Source: http://www.jdsupra.com, July 8, 2014
By: Charles Pernicka, Allen Matkins Leck Gamble Mallory & Natsis LLP
Design professionals, such as architects and engineers, often seek to avoid liability to third party property purchasers for their negligence by arguing that their role in preparing plans was too remote for a duty to be imposed upon them. Instead, design professionals often become involved in construction lawsuits, if at all, when they are sued on cross-complaints by the builders or developers with which they have contracts. The California Supreme Court has now changed this paradigm.
On July 3, the California Supreme Court issued a decision confirming that construction design professionals do owe a duty of care to third party property purchasers who did not hire the professionals, and with which the professionals do not have any contract. Restricting the applicability of earlier case law often relied upon by design professionals to avoid liability if they only prepared plans or made design recommendations, the Court held that design professionals owe a duty to purchasers and can be liable for negligence even when they do not actually build the project and do not exercise control over construction decisions.

The Beacon Residential Holding

In Beacon Residential Community Assn v. Skidmore, Owings & Merrill LLP (July 3, 2014, S208173) __ Cal.4th __, a condominium homeowners association, on behalf of its homeowner members, sued the developer of the project and the project architect for construction defects caused by negligent architectural design work. Building on a long history of case law, the Court held that where the design professional is not subordinate to any other design professional (in this case, where the architect was the principal architect for the project), a duty of care is owed to future purchasers. Even though the developer made final decisions on the architect’s recommendations, and the contractors had control over the construction process and implementation of plans and recommendations, the Court noted that in hiring the architect the developer relied upon the architect’s specialized training, technical expertise, and professional judgment, and that the architect applied its expertise throughout the construction of the project, conducting inspections, monitoring contractors’ compliance with plans, and altering design requirements as issues arose. In holding that the design professional could be directly liable to future homebuyers, the Court determined that the alleged negligent design bore a close connection to the injury suffered, and that it was foreseeable that the home purchasers would be the ones to suffer that injury.
In so holding, the Supreme Court distinguished Weseloh Family Ltd. Partnership v. K.L. Wessel Construction Co., Inc. (2004) 125 Cal.App.4th 152, often relied upon for the proposition that a design professional does not owe a duty of care to a third party property owner that did not hire it. The Court limited the applicability of Weseloh, explaining that Weseloh did not broadly hold that a design professional that provides only professional advice and opinions, without having ultimate decision making authority, cannot be liable to third parties for negligence. Rather, Weseloh held only that a design professional’s role can be so minor or subordinate to another professional in the same discipline as to foreclose liability to third persons.

Practical Implications

Beacon Residential increases the liability exposure of design professionals for construction claims, at least where the design professional is the principal professional in its discipline for the project. It provides another source of direct recovery for homeowners by solidifying the right of property owners to bring claims directly against design professionals for construction deficiencies, and, in those circumstances where the design professional’s indemnity obligations are not controlled by contract, it strengthens the ability of builders, developers, and contractors to bring claims for equitable indemnity pointing the finger at design professionals.
Though the case was brought in the context of residential construction, its applicability might not be limited to only residential properties. The decision briefly addressed the residential SB 800 Right to Repair Act’s statutory scheme, but the Court declined to find that these statutes provided the basis for the duty. As a result, where commercial or other property types are built for sale, or in other circumstances in which the design professional does not have a direct contract with the property owner, the design professional may still be directly liable to the purchaser or property owner for negligence in performing its work.