{"id":895755,"date":"2019-04-17T14:41:52","date_gmt":"2019-04-17T20:41:52","guid":{"rendered":"https:\/\/www.myconstructionexpert.com\/blog\/?p=895755"},"modified":"2019-04-17T14:42:00","modified_gmt":"2019-04-17T20:42:00","slug":"damages-in-architect-engineering-malpractice-actions","status":"publish","type":"post","link":"https:\/\/www.myconstructionexpert.com\/blog\/damages-in-architect-engineering-malpractice-actions\/","title":{"rendered":"Deconstructing Damages in Architect or Engineer Malpractice Actions"},"content":{"rendered":"\n

James W. Walker and J. Brandon Sieg | Vandeventer Black<\/a> | April 10, 2019<\/p>\n\n\n\n

No design professional is perfect all the time. At some point, they make mistakes\u2014specify the wrong materials, leave out a required element, overlook a code requirement, bust a calculation, among other things. Sometimes they catch and correct their mistakes before any harm occurs. Sometimes, though, mistakes in construction documents cause our clients to spend \u201cextra\u201d money or the con-tractor to lose time, or both. What is the design professional\u2019s financial responsibility to the client?<\/p>\n\n\n\n

The standard of care for design professionals is to perform services with the same degree of care and skill as \u201cthose ordinarily skilled in the business.\u201d See, e.g., AIA B101-2017, \u00a7 2.2 (\u201cThe Architect shall perform its services consistent with the professional skill and care ordinarily provided by architects practicing in the same or similar locality under the same or similar circumstances.\u201d). Unless the contract says otherwise (and it shouldn\u2019t!), the architect does not ordinarily promise a perfect plan. The cases emphasize that the owner does not ordinarily bargain for infallibility in the performance of design services.<\/p>\n\n\n\n

Defense Considerations for Damages in Architect\/Engineer Malpractice Cases<\/strong><\/p>\n\n\n\n

So this raises some interesting questions: How many mistakes can a design professional make before being financially responsible to the owner? Does it matter if the architect or engineer (A\/E) makes lots of tiny mistakes or one giant one? Does it matter if the mistake is an error or an omission? Is there a dollar threshold, either by individual mistake or in the aggregate? Here are some things to keep in mind when your A\/E client\u2019s client comes asking for money.<\/p>\n\n\n\n

The \u201cBetterment\u201d Principle<\/strong><\/em><\/p>\n\n\n\n

Suppose the construction documents (CDs) show a light fixture but omit wiring and a switch. The contractor\u2019s price does not include the cost of the wiring, the switch, or the labor to install them. Naturally, the owner has always wanted a switch, so the contractor issues a change order to install one and wire it to the light. Should the design professional pay 100 percent of the change order? No. The owner received something of value in the change order\u2014a switch and wiring\u2014that was not included in the general contractor\u2019s bid. Had the plans included these items, the bid would have been correspondingly higher and the owner would have paid the higher price. Should the design professional pay any of the change order? That\u2019s more complicated\u2026<\/p>\n\n\n\n

The \u201cOut-of-Sequence\u201d Principle<\/strong><\/em><\/p>\n\n\n\n

Suppose in our example that the omission of a switch is not discovered until after the electrician has demobilized following rough-in and after drywall has been installed. Now the work required to install and wire the switch includes remobilizing the electrician and tearing out and replacing some drywall. The cost of the switch and wiring has not changed, so the owner still pays for that, but labor and material costs are higher now because the work is done out of sequence. The owner gets no value from that portion of the change that is the added costs of out-of-sequence work, so that portion of the change order is the design professional\u2019s responsibility, unless\u2026<\/p>\n\n\n\n

The \u201cYou Didn\u2019t Bargain for Perfection\u201d Principle<\/strong><\/em><\/p>\n\n\n\n

Suppose in our example that the switch and wire change order cost is $5,000, and of that, $2,500 represents the out-of-sequence cost. Suppose also that the guaranteed maximum price (GMP) for the job is $5 million. Whether we look at the total cost of the change or just the out-of-sequence added cost, the cost of the omission is a miniscule fraction of the total job cost and should be within the expected range of added costs, given the less than perfect standard, unless\u2026<\/p>\n\n\n\n

The \u201cDeath by a Thousand Cuts\u201d Scenario<\/strong><\/em><\/p>\n\n\n\n

Suppose in our example that the switch and wiring change order is one of 315 distinct change orders on the job with an aggregate total cost of $300,000 and aggregate \u201cout-of-sequence\u201d costs of $200,000. Now the added costs are a more sizeable percentage of the total job cost\u20144 percent to 6 percent, depending on what counts. Suppose the industry\u2019s track record shows that on average, jobs of this type and delivery method typically experience change orders in the range of 2 percent to 3 percent of the cost of construction. Does that provide an allowance of sorts? Does the design professional pay for all errors and omis-sions from dollar one, or just for the compensable costs in excess of the tolerance threshold? The case law is not clear on this point.<\/p>\n\n\n\n

How About Changes Originating from the<\/em> Owner or the Authority Having Jurisdiction?<\/strong><\/p>\n\n\n\n

Suppose in our example that 212 of the 315 change orders are either owner initiated or required by the authority having jurisdiction (AHJ). Does that mean that the design professional can disregard those costs when determining whether the level of imperfection in his or her services is tolerable? With respect to owner-initiated changes, the answer should be \u201cyes.\u201d With respect to AHJ-related changes, the picture is murkier. There is certainly an expectation that the design professional is well versed in code requirements and preferences in the jurisdictions in which he or she practices, but we all know that sometimes there is just no predicting who will be reviewing the plans or what will be required. What if the design professional took some chances on what would get through plan review, hoping to save the owner money if successful? Again, muddy.<\/p>\n\n\n\n

What About Fast-Track or Design-Build Projects?<\/strong><\/em><\/p>\n\n\n\n

Suppose in our example that the project was fast tracked or was a design-build project. Does that affect the tolerable error rate? The answer is definitivel\u2026maybe! The notion of a financial error rate reflecting the expected level of imperfection in design services is not well developed in the courts. However, there is no reason why the chosen style of project delivery may not also have a higher or lower error rate associated with it. Be sure to consider your jurisdiction\u2019s version of the economic-loss rule if your architect client is sued by a project owner in the design-build context. Similar to so many things in this area, it depends on the industry\u2019s experience, and data of this sort is scarce. It is certainly worth considering the complexity and speed of the project when assessing the tolerance for imperfection.<\/p>\n\n\n\n

Pre-litigation Considerations for Your A\/E Client<\/strong><\/em><\/p>\n\n\n\n

Considering the legal defense issues described above, you may want to discuss the following concepts with your A\/E clients to better prepare them for future claims:<\/p>\n\n\n\n