Source: http://www.newyorklawjournal.com, October 11, 2016
By: Paul M. Hellegers and Wojciech Jackowski
Historically, when a property in New York City was damaged during excavation activities on a neighboring property, the injured property owner has been able to obtain compensation from the adjoining property owner/developer or the contractor performing excavation by proffering evidence of excavation and resulting property damage without any need to prove fault. Only the owner/developer and the excavator were at risk of being held strictly liable—which made sense since they were the parties who had some control over the excavation process.
Recent case law developing in the Appellate Division, First and Second Departments, however, has dangerously broadened the range of project participants on whom such liability may be imposed—regardless of their fault or negligence—to encompass various design professionals involved with the construction project where excavation is performed, e.g., architect of record, structural engineer, excavation engineer. In other words, an architect or engineer whose plans affect (or even potentially affect) the design or methodology of excavation-related work runs the risk of being held strictly liable under the Building Code, regardless of fault, for any damage to an adjacent property.

Requirements

Building Code Section 3309.4 requires “the person who causes an excavation or fill to be made” to “preserve and protect from damage any adjoining structures.…” This provision is descended from an 1855 statute that has always been construed by the courts to impose strict liability for any damage to an adjoining structure, without regard to fault or negligence, on “the person who causes an excavation or fill to be made.”¹
The courts’ interpretation of who “causes an excavation” has expanded over time. For many years, the courts held that it was only the project owner, regardless of whether the owner hired someone else to perform the actual work. As one court said over a century ago, “Is it reasonable to suppose that it was the intent of the Legislature…to impose this liability upon the person that had the contract for digging the excavation? Counsel admit that they have discovered no case that so holds. The words, ‘the person causing such excavation to be made,’ must refer to the owner” or a long-term tenant.² The statute effectively cast the owner in the role of an insurer against any damage caused to any neighboring building by excavation on the owner’s property.
Beginning in 1944, courts have also applied this law to the contractors who actually perform the excavation work, without explaining the change.³ In 1949, the First Department explicitly held that “[t]he general contractor also…is now held responsible for the discharge of this duty.”⁴ In 1957, the Second Department affirmed the application of this new rule to a subcontractor that did the actual excavation work.⁵ This array of project participants who are held to the statutory absolute liability standard remained unchanged until recently.

Recent Expansion

In 2012, a Queens County Supreme Court decision, American Security Ins. Co. v. Church of God of St. Albans, applied the statute to an architect for the first time, holding that the architect had “caused” an excavation merely by including an excavation plan which called for excavation (and underpinning) under the neighboring property in his set of construction drawings, because the architect “planned for excavation to occur,” even though the contractor did not actually follow the architect’s underpinning plan.⁶ In 87 Chambers v. 77 Reade,⁷ the First Department rejected this interpretation, holding in 2014 that including a cellar in plans does not constitute “causing” an excavation within the meaning of the statute (the Second Department followed this decision late last year in reversing the 2012 Supreme Court decision).
But the First Department in 87 Chambers went on to hold that the structural engineer for the project (which also had a separate excavation engineer, hired by the contractor) could be a “person who cause[d] an excavation” within the meaning of the statute, if the structural engineer “substantially contributed to the design and methodology employed during the excavation process.” (The plaintiff specifically alleged that the structural engineer recommended use of a step mat footing instead of underpinning.) It did not matter if such contribution was negligent or helped cause the damage, because the court separately held that the structural engineer could also be held liable for negligence if the excavation design changes that it recommended actually caused the damage.
More recently, in July 2016, another trial court in Queens County Supreme Court issued a decision holding engineers retained by the general contractor to supervise the development strictly liable, after distinguishing their roles from that of the architect in St. Albans since they were “contractually bound to provide supervision over the project.” Additionally, the chief engineer took the further step of revising the shoring technique in the excavation plans to reduce ground vibrations.⁸ Thus, unlike the architect in St. Albans and in 87 Chambers, the engineers assumed responsibility for overseeing both the project’s excavation methodology and its safety.
The court did not and needed not address whether the design professional’s modification of the excavation plans was negligent or contributed to causing the damage. The decision is silent with respect to any cause of action grounded in professional negligence as against the engineers, and for all that appears from the decision, the chief engineer’s modification did nothing but reduce the likelihood of damage to plaintiff’s property. The engineers have filed a notice of appeal.

Conclusion

As the above cases show, if damage to neighboring property occurs, any design professional whose plans do more than contemplate the need for excavation, by actually contributing in any way to the design or methodology used in the excavation, shares strict liability for the damage with the project owner and excavating contractor. This is so regardless of whether such contribution was negligent or contributed to causing the damage, and even if the project had a separate engineer with express responsibility for support-of-excavation plans.
Moreover, a professional liability insurance carrier may disclaim coverage when liability is premised solely on this section of the Building Code and in the absence of any finding of professional negligence. An architect in such a position risks being subjected to liability for all the plaintiff’s damages. The architect may be without any effective recourse against other project participants for contribution if the plaintiff should choose to execute on its judgment against the architect’s assets first. Note that CPLR 1401 requires only liability for injury to property (although the cases generally assume this has to be tortious). If tort is not required, and if no one was negligent, contribution would be available but only ratably, i.e., divided equally among all strictly liable defendants.⁹
To guard against this risk, we recommend that architects and engineers seek to include clauses in their contracts requiring the owner/developer to indemnify them against any strict statutory liability that may come to be imposed on them for excavation damage to adjacent properties not caused by their own negligence.
Endnotes:

1. See Yenem Corp. v. 281 Broadway Holdings, 18 N.Y.3d 481, 489-91 (2012).

2. Bloomingdale v. Duffy, 71 Misc. 136 (App. T.), aff’d, 146 App. Div. 879 (1st Dept. 1911); See also Rosenstock v. Laue, 140 App. Div. 467 (1st Dept. 1910); Victor A. Harder Realty & Const. Co. v. City of New York, 64 N.Y.S.2d 310 (Sup. Ct., N.Y. Co. 1946) (contractor sued only for negligence); Columbia Mach. Works v. Long Island R. Co., 267 App. Div. 582 (1st Dept. 1944) (contractor held liable only for negligence).

3. See Union Course Holding Corp. v. Tomasetti Const. Co., 295 N.Y. 802 (1946), aff’g 184 Misc. 382 (Sup. Ct., N.Y. Co. 1944)(contractor held liable although no finding of negligence).

4. Fagan v. Pathe Indus., 274 App.Div. 703, 705-706 (1st Dept. 1949), citing Columbia, supra note 2.

5. Palermo v. Bridge Duffield Corp., 3 A.D.2d 863 (2d Dept. 1957), aff’g 154 N.Y.S.2d 288 (Sup.Ct., Kings Co. 1956).