Fundamentals Of Design Professional Malpractice

In today’s litigious society, no profession can escape the cost and aggravation of legal claims and suits. Design Professionals, architects and engineers, are no exception. One important and distinct type of claim or suit is the professional liability or malpractice claim.

A variety of other types of claims and suits may be made against the design professional, such as claims for ordinary negligence, such as automobile liability cases, or slip and falls on the company’s property. There are suits for wrongful employment practices such as discrimination, sexual harassment, or wrongful discharge. Finally, there are suits for commercial disputes over contracts, trade secrets, and patents.

Professional liability claims are unique and distinct from other types of claims because they are made against the professional in relation to the performance of professional services and the specific duties owed by professionals which are not applicable to the public at large. As a result special rules and standards apply to these claims that do not apply to other types of negligence actions.

A claimant may file a claim or suit asserting professional negligence, as a tort, such as negligence or misrepresentation, or may assert the claim as a breach of contract claim or that the design professional was negligent in the performance of its contractual duties.

ELEMENTS OF A CAUSE OF ACTION FOR PROFESSIONAL MALPRACTICE

In the absence of a specific contractual undertaking, the architect or engineer design professional owes legal duties to perform their work in accordance with the standard of practice of their profession.

Generally speaking, in order to prevail on a professional malpractice or professional negligence cause of action, the Plaintiff must assert and establish:

a. what the standard of practice is for the design professional under the circumstances;

b. that the design professional violated the standard of practice, and the way in which the standard of care was violated; and

c. that the Plaintiff suffered damages as a proximate result of the violation of the standard of practice.

STANDARD OF PRACTICE

What does it mean for there to be a standard of practice or a violation of the standard of practice? The standard of practice is the exercise of ordinary skill and care common to the professional under the circumstances. It is not the average performance of all professionals or the best performance of professionals. The standard of practice can relate to any aspect of a design professional’s work, from design to construction administration.

Just because a majority of professionals would do a task a certain way or that the claimant’s expert would do it differently does not mean that the way that the design professional performed the task is wrong or was a violation of the standard of practice.

Professional negligence must be contrasted with ordinary negligence. Professionals, like any other person, can be sued for ordinary negligence for matters not relating to their professional duties and practice. For example, if a person slips and falls on ice on their property of the professional, in the course of driving to or from a construction site, negligently causes a motor vehicle accident, those claims would be ordinary negligence claims where the standard of practice would not be applicable.

The design professional does not guaranty success (unless the design professional contractually or expressly makes a guaranty or warranty), and a bad result does not necessarily constitute a violation of the standard of practice.

Ordinarily, a claimant must present expert testimony to support a claim of professional negligence. There is an exception where the alleged professional negligence is a matter of common knowledge, or if the defendant professional establishes by his/her own testimony the standard of practice and breach.

PROXIMATELY CAUSED DAMAGES

Proximate cause is a legal term that involves elements of forseeability and a close relationship between the conduct alleged to impose liability and the damages.

In the context of claims against design professionals for malpractice, it is often alleged that the design professional should have designed the building or system differently, specified different equipment, or omitted something of significance from the design or specifications.

However, where the alleged damages involve things that should have been provided, but were omitted, or where betterments or improvements should have been specified or designed into the building or system, those may not be proximately caused damages. If the additional work or additional equipment, such as more expensive or sophisticated features or controls, would have been required had the design professional acted properly, then those costs would ordinarily have been incurred by the owner at the time of construction if the professional had not been negligent, and are not proximately caused damages. If the alleged damages involve improvements that make the building or system better or more valuable to the owner, then those betterments may not be proximately caused damages as the owner would benefit from those improvements and would have paid for those betterments.

On the other hand, if the cost of providing those improvements including the cost of the additional equipment or system, or the cost of installation of that additional system or equipment is more than it would have been had the design professional properly designed the system or properly prepared the specifications at the outset of the project, then those additional costs may be recoverable as proximately caused damages. For example, if the price of purchasing the additional HVAC equipment has gone up since the original contract and bidding process, or if it would cost more to install the equipment after the fact because other equipment would have to be remove and reinstalled, then those would be recoverable costs and/or expenses.

BREACH OF CONTRACT VERSUS NEGLIGENCE

Completely apart from the issue of professional malpractice for violating the standard of practice, a design professional may be liable for breach of a specific contractual promise or a specific guaranty or warranty.

However, in the absence of such a contractual undertaking or warranty, to what extent is a design professional liable to a third party under principles of contract or tort?

