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ConstructionRisk.com
Report
Vol. 3, No. 3 - May/June 2001
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Inside
This Issue:
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Expert
Affidavit Required With Complaint
A construction contractor on a design-build wastewater treatment
construction project filed suit against the engineering firms that had
entered with them into the design-build venture.
A Georgia state statute requires that an expert affidavit be
filed with a complaint alleging professional malpractice.
The contractor failed to file such an affidavit with its
complaint, and the trial court dismissed the case without prejudice.
Since the dismissal was without prejudice, this meant that the
contractor could potentially re-file the complaint again with a properly
executed affidavit. The engineers pre-empted action, however, by filing an appeal
asking the appellate court to go beyond the trial court’s remedy and
direct that the case be dismissed with prejudice so that the contractor
could not file its case again.
In reviewing the matter, the appellate court remanded the case to
the trial court to enter judgment of dismissal with prejudice.
The court agreed with the engineers arguments that a plaintiff
who brings an action alleging professional malpractice must file with
the complaint an expert’s affidavit.
The affidavit must set forth at least one negligent act or
omission and the factual basis for the claim.
“If the required affidavit is not filed with the complaint, the
complaint is subject to dismissal for failure to state a claim.
A dismissal for failure to state a claim is a dismissal on the
merits and is with prejudice.”
Jordan, Jones & Goulding v. Balfour Beatty Construction, 2000
WL 1364215, 246 Ga.App. 93.
NOTE: This case focused on statutory language and was decided
strictly on the basis on how that language was to be interpreted and
applied. The statutes vary
in the different states, and the timing of when an expert affidavit must
be filed may be different depending upon the jurisdiction.
Even if not required by statute to be filed with the complaint,
however, an expert’s testimony is almost always required if a judge or
jury is being called upon to decide whether a design professional
performed its services negligently.
To prove negligence, the plaintiff
must present evidence that the designer did not comply with the
generally accepted standard of care. Expert testimony is necessary to
prove the standard of care and that it was violated by the defendant.
For newsletter articles analyzing cases on that point, please see
the A/E Briefings subject index on the first page of the
ConstructionRisk.com website.
Copyright ã 2001,
ConstructionRisk.com, LLC - Virginia
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You can also view frequently asked questions concerning contract
language and you can obtain information and samples of various insurance
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No
Damage for Delay Clause Not Enforced
A construction contractor was delayed in completing a road
construction project by a flaw in the design provided by the project
engineer. The project owner
(Broward County, Florida) denied the contractor’s delay and impact
claim, asserting that it was barred by a contract provision entitled
“No Damages for Delay.” The
courts held that to the extent that the delay was caused by bad faith or
by interference with the contractor’s
work, the contractor was entitled to recover.
The clause in question reads as follows, with the first sentence
in all capital letters: “No claim for damages or any claim other than
for an extension of time shall be made or asserted against the county by
reason of any delays. The
contractor shall not be entitled to an increase in the Contract Sum or
payment or compensation of any kind from the County for direct,
indirect, consequential, impact or other costs, expenses or damages,
including but not limited to costs of acceleration or inefficiency,
arising because of delay, disruption, interference or hindrance from any
cause whatsoever, …; provided, however, that this provision shall not
preclude recovery or damages by the Contractor for hindrances or delay
due solely to fraud, bad faith or active interference on the part of the
County or its agents. Otherwise, the Contractor shall be entitled only to
extensions of the Contract Time as the sole and exclusive remedy for
such resulting delay, in accordance with and to the extent specifically
provided above.”
During construction, the contractor “Triple R Paving, Inc.”
discovered an alignment problem that prevented a major portion of the
work from proceeding. When
it asked the County to permit it to move its manpower and equipment off
the site until the problem was corrected the county directed it not to
do so. The work then
progressed slowly and out of sequence.
Triple R was paid for all the work performed, but the county
refused to pay for any of the inefficiency that was caused by the
inability to get site access and complete the job in the time originally
anticipated.
Triple R filed suit against the County.
The County sued its engineer as a third-party defendant under the
indemnification clause of the contract between the engineer and the
county. The suit survived a
motion by the engineer for a directed verdict against the contract on
the basis of the No Damage for Delay Clause.
