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ConstructionRisk.com ReportÔ
Vol. 2, No.3 - Mar. 2000
In This Issue:
· A/E
Relied on Owner to Test Old Tank before Incorporating into New Project:
Potential Liability for Death Caused by Tank Rupture
· Contractor
Criminally Indicted for Death of Workers
· Copyright infringement
by Reuse of Architect’s Plans
· A/E Contract Established
Time Limit for Suit
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A/E Relied on Owner to Test Old Tank before Incorporating into New
Project: Potential Liability for Death Caused by Tank Rupture
Risk to the project architect/engineer (A/E) can be caused when its
client (the project owner) provides it insufficient, incomplete, or
inaccurate information upon which it relies. Agreements between the A/E
and its client should identify data and information to be provided to
the A/E by the owner and it should permit the A/E to rely upon that
data. There are a number of reported cases where the A/E has performed
planning and design in reliance upon owner data such as site data or
geotechnical engineering reports that turned out to be erroneous. When
that happens, the project may not be able to be constructed as planned
or the facility may not perform as expected. In the absence of a clear
contract as to who has responsibility for that information and what
reliance the A/E may place upon it, the matter is apt to end up in court
if things go terribly wrong on the project.
In Venecia Gilliam v. Meridith Corporation, 744 So. 2d 1249
(24 Fla. Law W.D. 2605), the City of Minneola, Florida retained an A/E
to design a booster station to solve a water pressure problem in the
city water system. The A/E drafted specifications for construction bids,
calling for a new 5,000 gallon water storage tank. Minneola asked the
A/E to prepare an alternate specification using a 3,500 gallon tank the
city had previously used in the system. In complying with the request to
prepare an alternate specification, the A/E recommended to the city that
the old tank be professionally inspected and tested before deciding
whether to use it.
The city opted to use the 3,500 gallon tank and asked the A/E to
obtain a proposal for the inspection. As requested, the A/E obtained a
proposal for testing from a testing firm and forwarded the proposal to
the city. Apparently, nothing was done with the testing proposal by the
city to either accept it or reject it. The tank was never inspected. The
A/E asserts that he inquired about the proposed inspection and was led
to believe that it had been done. The fact that the city sandblasted and
painted the tank so it appeared to have been refurbished reinforced the
A/E’s belief that it had been inspected. A city employee, however, in
testimony during a deposition, countered the A/E’s assertions.
Two years after the completion of construction on the booster
station, the tank ruptured and a worker was killed. The tank ruptured
because of defective welds that had been made 19 years earlier to patch
a rectangular hole in the tank that ironically had been cut for the
purpose of inspecting the tank back then. The court says that
determining the cause of the rupture is complicated by the fact that
after the pressure booster project was completed, the city installed a
replacement pump that did not meet the A/E’s original specifications.
The A/E had no part in the installation of the replacement pump. The
trial court granted a motion for summary judgment in favor of the A/E.
The appellate court reversed that decision, saying there were factual
issues to be decided by a jury, as to the A/E’s role and
responsibility during the initial installation of the booster station
and in the inspection of the 3,500 gallon water tank.
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Contractor Criminally Indicted for Death of Workers
When two workers that were trapped and drowned in a collapse trench,
a general contractor and its president were indicted by a Grand Jury for
manslaughter, negligent homicide and reckless endangerment. The facts as
described by the court are these: The general contractor was installing
a water and sewer line. During excavation of a trench where the sewer
lines were to be installed, the work crews discovered a six-inch,
pressurized water pipe. This pipe was not on any map and was not marked
on the pavement. The pipe cut across the trench and then ran parallel to
the path where the lines were to be placed.
The contractor immediately stopped the work and conferred with the
City plumbing inspector familiar with the prevalent safety practices at
the City excavation sites. After this consultation, the contractor, in
the presence of the City inspector, instructed the workers to resume the
excavation, "but told them to take certain precautions by moving
the trench several inches away from the pipe. In addition, the workers
hand-dug every few feet to ensure the pipe was not disturbed during the
excavation." At some point the trench wall suddenly collapsed and
the water pipe burst, flooding the trench and drowning two trapped
workers.
After the company and its president were indicted, they filed motions
with the court asking that the charges be dismissed on legal sufficiency
grounds. The trial court granted the motion as to the manslaughter and
reckless endangerment charges. In affirming that decision, the appellate
court stated that it could find nothing in the proof presented to the
Grand Jury suggesting that the defendants "consciously disregarded
a substantial and unjustifiable risk" of death or serious physical
injury sufficient to sustain a charge that they were
"reckless." What persuaded the court was that the contractor
consulted the City plumbing inspector and, before resuming the work,
cautioned the workers to avoid the pipe by moving the trench as far away
from it as conditions permitted. The workers also frequently checked the
location of the pipe. "Thus, defendants did not disregard a risk.
On the contrary, they took steps to avert it. Furthermore, the workers’
deaths were an unforeseeable consequence of defendants’ conduct."
People v. Roger Reagan, 1999 NY Lexis 3732 (Nov. 18, 1999).
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Copyright infringement by Reuse of
Architect’s Plans
Disputes over who has ownership and
rights to use or reuse the architect’s plans are becoming more common.
The AIA contract documents contain language granting the architect
ownership and control of the documents. It seems, however, that more
owners are amending that article of the contract so that they take
ownership of the documents. S erious
business and risk management repercussions may result.