Historically, Defendants and design professionals were not liable to third parties for property damage or bodily injury, or to other contractors for their economic losses, in the absence of privity of contract, i.e., a direct contractual relationship with the party making the claim.

The principles of privity of contract were eroded over the years both in ordinary negligence cases and in professional liability cases and claims have been allowed in most states against professionals by third parties in spite of the lack of contractual privity.

However, at least in Michigan, recently there has been a movement in the opposite direction limiting the liability of contractors and design professionals to third parties.

The court in Matrix relied upon a Michigan Supreme Court decision in Fultz v Union-Commerce Associates, 470 Mich 460-463 (2004) which held that a third party cannot sue a contractor without having a contractual relationship with the contractor in the absence of proving some duty owed to the claimant independent of the duties undertaken by the contractor under the contract with the owner.

Other states still allow suits by third parties against design professionals in the absence of privity of contract.

Third party Plaintiffs which are not in contractual privity with the design professional may also assert that they are third party beneficiaries of the contract between the design professional and the owner and thus entitled to sue. This approach often does not succeed because a third party beneficiary must establish that the parties to the original contract with the owner intended to benefit the third party.

FRAUD AND MISREPRESENTATION

Claims against design professionals for fraud or misrepresentation are generally considered distinct from ordinary malpractice claims involving breach of the standard of practice. They do not require proof of the standard of practice and violation of the standard of practice, but rather have their own independent elements as follows:

a. a misrepresentation or omission of an important fact;

b. the misrepresentation or omission was made negligently, innocently, or intentionally;

c. the claimant reasonably relied upon the misrepresentation or omission; and

d.the claimant suffered damages as a proximate result of the misrepresentation or omission.

Frequently claimants will assert misrepresentation or omission allegations against design professionals relating to errors or omissions in specifications, or in statements made to the contractors in the course of the bidding process or construction or administration of the contract. In such cases, the third party may not be able to establish the necessary element of reasonable reliance where the design professional’s duty is owed to the owner, not the third party.

Claims for misrepresentation often require a higher level of proof, i.e., proof by clear and convincing evidence.

Misrepresentation claims by third parties may be allowed even where professional liability claims based on breach of contract are not, because they are considered to be a distinct type of claim.

STATUTE OF LIMITATIONS/STATUTE OF REPOSE

One of the different rules applicable to professional liability claims is the time period during which a claimant can sue, or the statute of limitations or in some instances a statute of repose. A statute of limitations usually limits a claimants right to sue after a certain number of years after the claim accrues. The accrual date can be the date of the alleged wrongful act, the completion date of a project, the date of the injury or damage, or in some instances, the last day that the professional performed services for its client.

A statute of repose limits the time after which suit can be performed to a certain number of years after a date, often the completion or occupancy of a project or building, without regard to when the injury or damage occurred or could have been discovered. Thus a statute of repose could preclude a suit even though the damages had not occurred or became manifest or discoverable before the deadline.

COMMON CAUSES OF MALPRACTICE CLAIMS

Malpractice claims can arise out of a variety of situations and causes too numerous to relate. However, some of the more common ones are addressed here.

Many malpractice claims arise out of disputes over the scope of work and claims relating to oral agreements or representations. As a result, it is very important for the design professional to document its scope of work and all agreements or understandings, even for small projects and for clients where there is a long term ongoing relationship.

Too often, after an initial proposal or professional services contract for an initial project, and after an ongoing relationship settles in, informalities arise, where formal documentation of the project and scope of work can go by the wayside. If a major loss or claim arises, that prior close or long term relationship may not prevent disagreements over scope of work and duty issues or prevent one party from asserting revisionist history to support their claim. Good documentation is an important measure to prevent malpractice claims and help defeat them when they arise.

Similarly, informal or oral decisions or changes made in the field without the necessary investigation, communication, and documentation can lead to malpractice claims based on ambiguous decisions or change orders, lack of owner consent, or insufficient information.

Failure to address complaints or issues raised by the owner, or contractors, in a timely fashion and respectfully can cause anger and blow out of proportion a manageable issue that could have been solved early at little expense. Complaints over billings or charges that are ignored or blown off can sometimes lead to other claims of poor work or services and snowball into a malpractice suit.

Where delays are caused by unexpected circumstances or conditions, bad weather or supplier issues, claims may be made against the owner for delay damages and extra expenses or result in litigation against the contractor for delayed or uncompleted work, missed deadlines, and poor workmanship. These claims often result in the design professional being brought into the fray and litigation. It is best to identify and address these issues clearly and directly with the owner and contractor and resolve them before the amount of money and time involved becomes critical to either side making litigation more likely.