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Inside This Issue:

  • A/E Potentially Liable to Contractor for Defective Design Documents.
  • Architects Not Liable Under ADA
  • State Board Improperly Penalized Engineer that Performed Services Overlapping Those of Architects.
  • Mold Problems Increase: Is Coverage Available?

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A/E Potentially Liable to Contractor for Allegedly Defective Design Documents

A general contractor sued a project architect, alleging that the architect prepared erroneous design documents knowing that the project owner would supply them to the successful bidder who would be injured if they were inadequate. An appellate court held the allegations were sufficient to establish a special relationship between the parties, thus permitting the suit to go forward despite the lack of a direct contract between the design professional and the contractor.

The trial court had dismissed the contractor’s complaint, and concluded that the architect did not owe a duty to prevent economic injury to the contractor since there was no contract directly between the parties. The complaint alleged that the contractor suffered economic losses from defects, omissions, and lack of specificity in the design documents. It also alleged that the architect knew the project owner (School District of Palm Beach) would supply the design documents to the successful bidder who would be injured if they were inadequate.

In dismissing the complaint, the trial court did two things that the appellate court found to be reversible error. First, the trial court found that the contracts that each entity had with the school district did not create privity of contract or any special relationship between the contractor and architect. Second, it found that based on the contract between the architect and the school district, the architect was not a supervisory architect on the project, and consequently owed no duty to prevent purely economic injury to the contractor. Florida recognizes a common law cause of action against professionals based on their acts of negligence despite the lack of a direct contract. The court states that the economic loss rule does not bar actions for purely economic losses where a special relationship exists between the professional and the third party who is affected by the professional’s negligent acts. For these reasons, the court reversed the trial court’s decision. The contractor will be able to pursue its claim in a trail court. Hewett-Kier Construction, Inc. v. Lemuel Ramos and Associates, Inc. 775 So.2d 373 (Fla. App. 2000).

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Architects Not Liable Under Americans with Disabilities Act

By: Gilson S. Riecken, AIA, Esq.
Hanson, Bridgett, Marcus, Vlahos & Rudy LLP

Where two plaintiffs sued a theater owner and its architect for a new facility in which the plaintiffs claimed the seating and restroom facilities were designed and built out of compliance with the ADA, the United States Court of Appeals for the Ninth Circuit weighed-in on the side of designers regarding liability under the Americans with Disabilities Act (ADA). It held that designers are not liable under the ADA if they are not also the owner, lessor/lessee, or operator of a non-complying facility. Designers’ exposure to ADA liability is an unsettled area of law, with courts in different jurisdictions arriving at opposite results on essentially similar facts. Thus the question of whether a designer could be directly sued for ADA discrimination has depended on where the lawsuit occurred.

While courts have ruled both ways on the question of designer liability under the ADA, until August 6, 2001, no case had reached the Court of Appeals level in the Ninth Circuit. That silence came to an end in Lonberg v. Sanborn Theaters, Inc., when the Court of Appeals held that designers are not within the class of persons who can be sued under the ADA. Until the Supreme Court addresses this issue, designers in the western states are not subject to lawsuits under the ADA based on their decisions.

Unsettled Question of Designer Liability Under the ADA. Designers’ exposure to ADA liability is an unsettled area of law, with courts in different jurisdictions arriving at opposite results on essentially similar facts. Thus the question of whether a designer could be directly sued for ADA discrimination has depended on where the lawsuit occurred. In Minnesota and Florida, a person could hold an architect accountable under the ADA for discrimination if the design did not provide equal accommodation to persons with disabilities. (United States v. Ellerbe Becket, Inc, 976 F.Supp. 1262 (D.Minn.1997) and Johanson v. Huizenga Holdings, Inc. 963 F. Supp. 1175 (S.D.Fla. 1977)). These courts held that the architect’s “significant degree of control over the design and construction” of the facilities justified liability under Section 12183(1) of the ADA. But in the District of Columbia the federal courts have held that the ADA does not impose liability on designers because they are neither the owners nor operators of the facilities. Paralyzed Veterans of America v. Ellerbe Bekect, 945 F.Supp. 1 (D.D.C. 1996).

