Washington Supreme Court Clarifies Affirmative Defense of Design Defects

Kate H. Kennedy | Davis Wright Temaine

In a recent ruling, the Washington Supreme Court confirmed and clarified the ability of contractors to shield themselves from liability for construction claims arising out of defects in owner-provided plans and specifications. This rare decision on contractor liability provides guidance on the burdens and limits of the design defect affirmative defense in Washington state.

The underlying issue in Lake Hills Investments v. Rushford Construction Co., was responsibility for delay and damages arising out of the Lake Hills Village construction project in Bellevue, Wash. The owner claimed $16 million in damages against the contractor for what it asserted was defective work and delays to the project.

The contractor in turn counter-claimed for $5 million unpaid contract balance and asserted as an affirmative defense to the owner’s claim that the owner’s plans and specifications were defective. This affirmative defense is known as the Spearin Doctrine. A jury returned a verdict of over $9 million to the contractor.

On appeal, the owner argued that certain jury instructions were in error. Among the challenged instructions was one pertaining to a contractor’s burden under the Spearin Doctrine—specifically whether the jury instruction should have included the word “solely” to indicate that the defense was available only if the alleged damages arose solely from defective plans and specifications. Addressing this argument, the appellate court agreed with the owner that the word “solely” should have been included in the jury instruction.

However, upon appeal to the Washington Supreme Court, the Court held that “the issue is not whether the word ‘solely’ was missing from the jury instruction. Rather, the issue is deciding ‘whether the implied warranty of design accuracy can completely shield a contractor from liability for breaching its duty of good workmanship….'” In other words, the issue is whether and when the Spearin Doctrine can be considered a complete defense or partial defense.

In explaining the basis for its decision, the Court noted that the rationale for the Spearin Doctrine is one of “fairness based on control” and, accordingly, that design defects can be a partial or complete affirmative defense depending upon the circumstances. In either case—whether utilizing the Spearin Doctrine as a complete or partial defense—the burden is on the contractor to establish (i) the contractor relied on the subject plans and specifications, (ii) that the plans and specifications were defective, and (iii) the effect of the defect(s).

The ruling provides confirmation that defects in an owner-provided design can provide partial or complete relief to contractors—it is not necessary to establish that the design defect was the sole cause of alleged damages to utilize this affirmative defense. However, contractors should also be aware that to utilize this defense, they will need to establish causation and damages attributable to the design defect.

Florida’s New Virtual Building Inspection Law: A Contractor’s Friend or Foe?

Jason Bullinger | Rumberger Kirk

The Florida legislature recently enacted a new law allowing for building inspections by state agents to be done virtually. While the focus of this measure was to alleviate the backlog of inspections and strain on building departments brought on by the pandemic, it could raise new issues for litigators and contractors in construction defect cases.  Along with other changes to Section 553.79, the new law allows a “state or local enforcement agency” to “perform virtual inspections” at their “discretion.” Fla. Stat. 553.79(6) (2021). It carves out an exception for threshold buildings, or one that is greater than three stories or 50 feet in height.  The law went into effect on July 1.

Most would agree after working through the pandemic for over a year, technology has its limitations. The natural limitations imposed by virtual inspections could end up becoming part of a property owner’s claim against a developer or contractor for construction defects. Plaintiffs in construction defect cases typically assert negligence, breach of warranty, and building code claims against the implicated contractors in defect suits. Contractors routinely assert the project’s compliance with building code, as well as the fact that it passed all inspections, as a defense. When a building code violation claim under Section 553 is asserted, the defense actually has the effect of shifting the burden to the plaintiff to prove that the contractor had knowledge of the alleged defect:

“. . . [A]ny person or party . . . damaged as a result of a violation . . . the Florida Building Code, has a cause of action in any court of competent jurisdiction against the person or party who committed the violation; however, if the person or party obtains the required building permits and any local government or public agency with authority to enforce the Florida Building Code approves the plans, if the construction project passes all required inspections under the code, . . . this section does not apply unless the person or party knew or should have known that the violation existed.”

