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Viewpoint: Game-Changing Court Case Elevates Liability Risk for Design Firms

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A recent court case could increase liability exposure for design firms in California. For years, design professionals have avoided negligence liability to third party property purchasers by arguing that their role in preparing plans is too remote for a duty to be fairly imposed upon them. Instead, design professionals typically become involved in construction lawsuits, if at all, when they are sued by the builders or developers with which they have contracts. This paradigm is changing as a result of the California Supreme Court's holding in Beacon Residential Community Assn v. Skidmore, Owings & Merrill LLP.

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In Beacon Residential, the Court ruled that in the context of residential development, design professionals owe a duty of care to third party property purchasers. In so ruling, the Court distinguished earlier case law that restricted liability where the design professional only prepared plans or made design recommendations and 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.

PERNICKA
HARTNEY

The plaintiff, a condominium homeowners association, sued the developer of the project and the project architect on behalf of individual homeowners for construction defects allegedly caused by negligent architectural design work. Building on a long history of negligence case law, the Beacon Residential Court held that where the design professional is not subordinate to any other design professional, 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 reaching this conclusion, the Supreme Court distinguished Weseloh Family Ltd. Partnership v. K.L. Wessel Construction Co., Inc. (2004), a case 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.

The Beacon Residential ruling increases the liability exposure of design professionals for residential construction claims, at least where the design professional is the principal professional in its discipline for the project. Design professionals and their insurers will have to adapt to this reality. The ruling 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. 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.

Future implications could be far-reaching. Though the case was brought in the context of architectural defects in residential construction, its logic could be extended to other types of development and other professions, such as structural engineers, that contract directly with the builder. The Court declined to rule on whether or not the Right to Repair Act (SB800) provides an independent basis for design professional liability to residential homebuyers, leaving future cases to decide that issue.

Mark R. Hartney is the chair of Allen Matkins' Los Angeles Litigation department and former co-chair of the firm's Construction Law practice group. He can be reached at mhartney@allenmatkins.comCharles L. Pernicka is a resident in the Allen Matkins' San Diego office and is a member of the firm's Litigation Practice Group. He can be reached at cpernicka@allenmatkins.com.

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