The principal distinction between the two lines of cases lies in how the Courts apply the language regarding “design and construct” that appears in Section 12183(a), and its relationship to the preceding section. That section (Section 12182) provides the “general rule” for places of public accommodation. The general rules prohibits discrimination in places of public accommodation, and limits liability for discrimination in such places to those persons who own, lease (or lease to another), or operate the place of public accommodation. The section does not define discrimination, but subsequent sections fulfill that function. But the next section (12813) states: “As applied to public accommodations and commercial facilities, discrimination for the purposes of Section 12182(a) of this title includes (1) a failure to design and construct facilities for first occupancy … that are readily accessible to and usable by individuals with disabilities….”

The divergence between the competing views in the Courts is the result of different views over whether inclusion of “commercial facilities” in Section 12183 establish “design and construct” activities as a separate basis for liability. Section 12812 refers only to places of public accommodation, and makes no mention of commercial facilities. The courts imposing liability on designers interpret liability for the design of commercial facilities as distinct from that for places of public accommodation. In their view, liability for discrimination in the design and construction of any commercial facility in not limited to owners, lessors/lessees, and operators of a public accommodation or of a commercial facility.

In contrast, courts that do not hold designers liable have interpreted Section 12183’s “design and construct” language as only referring to the definition of what constitutes discrimination – not who may be held liable. In the view of those courts, the failure to design and construct in accordance with the ADA results in liability similar to that under the “general rule” of Section 12182(a), and thus applies only to owners, lessors/lessees, and operators of a public accommodation or of a commercial facility.

New Law of the Ninth Circuit. In Lonberg v. Sanborn Theaters, Inc., two plaintiffs sued a theater owner and its architect for a new facility in which the plaintiffs claimed the seating and restroom facilities were designed and built out of compliance with the ADA. The only claim against the architect was for an injunction to compel it to design in compliance with the ADA. The district court refused to grant the architect summary judgment on its claim that it could not be held liable because it was not the owner, lessor/lessee, or operator of the facility; holding that an architect can be liable based on its having a significant control over the design and construction.

But the Ninth Circuit rejected the argument that Section 12183 imposed liability on a broader class of persons regarding commercial facilities that Section 12182 holds liable regarding public accommodations. In reaching its conclusion, the Court examined the legislative history in an attempt to determine whether congress intended broader liability for commercial facilities. While the evidence it found was inconclusive, on the balance the Court decided against the broader liability. Originally both Sections 12182 and 12183 were in a single section, making the types of prohibited discrimination uniform for both places of public accommodation and commercial facilities. The legislative history indicated that Congress split the provision into two sections because it intended to make the ADA provisions apply less broadly to commercial facilities than to places of public accommodation. In addition, the Court noted, Congress gave no indication that it intended to include any different parties as potentially liable for the two categories of projects.

On the other hand, the Court noted that the language regarding who could be held liable for ADA discrimination was added only after the two sections were divided. Some commentators have read Congress’ decision to specify liability for owners, lessors/lessees, and operators for only one of the two categories as an indication that it intended something different for the other category. (See James P. Colgate, Note, If you Build It, Can They Sue? Architects’ Liability Under Title III of the ADA, 68 Fordham L.Rev. 137,158-159 (1999). Courts following that reasoning had developed the “significant degree of control” test to hold designers liable.

The Ninth Circuit found the significant degree of control test unsupported by any language either in the ADA or in the legislative history. In the Court’s view, the two sections call for a parallel interpretation, which is consistent with the other two parts of the ADA (prohibiting employment discrimination and discrimination by public entities). The “design and construct” language specifies one of the activities that may constitute discrimination if not conducted in compliance with the ADA. But it does not expand the class of persons who can be held liable. Thus designers are not liable under the ADA if they are not also the owner, lessor/lessee, or operator of a non-complying facility.

