligation to do what is reasonably necessary under the circumstances to minimize its losses, such as taking prompt action to obtain repairs, purchasing additional materials or labor, etc. If an element of damages could have been avoided had the claimant acted reasonably but they failed to do so, the mitigation of damages defense could preclude some or all of their damages claim.
When a claim is presented to a design professional, or in circumstances where a design professional believes a claim may be brought, the design professional should immediately contact his or her insurance carrier to notify them of the potential claim. Many claims are able to be resolved without a lawsuit being filed or any monies being paid. Timely notification to the insurer protects both the design professional and the insurance company by permitting a prompt investigation of the claims, and enabling appropriate action to be taken to address the claim, which may result in litigation being avoided altogether.