A jury then held in favor of the contractor as to certain of the
delay damages. On appeal,
the engineer argued that the trial court should have granted its motion
for directed verdict . Although
agreeing that generally clauses providing for no damages for delay are
legal and enforceable, the appellate court found that in this case the
facts surrounding the delay which resulted form the horizontal sight
distance design flaw were sufficient to allow a fury to decide the
question of fraud, bad faith, or active interference.
Evidence of the engineer’s “knowledge of the
design flaw and the subsequent failure to apprise Triple R of the
problem was sufficient, said the court, to constitute willful
concealment of foreseeable circumstances which impact timely
performance, such that the no damages for delay clause may be overcome.
The appellate court engineer responsible for the design flaw.”
In this case, the court said that the evidence established that
the engineer was well aware of the design flaw in the bridge
construction, but withheld that information from Triple R.
“Thus, there is sufficient evidence to allow a jury to
determine whether fraud, bad faith, or active interference vitiated the
no damages for delay clause.”
In related issues, the court held that the trial
court committed reversible error in the written jury interrogatories.
The questions to jury used language inconsistent with the jury
instructions that had been given at the end of the trial.
This had the serious potential to confuse the jury and prevent it
from awarding the full extent of damages to which the contractor was
entitled. The damages
at issue were those to be awarded pursuant to the Eichleay formula to a
contractor who suffers unabsorbed home office overhead when the
government delays work on the contract indefinitely but requires the
contractor to remain available to resume work immediately on the
government’s instruction. The
court reversed and remanded the case.
A new trial on the damages would apparently be required in order
that a jury may consider a proper combination of instructions and
interrogatories so that it may award appropriate damages to the
contractor.
Triple
R. Paving, Inc. v. Broward County, 2000 WL 1584452 FL, 25 Fla. L. Weekly
D2517 (Oct. 25, 2000).
NOTE: This case is somewhat unusual in that the contractor was able
to successfully claim damages despite the no damages for delay clause.
Such clauses are generally enforced by courts.
In another recent case, for example (DiGioia Brothers Excavating,
Inc. v. City of Cleveland, 734 N.W. 2d 438, 2000), an Ohio Court held
that none of the exceptions to enforceability of a no damage for delay
clause applied to the facts of the case since the contract actually
addressed the specific cause of the delay.
The contract for installation of a water main noted hundreds of
locations where there were interferences with subsurface utilities.
The contract also advised that there may be unmarked or
inaccurately located utilities and it expressly disclaimed liability for
delay that might result from such interferences.
Contractual language disclaiming responsibility for information
or lack of information provided by an owner must be taken quite
seriously by a contractor. Contractors
must not assume that a court will get them out of a contract because it
ultimately looks unfair or produces an unfortunate loss for the
contractor for matters beyond the control of the contractor.
The time to manage this risk is during contract negotiation.
Particular caution should be exercised when negotiating contracts
with owners who have a history of writing
hard contracts that impose risks upon architects, engineers and
contractors that are not generally encountered in the standard form
contracts commonly used in the industry.
Copyright ã 2001,
ConstructionRisk.com, LLC - Virginia
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Statute
of Repose Passes Constitutional Test
The Supreme Court of Washington held that the state’s six-year
statute of repose did not violate the state constitution or the equal
protection clause of the United States Constitution.
Although it found itself compelled to enforce the statute to
grant summary judgment on behalf of design professionals who designed
condominiums that slid down a hillside during heavy rains, the court
clearly felt the statute was distasteful and unfair.
The provision of the statute is:
“All claims or causes of action set forth in [the statute]
shall accrue, and the applicable statute of limitations shall begin to
run only during the period within six years after substantial completion
of construction, or during the period within six years after the
termination of the services enumerated [
], whichever is later. … Provided,
that this limitation shall not be asserted as a defense by any owner,
tenant or other person in possession and control of the improvement at
the time such cause of action accrues.”
Plaintiff, condominium association, sought to get out from under
the statute of repose by arguing that the phrase “termination of
services” means ALL services provided by the A/E on the improvement
and that since some minor repairs were completed years after the
substantial completion, it was this later date that would trigger the
running of the statute. The
court rejected that argument saying that if the statute were read this
way there would be no purpose if referencing substantial completion
since by definition there are always services to be completed after
substantial completion to bring the project to final completion.
