Posted on 03.29.16
Design Errors Exception to the Economic Loss Doctrine
Source: http://www.lexology.com, March 23, 2016
By: Carly Miller, Bradly Arant Boult Cummings LLP
A recent Pennsylvania case, Gongloff Contracting, LLC v. L. Robert Kimball & Assocs., Architects and Engineers, Inc., sheds light on circumstances in which design errors can lead to damages in tort as courts recognize exceptions to the economic loss doctrine for such errors or deficiencies.
A University engaged Kimball as an architect-engineer for the construction of a convocation center. After Kimball completed the design, the University hired Whiting-Turner as the general contractor, which then entered into a subcontract with Kinsley Construction to do the structural steel fabrication and erection. Kinsley then entered into a subcontract agreement with Gongloff Contracting under which Gongloff was to provide labor, materials, and equipment to erect the structural steel. Kinsley also entered into a subcontract with Vulcraft to detail and fabricate the steel trusses, which would be erected by Gongloff. In addition, Kinsley hired Carney Engineering to assist in the detailed design of the structural steel. Kimball’s design of the steel structure was supplied to each of the parties. Both Vulcraft and Carney raised concerns about the roof design, warning that the header beams that supported the trusses were drastically undersized.
Gongloff brought suit against Kimball for negligent misrepresentation, alleging monetary damages resulting from Kimball’s improper roof design. The trial court decided that Gongloff could not pursue the negligent misrepresentation claim and ruled in Kimball’s favor based on the economic loss doctrine. Gongloff appealed raising two issues: (1) whether a design professional is required to make an explicit negligent misrepresentation of a specific fact for a third party to recover economic damages, and whether (2) Gongloff properly alleged that Kimball either “expressly” or “impliedly” represented that the structure could safely sustain all required loads.
Pennsylvania law generally bars claims brought in negligence that result solely in economic loss, known as the economic loss rule. An exception, however, provides that if a person in the course of his profession supplies false information for the guidance of others, he is subject to liability for monetary loss caused by the “justifiable reliance upon the information,” if he fails to exercise reasonable care in communicating the information.
Kimball argued that Gongloff was required to identify particular communications of documents provided by Kimball that were false. The court, however, did not agree that such a conclusion was proper, and stated that the actual misrepresentation here was the information in Kimball’s roof design. The court also agreed with Gongloff’s argument that the trial court erred when it faulted Gongloff for failing to show that Kimball “explicitly or impliedly represented that the structure could safely sustain all required construction.”
The court concluded that Gongloff had alleged sufficient facts to meet the exception to the economic loss doctrine. The court reasoned that Gongloff showed that Kimball supplied its design in order to provide guidance as to how the project was to be built, that Kimball qualifies as a design professional, and that the feasibility of the construction of the roof in accordance with Kimball’s design was determined to be impossible, thereby permitting an inference that the design included false information.
This case serves as a reminder to contractors, architects, and designers that errors or deficiencies in design are not necessarily shielded by the economic loss doctrine in states that apply this doctrine. Special attention should be paid to the possibility of being hit with damages for such design flaws if one enters contracts in states applying such exceptions to the economic loss doctrine.
A University engaged Kimball as an architect-engineer for the construction of a convocation center. After Kimball completed the design, the University hired Whiting-Turner as the general contractor, which then entered into a subcontract with Kinsley Construction to do the structural steel fabrication and erection. Kinsley then entered into a subcontract agreement with Gongloff Contracting under which Gongloff was to provide labor, materials, and equipment to erect the structural steel. Kinsley also entered into a subcontract with Vulcraft to detail and fabricate the steel trusses, which would be erected by Gongloff. In addition, Kinsley hired Carney Engineering to assist in the detailed design of the structural steel. Kimball’s design of the steel structure was supplied to each of the parties. Both Vulcraft and Carney raised concerns about the roof design, warning that the header beams that supported the trusses were drastically undersized.
Gongloff brought suit against Kimball for negligent misrepresentation, alleging monetary damages resulting from Kimball’s improper roof design. The trial court decided that Gongloff could not pursue the negligent misrepresentation claim and ruled in Kimball’s favor based on the economic loss doctrine. Gongloff appealed raising two issues: (1) whether a design professional is required to make an explicit negligent misrepresentation of a specific fact for a third party to recover economic damages, and whether (2) Gongloff properly alleged that Kimball either “expressly” or “impliedly” represented that the structure could safely sustain all required loads.
Pennsylvania law generally bars claims brought in negligence that result solely in economic loss, known as the economic loss rule. An exception, however, provides that if a person in the course of his profession supplies false information for the guidance of others, he is subject to liability for monetary loss caused by the “justifiable reliance upon the information,” if he fails to exercise reasonable care in communicating the information.
Kimball argued that Gongloff was required to identify particular communications of documents provided by Kimball that were false. The court, however, did not agree that such a conclusion was proper, and stated that the actual misrepresentation here was the information in Kimball’s roof design. The court also agreed with Gongloff’s argument that the trial court erred when it faulted Gongloff for failing to show that Kimball “explicitly or impliedly represented that the structure could safely sustain all required construction.”
The court concluded that Gongloff had alleged sufficient facts to meet the exception to the economic loss doctrine. The court reasoned that Gongloff showed that Kimball supplied its design in order to provide guidance as to how the project was to be built, that Kimball qualifies as a design professional, and that the feasibility of the construction of the roof in accordance with Kimball’s design was determined to be impossible, thereby permitting an inference that the design included false information.
This case serves as a reminder to contractors, architects, and designers that errors or deficiencies in design are not necessarily shielded by the economic loss doctrine in states that apply this doctrine. Special attention should be paid to the possibility of being hit with damages for such design flaws if one enters contracts in states applying such exceptions to the economic loss doctrine.