One Caveat …

While designers are not directly liable under lawsuits for the failure to design or construct in accordance with the ADA, this does not mean that the designer will escape all liability for designs that do not comply with the Act’s requirements. It is very likely that any owner or operator sued for a project designed out of compliance will probably assert a negligence claim against the designer. But such a claim will concern standard of care issues, rather than civil rights claims involved in an ADA suit.

** For more information, contact Mr. Riecken at Hanson, Bridgett, et.al., a nationally recognized law firm whose practice emphasizes construction law, representing design professionals and others on construction projects.
415-995-5062; griecken@hansonbridgett.com;
Hanson Bridgett
333 Market Street
Suite 2300
San Francisco CA 94105

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State Board Improperly Penalized Engineer that Performed Services Overlapping Those of Architects

An engineer was incorrectly penalized by the Kansas State Board of Technical Professions when it restricted him from performing professional services that architects asserted were limited to their own profession. The Board determined that certain drawings constituted the practice of architecture and that the engineer in question was unlicensed to practice architecture. What the Board failed to consider, however, was that the engineer had been trained in civil engineering “with an architectural engineering option.” That program involved courses in architectural design, architectural development, architectural construction, and courses involving construction methods. He also took courses relating to electrical and mechanical systems. Testimony demonstrated that the engineer was trained and technically qualified to provide the services he provided. Testimony also attested to the good quality of the services performed.

The Board’s adverse decision against the engineer was affirmed by the district court which held that the state statute did not authorize design or construction of buildings by an engineer. On appeal, the appellate court reversed the Board and the district court. As explained by the court, the state statute appears on the one hand to restrict a licensee to only the service to which he is licensed, but then in another section of the same regulation, permits the licensee to accept assignments to perform “those phases of the project in which the licensee is qualified.” As understood by the court, the regulations specifically provide for licensees to draft outside their specialty if qualified by education and experience, but the regulations do not require the licensee to obtain multiple specialty licenses.

The court considered cases from other states holding a licensed professional engineer must also have an architectural license when performing services that might be legally performed by an architect, “but only when the functions he or she has performed are outside the scope of his or her engineering license.” Other jurisdictions hold that a licensed professional performing services that could properly be regarded as within both the architectural and engineering governing statutes, is considered to perform under the statute under which he or she was licensed and is not affected by the fact that the services fall incidentally within the purview of the other (architectural or engineering) licensing statute . In this case, the court held that by failing to determine whether the engineer was qualified to prepare the plans as an engineer, the Board prevented the practice of another legally recognized profession – engineering. “A licensing statute should not be applied in a manner that would prevent the practice of any other legally recognized profession,” says the court. Schmidt v. Kansas State Board of Technical Professions, 21 P.3d 542 (Kans. 2001).

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Mold Problems Increase: Is Coverage Available?

By: Anne Simmons and David J. Dybdahl

The presence of mold in buildings and the resulting health effects are increasingly becoming a public concern. Office buildings have been evacuated, homeowners are fleeing their homes, renters are being relocated, and schools have been closed all due to what some think will be the next “asbestos”.

Mold is a microscopic fungi and is present in almost any home, school and commercial building. It thrives where moisture, oxygen, and a food source (wood, paper, or other organic material) are present, implying conditions for mold growth are ubiquitous. Mold reproduces through spores, which are very buoyant and are able to travel through the air. Spores reproduce quickly, often multiplying by millions in a few days.

The products and techniques used today in construction increase the likelihood of mold. The use of paper and wood products in construction materials such as drywall, wallpaper, and ceiling tiles give mold a food source and a rich breeding ground. Airtight buildings trap mold indoors and HVAC systems spread it through buildings. Add moisture to this environment via plumbing, flooding, leaks, high humidity or any other water related problem, and mold will proliferate sometimes unknowingly to the owner until health or structural problems arise.

A number of health problems have been reported as a result of touching, ingesting or inhaling mold. These include; asthma, allergies, nosebleeds, headaches, eye irritation, fatigue, coughing and in extreme situations, immune deficiency, brain damage and even death. Although, evidence suggests children and the elderly are most susceptible to potential health risks associated with molds, the scientific community is not in agreement regarding the cause-effect relationship between mold and health.