Fla. Stat. 553.84 (2021). Building departments and other government entities are rarely brought into litigation. However, with defects that are seemingly more patent, a contractor could invoke the presumption under 553.84 and shift the focus to the negligence of the building department, or possibly even the app developer, arising from limitations in their virtual inspection. While pointing the finger at the building inspector may sound like a reasonable option, the Florida Supreme Court has found that a building department is acting under its police powers by performing inspections to enforce compliance with building code. Therefore, Section 553 gives property owners no remedies against the state for negligent inspections. Trianon Park Condo. Ass’n, Inc. v. City of Hialeah, 468 So. 2d 912, 922 (Fla. 1985). As far as the app developer goes, private entities can be entitled to sovereign immunity protection if they are acting as an agent for the state by performing an essential government function, or when the state retains a right of control over the contractor’s activities.  Operations Mgmt. Int’l, Inc. v. Johnson, 294 So. 3d 1005, 1006–07 (Fla. 1st DCA 2020), reh’g denied (May 21, 2020).

However, when the individual on site controlling the technology is the contractor or permit holder themselves, property owners may suggest that they are the ones to blame for anything missed by the inspector. For example, some entities, such as the City of Miami Beach, have already implemented a plan for virtual inspections during the beginning phases of the pandemic. While the permit holder is required to act in accordance with the inspectors requests during the inspection, the procedures do place the control of the technology used in the hands of the contractor or permit holder and not some third party. Florida construction defect lawyers are experts at finding sources of new liability and all potential sources of insurance coverage. Notably, this new law does not appear to give the permit holder the ability to insist upon an in-person inspection. Contractors dealing with virtual inspections should develop policies and procedures for ensuring they are protected in a case where a property owner alleges that the building inspector negligently conducted their virtual inspection, and the contractor is at least partially to blame.

Who’s on First? Washington State Employer Liability at the Worksite for Safety Violations

Brian Esler and Rebecca Schach | Miller Nash

The Washington Supreme Court handed down a new framework last week on an employer’s responsibility at the worksite for health and safety violations. The Tradesmen decision results from two separate lawsuits involving different industries in which staffing agencies—defendants Tradesmen and Laborworks—placed temporary workers with host employers. In both cases, the Department of Labor and Industries (“Department”) cited the staffing agencies along with the host employers for WISHA violations. On appeal, the parties agreed that an employment relationship existed between the workers and staffing agencies. The only issue was whether staffing agencies may be liable employers for safety violations under WISHA, in a joint employment context.

In the first lawsuit, the staffing agency Tradesmen contracted to provide employees at a construction site. Under the contract, Tradesmen hired and paid the employees’ compensation, including wages and benefits, taxes, unemployment insurance, and workers’ compensation insurance. In return, the host employer at the construction site was solely responsible for directing, supervising and controlling Tradesmen employees and their work.

Related to workplace safety, the contract required that the host employer to notify Tradesmen if any employees were moved to a different worksite. Tradesmen inspected each new or different worksite where the employees worked for health and safety issues. In this instance, the host employer assigned a Tradesmen employee to a different site without notifying Tradesmen so a worksite inspection was never done.

At the construction site, the Department cited Tradesmen and the host employer for fall risk and scaffold hazards.

In the second lawsuit, the staffing agency Laborworks contracted to provide temporary workers to sort recycling and waste at a recycling plant. Under the contract, Laborworks hired and on-boarded the workers, paid the wages and taxes, provided benefits, provided unemployment insurance, and paid for workers’ compensation insurance. In return, the host employer contracted to “supervise, control, and safeguard [the worksite] premises, processes, or systems.”

At the recycling plant, the Department cited Laborworks and the host employer for failing to provide vaccinations, failure to provide proper safety equipment for sharp object exposure, inadequate safety training, and inadequate medical recordkeeping.

The Washington Supreme Court reviewed a number of its own decisions and federal OSHA decisions to lay the foundation for its decision. The Washington Supreme Court ruled that WISHA liability where the putative employer is a staffing agency should focus on whether the staffing agency (1) has sufficient control over the workers and (2) has sufficient control over the work environment to abate the relevant safety hazards. To help with this determination of liability, the Court instructs the Department to consider these factors:

  • Power to control the workers;
  • Control over the manner and instrumentalities of the work being performed, i.e. how the work gets done;
  • Power or ability to change the work conditions and status; and
  • Level of knowledge of the relevant safety hazard involved in the violation.

With this framework in mind, the Court found that Tradesmen was not liable for worksite violations because Tradesmen did not control the workers, how the work was being performed, the worksite conditions, and lacked knowledge of the relevant safety hazard because the host employer never notified Tradesmen of the worksite change. In contrast, Laborworks was liable for worksite violations because Laborworks controlled the workers’ preparation for the work including vaccinations, training, and related recordkeeping. Laborworks also had knowledge of the relevant safety hazard from a prior workplace injury.

