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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. Serious 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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