Along with adverse health effects, mold also causes structural damage to buildings. Mold infested ceiling tiles, carpets or floorboards must be replaced. In some homes and office buildings, mold remediation can reach astronomical costs and look like asbestos removal projects. In the worst scenario, the building has to be demolished.

Many homeowners faced with testing and remediation expenses, relocation costs, and mortgage payments on houses that are uninhabitable are turning to their homeowner policies for relief. In Texas alone, in the aftermath of tropical storm Allison, Farmers Insurance Group saw an increase of mold claims from nonexistent four years ago to 1000 in the first six months of 2001. State Farm states that mold claims in Texas have increased 650% this year. Estimates indicate homeowners could see a 30 – 40% increase in homeowner premiums as a result of mold claims. Insurers do not believe that these types of claims were included in their premium structure and have requested that the Texas state insurance commissioner exclude mold coverage from homeowner’s policies.

Lawsuits abound! Some believe that mold litigation will outpace asbestos litigation. This media driven craze is sending many who believe they are mold victims to plaintiff’s attorneys in record numbers. Although, the health effects of mold are still in question, plaintiffs are suing contractors, landlords and insurance companies.

Based on negligence, suits against contractors are most common. Design or infrastructure errors can cause windows, roofs and sprinkler systems to leak. Other errors can allow moisture to collect inside walls and under floors due to improper drying periods during construction. In July of this year, Santa Clara County, California settled a $12 million lawsuit against 19 defendants alleging design and construction flaws in their newly built courthouse. Soon after occupying the new building, leaks sprang from the roof, windows and walls. Repeated attempts were made to repair the leaks. After numerous health complaints from employees, toxic molds were found and the courthouse was closed.

Claims against landlords result from improper maintenance of common areas such as crawl spaces and attics where mold can live and grow. A student at the University of California at Berkeley is suing the university for an undisclosed amount stating that the married housing apartment in which he lives is contaminated with mold. The suit alleges that as a result, the plaintiff’s young son suffers from coughs, congestion, runny nose, eye irritation and breathing problems. The suit cites negligence and nuisance and orders the university to remove the mold.

Liability claims where exposure to mold is the proximate cause of the loss are certain to create many untested coverage issues on commercial insurance policies. Although mold is not specifically mentioned within standard pollution exclusions in commercial general liability policies, expect insurers to deny the claim based on the exclusion.

The absolute pollution exclusion in the commercial general liability policy contains the following language:

f.(1) “Bodily Injury” or “Property Damage” arising out of the actual, alleged, or threatened discharge, dispersal, release, or escape of pollutants, etc.

Pollutant means any solid, liquid, gaseous, or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste. Waste includes materials to be recycled, reconditioned, or reclaimed.

Insurers could argue that the plaintiff’s adverse health effects were a result of exposure to mold which “released or escaped” and irritated the plaintiff. In this case, the pollution exclusion would apply. There are many counter arguments. For example, when the pollution exclusion was filed with the insurance commissioners for approval there was no mention of excluding mold claims. In this case, the exclusion should not apply. There may be coverage in a general liability policy for a mold claim but do not bet your career on it! Get the appropriate environmental insurance coverage on the risk or at least recommend it to reduce the risk of professional liability claims.

According to a number of senior insurance executives at the recent Environmental Insurance Forum in New York, they expect mold exclusions to find their way onto standard GL and umbrella policies. In an environmental insurance policy, the definition of a pollutant is broad enough to include mold. However, some environmental insurers are now adding mold exclusions to their policies.

If there is a need to cover potential claims from mold, an environmental impairment liability policy with coverage for on site pollution and no mold exclusion would be the appropriate policy form. On contractors pollution and professional liability policies, there should normally be coverage in the standard policy form in the absence of a separate mold exclusion.

The authors (Ms. Simmons and Mr. Dybdahl) are on the Board of Directors of the Society of Environmental Insurance Professionals (SEIP), 4901 Pine Cone Circle, Middleton, WI 53562. (877-735-0800). More information on the organization and on liability arising out of mold can be found on the SEiP web site at www.armr.net or by e-mail to simmons@armr.net.

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