Veni, Vidi, Vici, Lis Pendens: I came, I saw, I got sued – Part 1 of 2

December 04, 2012

Excerpted from the September 2012 issue of ProNetwork News, part one of a two-part series:

pronetworknews_sept2012What if Caesar had written “I came to the project site, I observed for general conformance with the Contract Documents but not for means or methods or work covered since my last visit” and then wrote a three word report? Caesar was a master of understatement and understatement leads to misunderstandings and, well, understatement. Architects have always faced liability for undiscovered construction defects but current economic times have forced many contractors out of business. With the typical lack of contractor insurance for defective work, A/E’s are the only solvent or insured pocket, leaving design professionals more vulnerable to construction defect claims than in the past.

Veni – I went to the site

Those preaching risk reduction used to urge that architects and engineers leave construction administration to construction managers and contractors. This approach allowed or even encouraged contractors, CMs, program managers and owner’s representatives to take market share for services formerly performed by A/E’s. It also missed the point. Design professionals do not seek to eliminate liability, but to manage the reasonable risks of design practice. Reasonable risks are those placed with the party able to control them.

If an owner wants an A/E to ensure perfect construction, the project is doomed to fail for two reasons. First, there hasn’t been perfect construction since the Pyramids (and they had different labor and insurance agreements in those days). Second, the A/E does not control all of the variables that go into a construction project. There are elements of construction installed and concealed by the time the A/E arrives for a weekly or monthly meeting and site tour and even the most gifted A/E is powerless to see through walls.

Architect and consulting M/E/P engineer design a medical office building and, by contract, are required to make only monthly site visits to review the work in progress, corresponding with the monthly draw. Less than one year after substantial completion, the owner notices moisture and mold growth on the underside of soffits in a number of locations. The general contractor is out of business, as is the installing mechanical contractor.

The owner retains a well-known litigation consultant who opens the soffits and determines that there are short runs of insulated pipe as specified but long runs of uninsulated pipe. The litigation consultant theorizes that the short runs of insulated pipe correspond to installation on the one day the architect and engineer visited the site, always on the same day every month.

Liability arising from construction administration typically comes either from the contract or from the A/E’s actions. In this area, the law tends to divide the world into contracts and torts. Torts are not those pastries but non-contract duties running to injured third parties. In tort law, you owe third parties damages in proportion to your degree of fault. If you have a car accident with two other cars, one of the drivers may be more at fault than the other or have caused the whole mess. Tort law apportions liability among the parties so that nobody pays more than his or her fair share. A party 20% responsible owes 20% of the damages. The contract’s description of your scope of services and your actions will factor into your percentage. They are not likely to give you 100% or 0% of the liability, but usually something in between.

A contract is different because it is a deal – a legally enforceable promise. If you break the deal – breach — you owe all of the damages caused by your breach. If the owner has deals with others, who also breach, you are still responsible for all of the damages flowing from your own breach. Like telling the officer that you weren’t the only one speeding, a contractor’s breach of its own contract does not get the A/E off the hook. You are both responsible for the entirety of your damages. If the damages overlap, the owner only gets to recover the total of its actual damages but can pursue those damages from either or both of you in whatever order it chooses. If the contractor is solvent or insured, you may be in luck. Unless you also have a contract with the contractor, though, in many jurisdictions you may not be able to force the owner to beat up the contractor. More on that below.

For decades, A/E agreements have called for A/E’s to visit periodically. Owners may insist on “as required” or “as needed” language. The best response to such a request is to explain the increase in fees necessary to provide it. Increased fees usually end the discussion but the decision is not usually reflected in the final version of the contract. It will be lost to a later judge or jury. The best way to reflect the discussion is to address it like a limitation of liability provision:

A/E has offered to provide more frequent or full time site presence as a part of Basic Services for an increased fee. Owner has declined to engage A/E for more frequent or full time site presence.

A judge or jury will know from your agreement that this was a term discussed and that it was not part of your deal. The same is true for typical language leaving to the contractor the responsibility for the contractor’s performance, now in paragraph 2.6.1.2 of the AIA B201 (2007), for example.

This has been an excerpt of the July 2012 edition of ProNetwork News. Download the full PDF version for more information about Veni, Vidi, Vici, Lis Pendens:  I came, I saw, I got sued – Part 1 of 2:

About the Author: Eric Singer is a partner at Ice Miller, LLP. He concentrates his practice in construction law, with emphasis on the representation of architects, engineers, contractors, owners, and lenders as well as other professionals, in litigation and alternative dispute resolution of design and construction issues. Mr. Singer, who was awarded his J.D by the University of Chicago Law School, is a former Professional Affiliate Director of the American Institute of Architects of Chicago and is a member of multiple bar associations and design professional groups. Recently ranked as AV Preeminent by Martindale-Hubbell and listed in The Best Lawyers of America, Construction Law, by those peer-review organizations, Eric is an active speaker and prolific author on the subject of construction litigation and the liability of the design professional. Contact Eric Singer at: eric.singer@icemiller.com

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