Pennsylvania appellate court confirms exception to economic loss doctrine for claims regarding faulty design documents
Source: http://www.lexology.com, September 15, 2015
By: Laura Freid-Studlo
In Gongloff Contracting, L.L.C. v. L. Robert Kimball & Associates, Architects & Engineers, Inc., 2015 Pa. Super 149 (Pa. Super. Ct. July 8, 2015), the Superior Court of Pennsylvania reversed the trial court’s decision and held that a claim for negligent misrepresentation could be based on faulty design documents under Section 552 of the Restatement (Second) of Torts. The case was brought by a structural steel subcontractor (Gongloff) against the architect-engineer (Kimball) for a university convocation center. Kimball provided Gongloff and others with the design of the steel structure and repeatedly denied allegations of errors in the design. But Gongloff alleged that the “never-before-utilized” design was in fact defective, and that Gongloff experienced various problems and significantly increased costs as a result of changes made to correct the design.
Kimball filed a motion for judgment on the pleadings stating that Gongloff’s claim was barred. Although negligence claims that result solely in economic loss are generally barred under Pennsylvania law by the economic loss doctrine, there is a narrow exception found inSection 552 for “Information Negligently Supplied for the Guidance of Others.” In Bilt-Rite Contractors, Inc. v. The Architectural Studio, 581 Pa. 454 (2005), the Pennsylvania Supreme Court adopted Section 552and held that it applied to cases where a design professional negligently supplies information that will foreseeably be used and relied upon by third parties, even where such parties have no contractual relationship with the design professional.
Kimball argued that an actual or express misrepresentation was required to find liability under Section 552 and claimed that Gongloff had failed to identify a particular document or communication that was false. The trial court agreed. But the appellate court reversed, stating that, under Bilt-Rite, architects could be subject to liability forSection 552 negligent misrepresentation claims when there is an allegation that they negligently included faulty information in their design documents. The court further explained that an architect’s design itself can be construed as a representation that the design, if followed, will result in a successful project. Gongloff’s allegations of misrepresentations in Kimball’s design were deemed sufficient to survive the motion, and the appellate court found the trial court’s decision that Gongloff was required to identify an express representation to succeed on its Section 552 claim “legally erroneous.”
It should be noted that Gongloff did more than vaguely allege deficiencies with Kimball’s design. The court listed several allegations from Gongloff’s complaint detailing instances where Kimball’s design was called into question or determined to be impossible. Additionally, Gongloff specified that “the design of the long-span-joists and their support system, was not adequate to safely sustain all required loads and normal construction methods could not, in fact, be utilized to erect the structure.”
While the court recognized that Kimball might well be able to prove later in the litigation that the allegations of defective design were unsubstantiated, Kimball was not entitled to judgment in its favor at the pleadings stage.
It will be interesting to follow whether the Gongloff case leads to an increase in claims by contractors and subcontractors against design professionals on projects with significant design changes and cost overruns.