In the case of Eiben v. A. Epstein
& Sons International, Inc., 57 F. Supp. 2d 607 (N.D. Ill. 1999),
the court determined whether the project (a county government) was
entitled to use an architect's drawings for the purpose of renovating
part of the original project designed by that architect ten (10) years
after they had been drafted. The "instruments of service"
clause of the AIA B141 contract provided:
"Drawings and
specifications as instruments of service are and shall remain the
property of the Architect whether the Project for which they are
made is executed or not. The County shall be permitted to retain
specifications for information and reference in connection with the
County's use and occupancy of the Project. The drawings and
specifications shall not be used by the County on other projects,
for additions to this Project, or for completion of this Project by
others, except by agreement in writing and with appropriate
compensation to the Architect."
When the county built a new addition to
the building, it retained the services of a different architect. This
architect was sued by the original architect for copyright infringement
for reusing the drawings. The court found that the use and copying of
the drawings was permitted under the unambiguous wording of the contract
because the activities occurred "in connection with the County's
use and occupancy of the [original] Project." According to the
court, "alteration in the use of the occupancy of a fractional part
of the [original building] cannot arguably be characterized as 'other
projects' within the contract's meaning." The court concluded:
"Where a change
in the use of a portion of a building is involved, encompassing the
partitioning of a previously open area into a number of rooms and
the creation of necessary modifications in the systems serving that
space, it is of course inevitable that the old plans must be drawn
to prepare the new plans. [Plaintiff's] beef that the new plans were
derived from and substantially similar to his earlier drawings is
much like Portia's contention that the contracted-for pound of flesh
could not be extracted unless it could be done without any
accompanying drop of blood -- but here [plaintiff's] consent to use
of his work 'for information and reference' necessarily carried with
it the right to use his drawings as the basis for the new plans
covering the revisions in the use of the space."
Risk Management Note: Architects
should pay attention to any contract amending the standard AIA type
language concerning ownership of documents. They should maintain the
ownership of the documents and the right to reuse them on other
projects. If an owner insists on ownership, it is prudent for the
architect to demand contract language limiting the purposes and
conditions under which they may be reused by the owner, and requiring
the owner to indemnify and hold the architect harmless for injuries or
damages resulting from the reuse. The architect is at greater risk of
liability when the owner or someone else uses its documents without its
input and control. Staying involved on the project during the
construction phase may enable the architect to make clarifications and
corrections to its drawings that avoid problems and liability. If the
drawings are modified by the owner without the architect’s input and
used for different projects or different purposes even greater risks are
posed for the architect. Again, one risk management solution is to
negotiate indemnification and hold harmless clauses in the contract with
the owner to protect the architect against liability arising out of the
reuse of the drawings.
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A/E Contract Established Time Limit for
Suit
To better manage and price
the risks associated with design services, A/E’s often include
language in their contracts with their clients establishing a specific
limitation on how long a client can wait before filing suit against the
A/E for damages arising out of the professional services. AIA B141
includes a clause stating: "As between the parties to this
Agreement: as to all acts or failures to act by either party to this
Agreement, any applicable statute of limitations shall commence to run
and any alleged cause of action shall be deemed to have accrued in any
and all event not later than the relevant Date of Substantial Completion
of the Work. . . ."
In the case of Harbor Court
Associates v. Leo A. Daly, Company, 1999 U.S. App Lexis 11265 (4th
Cir. 1999), the parties signed a standard AIA contract containing the
above-quoted time limitation. It established September 11, 1987 as the
date of Substantial Completion. That then became the date from which the
three-year state statute of limitations began to run. Nine years after
the project was completed, a fifteen-square-foot area of brick suddenly
exploded off the face of the Complex. According to experts retained by
the owner the damage was caused by fundamental and latent defects in
design and construction. Since the lawsuit was initiated more than three
years after Substantial Completion, the defendant asked to the court to
grant it summary judgment. The trial court granted the motion and the
plaintiff appealed. The plaintiff argued that the contract provision
violated public policy of the State of Maryland that holds that the
"discovery rule" should apply when determining when a suit
must be filed. That means that a "cause of action accrues when the
[plaintiff] in fact knew or reasonably should have known of the
wrong."
The appellate court affirmed the lower
court decision to grant summary judgment because even though the
Maryland courts apply the "discovery rule," the parties to a
contract are free to negotiate a specific time period for filing suit.
The court stated that it is reluctant to strike down voluntary bargains
on public policy grounds. In fact the court stated this would be done
"only in those cases where the challenged agreement is patently
offensive to the public good . . .." As further explained by the
court, "In light of this established judicial commitment to
protecting individuals’ efforts to structure their own affairs through
contract, we cannot conclude that the Maryland Court of Appeals would
decline to allow parties to contract around the state’s default rule
establishing the date on which a relevant statute of limitations begins
to run."
------------ Risk
Management Note ------------:
By establishing a definite cut-off time
for its client to sue it, an A/E is able to limit its risk to a limited
amount of time. On construction projects where plaintiffs have sought
recovery 25 years or more after project completion, this relief is
important. It also permits the A/E to reduce its insurance costs since
it may not need professional liability insurance coverage for as many
years after a project is completed. For A/Es maintaining practice
policies with retroactive insurance coverage dates going back many
years, this may reduce the premium charged by the carrier.
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understanding that ConstructionRisk.com, LLC is not engaged in the
rendering of legal services. Further, the comments in this newsletter
are for general distribution and cannot apply to any single set of
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this newsletter relates, we urge you to consult your own legal counsel.
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the opinion of any writer's employer and are not to be attributed to any
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Copyright 2000, ConstructionRisk.com,
LLC
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