The Tradesman decision gives Washington employers an important framework to consider when determining who is responsible for worksite health and safety. Liability will be made on a case-by-case basis, so Washington contractors and employers should revisit both their written contracts and job-site practices to consider who will be liable for workplace safety. Simply put, the written contract terms alone are not determinative regarding liability. Also as a reminder to our Washington employers, the determination of employer liability differs by statute, so while staffing agencies may be liable employers for the purposes of the Minimum Wage Act, that may not translate to liability under WISHA, so this analysis and evaluation should be ongoing even with existing business relationships. If you have questions about whether your contracts and job safety practices are sufficient, we are here to help.

Nevada Rules Insured Has Burden to Prove Exception to Exclusion

Michael Lowry | Wilson Elser

On October 28, 2021, the Nevada Supreme Court joined 26 other state supreme courts, holding the insured has the burden to prove an exception to an exclusion. The question before the court was if an insurance policy provides coverage, but that coverage is then modified by an exclusion, who has the burden to demonstrate an exception to the exclusion? Can an insured use extrinsic evidence to meet that burden? These issues routinely arise in coverage disputes.

The underlying action arose from Nevada’s construction defect litigation and concerned whether there was a duty to defend. Nevada adopted the majority rule that since the insured bears the initial burden of establishing coverage, the insured also should bear the burden of proving an exception to an exclusion applies. The court also concluded that the insured may rely on extrinsic evidence because “the duty to defend must be determined at the outset of litigation based upon the complaint and any other facts available to the insurer” at the time the insured tendered the defense.

7 Things to Know About Defective Products & Product Liability Cases

Searcy Denney Scarola Barnhart & Shipley

If you have questions about a product defect or product liability in general, below are seven things to know about defective products and product liability law.

  1. What is Product Liability Law?

Product liability law addresses how injured parties may recover for damages they sustained from a defective product. Typically, the responsible party in a product liability case is anyone in the product’s chain of distribution, including but not limited to:

  • The product manufacturer
  • The manufacturer of parts of the product
  • The party that assembles the product or installs it
  • The distributor of the product
  • The retail store selling the product directly to the consumer

Product liability law is based on state law and is often brought under the following causes of action:

2. How Can a Product Be Defective?

There are various ways a product can be defective, including:

  • Manufacturing Defects: These types of defects typically occur while the product is in the manufacturer’s care.
  • Marketing Defects: These types of defects involve problems with how a product is marketed, which may include issues with the labeling of the product, a lack of warnings or instructions, etc.
  • Design Defects: These defects are caused by a flaw in the design of the product itself, such that the product is defective from the start.

3. What Are Examples of Defective Products?

There are thousands of different products that are defective, causing millions of injuries each year. That said, it would be impossible to name every type of defective product. However, below are some examples of products that have had serious defects that may be surprising:

  • Essential oils. This is a product commonly used by consumers that you would not expect to be harmful. However, in recent news, this product has been recalled in some instances after the Centers for Disease Control and Prevention determined that certain bottles of room spray contained rare and dangerous bacteria that causes melioidosis – a potentially fatal condition.
  • Off-road motorcycles. Off-road motorcycles are supposed to be fun for riders to use during their outdoor adventures. However, if the bike is defective, this activity could be dangerous. Recently, the U.S. Consumer Product Safety Commission (CPSC) recalled some of these motorcycles because the retaining clips on the front brake caliper pin were falling out. This could cause the front brakes to fail, posing a crash hazard to the bike’s rider.
  • Defective battery. Sometimes the lithium battery inside many commonly-used products such as phones, video cameras, or even remote-controlled cars can be faulty, causing severe injuries.
  • LED Projectors. When you think of a defective product, rarely would an LED projector come to mind. However, the CPSC has recently recalled some LED projectors because they can malfunction and overheat, posing a fire hazard.
  • Jogging Strollers. Your baby’s safety is a top priority. Most parents would not expect their child’s life to be in danger when taking their baby for a stroll. However, on October 7, 2021, the CPSC recalled some jogging strollers due to a product defect. The stroller’s front wheel bearing could fail or detach in some situations, posing a fall and injury hazard.
  • Wood Stools. When sitting on a stool in your kitchen, you typically would not expect to be in danger. However, some wood stools have been recalled recently due to the stool breaking during use, posing fall and injury hazards. The CPSC recalled some stools in October 2021, recommending that consumers immediately stop using the recalled items and return them to the store where they were purchased for a full refund.
  • Youth ATVs. Recently, the CPSC recalled some youth ATVs because the vehicles failed to comply with federal mandatory ATV safety standards, posing a risk of severe injury or death to children.
  • Oversized Outdoor Reclining Chairs. When you are relaxing outside in your reclining chair on a warm summer day, the last thing you expect is the chair to suddenly collapse, causing you injuries. However, the CPSC has recently recalled several reclining outdoor chairs because they could break or collapse when weight is applied, posing a fall hazard. Reports of injured parties were sent to the retailer of the chair. The CPSC recommended that consumers immediately stop using the recalled chairs and return them to the nearest retail store for a full refund.
  • Oil and Vinegar Cruets. When you are sitting down with your family enjoying a nice Italian dinner, and you go to grab the oil and vinegar cruet to add a nice flavor to your salad, you typically would not expect to be lacerated by the cruet (which is a small container). However, in September 2021, the CPSC recalled about 26,150 cruets because the glass portion can break during use, posing laceration hazards.
  • Defective power or chain saw. Be careful to inspect your power or chainsaw before use, and do your research. In December 2020, the CPSC recalled 10-inch corded chain saws with extension poles because the chainsaw can start unexpectedly without the operation of the switch when the extension cord adapter is connected upside down. This could pose serious laceration hazards. The CPSC recommended that consumers stop using the recalled chainsaw immediately and contact the manufacturer for a free repair kit.

