An architect (HKS Architects) was sued by its client (Orlando Health, Inc,) for negligent breach of contract – alleging serious design defects required immediate repairs. HKS filed a third-party complaint against its engineer subcontractor (BBM) alleging that the Sub was the responsible party because it committed the structural design errors. Both HKS and NNM moved for summary judgment against the hospital, arguing that the damages sought were “consequential damages”, which had been waived by contract. The court denied the motion, finding that at least some of the damages sought by the hospital “flowed directly and necessarily from HKS’s breach of contract….” Orlando Health, Inc. v HKS Architects, Inc. 2025 WL 1919349, (Florida 2025).
Both the prime agreement as well as the subcontract contained waivers of consequential damages. As a result of design errors, much of the completed construction work had to be removed to do necessary remediation. The hospital seeks $1.2 million to demolish and reinstall previous work-in-place materials. It also claimed $160,00 for “extended project management costs” and it claimed $75,000 in other costs for peer review services.
The court stated that the parties didn’t define the term “consequential damages” as used in their contracts. The court looked to case law for definitions of the term and stated:
“Florida courts have defined “consequential damages” as damages that “do not arise within the scope of the immediate buyer-seller transaction, but rather stem from losses incurred by the non-breaching party in its dealings, often with third parties, which were a proximate result of the breach, and which were reasonably foreseeable by the breaching party at the time of contracting.” Keystone Airpark Auth. v. Pipeline Contractors, Inc., 266 So. 3d 1219, 1222–23 (Fla. 1st DCA 2019) (emphasis removed) (quoting Hardwick Props., Inc. v. Newbern, 711 So. 2d 35, 40 (Fla. 1st DCA 1998)); see also Consequential Damages, Black’s Law Dictionary (12th ed. 2024) (defining the term as “[l]osses that do not flow directly and immediately from an injurious act but that result indirectly from the act”). “The most common form of consequential damages is lost profits.” Hardwick Props., 711 So. 2d at 40. Other examples of losses typically regarded as falling into this category are reputational damage, see, e.g., Schauer v. Morse Operations, Inc., 5 So. 3d 2, 7 (Fla. 4th DCA 2009), rental expenses, Bartram, LLC v. C.B. Contractors, LLC, No. 1:09-cv-00254-SPM/GRJ, 2011 WL 1299856, at *1 (N.D. Fla. Mar. 31, 2011), and loss of use, id.”
***
In the case at bar [ ], the need for extensive repairs to the hospital did arise “within the scope of the immediate transaction” between Orlando Health and HKS. HKS was not contracted to monitor the drawings or other activities of someone else who was the direct cause of the damage. Instead, HKS was obligated to provide structural engineering plans for the project, and there is no dispute that the need for repairs was caused solely by deficiencies in those plans.
***
At oral argument, Orlando Health averred that Movants’ contention that these repair costs are “consequential” rather than direct is a novel one in the industry. That may well be true; the Court’s research has uncovered no case where such an argument was made by an architect or engineer who was sued based on repair costs due to defective plans. However, similarly situated defendants in some cases have conceded that such costs are direct damages that fall outside a consequential-damages waiver…. Atl. City Assocs., LLC v. Carter & Burgess Consultants, Inc., 453 F. App’x 174, 178–80 (3d Cir. 2011) (case in which the defendant architect successfully argued on appeal that “[l]ost rental income,” “[a]dditional payments to contractors due to delay,” and “[a]dditional administrative costs” were barred by contract’s waiver of consequential damages but did not challenge the trial court’s conclusion that “[a]dditional construction costs to fix errors” were not so barred).
***
Based on the definitions of the relevant terms and the facts of this case, the Court finds that Orlando Health’s costs of remediation and repair are not consequential damages that were waived in the Agreement. HKS was contractually obligated to provide plans, including structural engineering plans, for the construction of a hospital in a large project coordinated among many sophisticated parties. The costs of remediation and repair did not “result indirectly from” HKS’s plans, nor did they arise from “dealings with third parties” in either the more “traditional” sense (such as lost profits or loss of reputation) or the causative way described by the Keystone Airpark court. Instead, the costs to repair and remediate are the “direct, natural, logical[,] and necessary consequences of” HKS’s deficient plans. Thus, recovery of these damages is not barred by the consequential damages waiver in the Agreement.
Risk Management Comment:
The AIA contracts contain a mutual waiver of consequential damages clause. That clause is somewhat generic, however, and does not define what is included within consequential damages. When reviewing contracts, we like to add a more comprehensive mutual waiver that reads like the following:
Mutual Waiver of Consequential Damages. Consultant and Client waive all consequential or special damages, including, but not limited to, loss of use, profits, revenue, business opportunity, or production, for claims, disputes, or other matters arising out of or relating to the Contract or the services provided by Consultant, regardless of whether such claim or dispute is based upon breach of contract, willful misconduct or negligent act or omission of either of them or their employees, agents, subconsultants, or other legal theory, even if the affected party has knowledge of the possibility of such damages. This mutual waiver shall survive termination or completion of this Contract.
About the author: Article written by J. Kent Holland, Jr., a construction lawyer located in Tysons Corner, Virginia, with a national practice (formerly with Wickwire Gavin, P.C. and now with ConstructionRisk Counsel, PLLC) representing design professionals, contractors and project owners. He is founder and president of a consulting firm, ConstructionRisk, LLC, providing consulting services to owners, design professionals, contractors and attorneys on construction projects. He is publisher of ConstructionRisk Report and may be reached at Kent@ConstructionRisk.com or by calling 703-623-1932. This article is published in ConstructionRisk Report, Vol. 27, No. 7 (November 2025).
Copyright 2025, ConstructionRisk, LLC