The court also rejected an argument by the plaintiffs that until
the units were sold the substantial completion could not have occurred.
Since the statute defines substantial completion as the date when
the improvement MAY be used or occupied it did not matter what date the
unit was first actually used or occupied.
On the plaintiff’s argument that the statute unconstitutionally
benefited designers and contractors to the detriment of others,
including the project owner, the court showed sympathy for the argument.
In commenting critically upon the theoretical basis for the statute
(i.e., that it provides protection for those in the construction
industry who because of the durability of their products would have a
long tail of liability), the court stated: “Contractors are not liable
for the acts of owners, so that for them the fear of a long tail of
liability for acts of others in unfounded, but the reverse is not true:
owners may well have liability to third parties where harm is caused by
construction defects revealed after the six-year repose period.
Yet the statute extinguishes their rights against the responsible
contractors. Thus, the
statute provides repose to negligent contractors in order to protect
them from an illusory risk, while offering no protection to those who
actually have a risk – owners or tenants who had no part in creating
the harm but who have potential liability for it.
The long tail attaches to an innocent owner, while the statute
immunizes the wrongdoers.” Despite
its negative view of the wisdom of the statute, the court held that it
was constitutional and did not violate the equal protection clause.
Lakeview
Blvd. Condominium Association v. Apartment Sales Corp., 6 P.3d 74 (Wash.
App. 2000).
NOTE: With due respect to the court, there are a number of
persuasive reasons why it is appropriate for states to enact statutes of
repose to protect those involved in the construction industry.
Without such a statute, a firm could be sued indefinitely for
something it completed and was paid for years before.
In those circumstances it is difficult or even impossible to
price the services sufficiently to compensate for this contingent
liability that could come back to haunt the design firms or contractors
years later. There have
been cases where liability has been imposed on parties a half century
after a project was completed. In
our litigious era where plaintiff’s attorneys are constantly inventing
new theories of liability and junk science, there is dire need for some
protection for those such as A/Es and contractors who earn only a
reasonable (even modest) return on their work and services.
Without such protection, they would have to raise their prices to
cover the contingencies. Insurance
premiums would have to be raised and additional policies would have to
be purchased to cover the indefinite tail of liability.
This means the project owner and other affected parties would
incur greater costs at the time of the construction.
But it is not likely that those extra costs paid to the A/Es and
contractors for assuming this greater risk would ever inure to the
benefit of the owner. In the typical case, one can well imagine that when
litigation arises years later, many of the firms would no longer be in
business, or they would not otherwise have the resources to cover the
damages alleged. In a
future issue of this newsletter, we will provide references to other
articles and papers that more fully develop the reasoning behind
adopting statutes of repose. These statutes have significant benefit for the society at
large, even if based upon facts of an occasional situation such as the
case reported above, the individual result may seem somewhat unfair to
some of the parties involved.
Copyright ã 2001,
ConstructionRisk.com, LLC - Virginia
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Red
Vector
Visit
Red Vector for Online continuing education courses for design
professionals and contractors. http://www.redvector.com.
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Web
Design by Dynamic Horizon
For
information on designing a website for design professionals, consultants
and contractors, visit http://www.dynamichorizon.com,
as highlighted in an article in the current issue of Constructech
magazine.
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Disclaimer
This newsletter is independent of any insurance
company or law firm, and is distributed with the understanding that
ConstructionRisk.com, LLC, and the editor and writers, are not hereby
engaged in rendering legal services. Further, the comments in this
newsletter are for general distribution and cannot apply to any single
set of specific circumstances. If you have a legal issue to which you
believe this newsletter relates, we urge you to consult your own legal
counsel. ConstructionRisk.com expressly disclaims any responsibility for
damages arising from the use, application, or reliance upon the
information contained herein.
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Copyright
ã 2001, ConstructionRisk.com, LLC -
Virginia
Editor:
J. Kent Holland, Jr., J.D.
1313
Dolley Madison Blvd.
Suite
333
McLean,
VA 22101
703-623-1932
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