4. How to Conduct a Product Recall

When a product is defective, and a party in the product’s distribution chain, such as the manufacturer, distributor, or retailer, among other responsible parties, learns that the product is faulty, the responsible party may need to conduct a product recall. The CPSC provides guidelines on how to conduct a recall.

The CPSC recommends that one of the best ways to ensure that a product recall effectively reduces the amount of injuries or damages sustained to consumers is for a company to have a product recall plan already in place prior to an issue arising and execute it as quickly as possible.

Generally, a recall plan should begin with a company following the applicable laws and reporting the product to the CPSC. Responsible parties have a legal obligation to immediately report the following information about their products to the CPSC:

  • A defective product that could cause an unreasonable risk, injuries, or death to consumers
  • A product that fails to comply with applicable consumer product safety rules or any other rule, regulation, standard, or ban under the Consumer Product Safety Act, or any other statute enforced by the CPSC
  • An incident in which a child (regardless of age) chokes on a marble, small ball, latex balloon, or other small part contained in a toy or game and that, as a result of the incident, the child dies, suffers a severe injury, ceases breathing for any length of time, or is treated by a medical professional
  • Certain types of lawsuits applicable to manufacturers and importers and subject to the time periods detailed in Sec. 37 of the CPSA

Failure of a responsible party to properly report this information to the CPSC may lead to civil and/or criminal penalties. According to the CPSC, a responsible party should follow the following advice: “When in doubt, report.”

Sometimes defective products are reported by the consumers themselves or other sources. Once the CPSC decides that a recall may be necessary, it will expect a responsible party to respond quickly to its request for information and work closely with the CPSC’s Office of Compliance to ensure a proper recall.

5. How Do I Report an Unsafe Product or Search for Them?

If you are a consumer and would like to report an unsafe product to the CPSC, or you would like to protect your family and search the CPSC’s product recall database to see if a product you are considering is unsafe, consult the CPSC’s web page located at saferproducts.gov.

6. What Should You Do After Being Injured by a Defective Product?

If a defective product injures you, first, you should take care of your injury and seek medical attention. Your health and safety are most important. After you have addressed your medical needs, you should consider the following to help prepare your product liability case:

  • Be sure to keep the product that causes your injuries. Keep the product as-is without attempting to fix or modify it. Do not throw it away.
  • Be sure to collect your medical records documenting your injuries and take photos of the injuries caused by the defective product.
  • Be sure to follow your doctor’s advice and follow the prescribed treatment plan to ensure your injuries are treated properly.
  • Do not talk about your situation on social media. This could harm your case.
  • Seek guidance or advice on your legal rights as soon as possible after sustaining your injuries.

7. How Do I Know If I Have a Viable Product Liability Case?

If you or a loved one were injured or died because of a defective product, you may have a product liability claim. The key to winning your case is to prove that the product’s defect was the manufacturer’s fault (or another responsible party such as the seller or distributor of the product). Consumers expect, and the law requires, products to be safe and not dangerous to those using them.

Even if a product was safe when it left the manufacturer, you might still have a claim against another party if its packaging hurt you, the product was damaged at some point after leaving the manufacturer and being purchased by you, or the product did not have sufficient warnings or instructions.