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By:  J. Keith Ramsey and Monte S. Starr, Holland & Knight LLP

Ever since Moransais v. Heathman, 744 So. 2d 973 (Fla. 1999), Florida courts have recognized that individual professionals could be held liable to third parties for their negligence in the performance of a contract entered into by their employer. In Witt v. La Gorce Country Club Inc., 35 So. 3d 1033 (Fla. 3d DCA 2010), the Third District Court of Appeal expanded that liability to rule that as a matter of law, limitation of liability provisions in professional services contracts were not enforceable to insulate individual professionals from liability.

That was the case until April 24, 2013, when Governor Rick Scott approved Senate Bill 286. The bill will effectively abrogate the holding of Witt and permit business entities providing professional services to limit by contract the liability of their individual employees or agents. Under the newly created Florida Statute 558.0035, which is effective July 1, 2013, an individual design professional (identified in the new statute as an architect, interior designer, landscape architect, engineer, surveyor or geologist) can be protected from individual liability for negligence under each of the following circumstances:

 

  1. the contract is made between the business entity and a claimant or with another entity for the provision of professional services to the claimant
  2. the contract does not name as a party to the contract the individual employee or agent who will perform the professional services
  3. the contract includes a prominent statement, in uppercase font that is at least five point sizes larger than the rest of the text, that, pursuant to this section, an individual employee or agent may not be held individually liable for negligence
  4. the business entity maintains any professional liability insurance required under the contract
  5. any damages are solely economic in nature and the damages do not extend to personal injuries or property not subject to the contract

Other Statutes to be Amended

Several other statutes addressing design professional liability will also be amended to include the proviso, “Except as provided in s. 558.0035.” Those statutes are F.S. 471.023 (governing the certification of engineering firms); F.S. 472.021(governing the certification of land surveyors); F.S. 481.219 (governing the certification of architecture firms); F.S. 481.319 (governing the certification of landscape architecture firms); and F.S. 492.111 (governing the certification of professional geology firms).

The effect of this new legislation is that, under the plain language of the statute, if a professional services contract complies with the newly enacted statutory requirements, those contracting with design professional entities will not be able to hold the individual professionals liable for their negligence. Moreover, under the language of subsection (a), the limitation of liability may extend to claims brought by third parties if the underlying contract was for the provision of professional services to that third party.

Implications for Attorneys

Those attorneys with design professional clients need to familiarize themselves with the new law as their clients will no doubt be asking that limitation of liability provisions which conform to the statute be drafted for their contracts. Practitioners should caution their clients, however, that it will be a while before courts have the opportunity to apply the new law and its effect.

Therefore, in the interim, there are many issues and questions as to the limits of its applicability that an attorney may need to advise its clients of. For example, the law only provides for individual employee immunity from liability. It does not provide for immunity to the design professional firm for that employee’s negligent acts. Moreover, general partner liability principles dictate that individual partners can still be liable for the acts of their employees or even of their other partners. Finally, it is questionable that the new law will be of much benefit to sole proprietorships or self-employed professionals given the inherent liability under those firms.

Those attorneys with nonprofessional clients likewise should discuss the new law with their clients. It is important to keep in mind that the new limitation of individual professional liability must be contractually agreed to. Therefore those clients negotiating with design professional firms should be ready to negotiate what may become a sticking point in the contract process. If the design professional firm insists on the inclusion of the individual professional immunity, then perhaps the firm would agree to certain concessions such as an increase in the overall liability cap for firm liability as a trade or perhaps a reduction in the overall contract price. Attorneys representing contractors intending to partner with design professional firms for design-build agreements likewise should carefully consider the impact of the new law on the liability exposure between the contractor and the design professional entity.

The aforementioned are just some of the issues that attorneys are likely to encounter as the new law takes effect and then eventually when the new law is litigated.

The text of the bill can be reviewed at http://laws.flrules.org/files/Ch_2013_028.pdf.

Keith Ramsey is an associate and Monte Starr is a partner in Holland & Knight’s Orlando, Fla., office.  

James K. “Keith” Ramsey
200 South Orange Avenue
Suite 2600
Orlando, FL 32801

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The opinions expressed are those of the authors and do not necessarily reflect the views of the firm, its clients, or Portfolio Media Inc., or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.

 

Copyright 2013, ConstructionRisk, LLC