Economic Loss Defense

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Allstate Insurance Company v. Structures Design/Build, LLC, 2016 U.S. Dist. LEXIS 34349 (WD VA March 17, 2016)

This construction dispute case arises from a failed pipe connector that caused water damage to a facility and insured personal property, which Hillel at Virginia Tech, Inc. (“Hillel”) owned in Blacksburg, Virginia. Hillel contracted Structures Design/Build, LLC (“Structures”) to design and construct the facility. Structures, in turn, subcontracted PJ Little Plumbing, Inc. (“PJ”) for plumbing and mechanical installation. PJ purchased the failed pipe connector from CMC Supply, Inc. (“CMC”). Allstate Insurance Company (“Allstate”) insured Hillel for the damage to the facility and the personal property.

As Hillel’s subrogee, Allstate filed a complaint against Structures and PJ. Allstate sued Structures for various state law claims. It sued PJ for negligence and breach of express and implied warranties. PJ filed a third-party complaint to join CMC on a breach of implied warranty theory. PJ and CMC moved to dismiss the claims against them.

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Continue Reading Western District of Virginia Confronts Several Legal Issues That Frequently Impact Multi-Party Construction Disputes – Economic Loss, Damage to Other Property, Third Party Beneficiary Status, Warranties, Subrogation, and Third-Party Joinder

Balfour Beatty Infrastructure, Inc. v. Rummel Klepper & Kahl, LLP, 226 Md. App. 420, 130 A.3d 1024, 2016 Md. App. LEXIS 3 ( Md. Ct. Spec. App. Jan. 28, 2016)

The City of Baltimore retained a design professional, Rummel Klepper & Kahl (“RK&K”), to produce a design for construction of a wastewater treatment plant.  The City then invited bids for construction of the plant, and contractor Balfour Beatty Infrastructure (“Balfour Beatty”) was the successful bidder.  RK&K and Balfour Beatty each had a separate contract with the City, but did not have a contract with one another.  After alleged defects in RK&K’s design caused Balfour Beatty to incur delays and increases to the cost of its work, it sued RK&K, but not the City.

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Continue Reading Maryland Appellate Court Holds Economic Loss Doctrine Bars Contractor’s Tort Claims Against Government’s Design Professional on Public Construction Project

City of Whiting, Indiana v. Whitney, Bailey, Cox, & Magnani, LLC, 2015 U.S. Dist. LEXIS 150229 (N.D. Ind. Nov. 5, 2015)

The City of Whiting, Indiana (the “City”) contracted with American Structurepoint, Inc. (“Engineer”) to design a lakefront park that would protect its shoreline from erosion (the “Project”).  Engineer subcontracted with Whitney, Bailey, Cox, & Magnani, LLC (“Subconsultant”) to serve as the marine engineer for the Project (the “Subcontract”).  Pursuant to the Subcontract, Subconsultant designed a revetment to protect the Project shoreline.  The revetment failed, damaging the City’s property and necessitating remediation.

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Continue Reading Federal Court in Indiana Permits City to Sue Design Subconsultant Despite Lack Of Privity

Elliot-Lewis Corp. v. Skanska USA Building, Inc., 2015 U.S. Dist. LEXIS 98405 (E.D. Pa. July 27, 2015)

This dispute arises out of a major renovation and expansion of the Franklin Institute in Philadelphia (the “Project”).  Plaintiff Elliot-Lewis Corporation (“ELCo”) was a subcontractor hired to install the piping and controls for the Project’s heating, ventilation and air conditioning (“HVAC”) system.  The Project’s schedule required that start up and testing of the HVAC system begin by February 23, 2013 and that the system be operational by April 1, 2013.  But, when the HVAC was started for testing, flooding issues arose due to problems with the condenser pumps specified in the HVAC system’s specifications.  Ultimately, the HVAC system was not operational by April 1 and ELCo was required to perform additional work and install temporary cooling equipment so that the Franklin Institute could open during the summer.  ELCo was never paid by the prime contractor for this additional work.

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Continue Reading Federal Court in Pennsylvania Holds Design Professionals’ Negligence Claim Against Pump Supplier Barred By Economic Loss Rule

Gongloff Contracting, L.L.C. v. L. Robert Kimball & Assocs., Architects and Eng’rs, Inc., 2015 Pa. Super 149 (Pa. Super. Ct. July 8, 2015)

Pennsylvania law generally bars negligence claims when the injured party has suffered only economic losses.  This principle is commonly referred to as the economic loss doctrine.  An exception to this doctrine is found in Section 552(1) of the Restatement (Second) of Torts, which provides that, “one who, in the course of his business, profession or employment … supplies false information for the guidance of others in their business transactions, is subject to liability for pecuniary loss caused to them by their justifiable reliance upon the information, if he fails to exercise reasonable care or competence in obtaining or communicating the information.” In Bilt-Rite Contractors, Inc. v. Architectural Studio, 581 Pa. 545 (2005), the Pennsylvania Supreme Court adopted this exception and found it to be applicable in cases where information is negligently supplied by an architect or design professional under circumstances where it is foreseeable that others will rely upon that information.  In Gongloff, the Superior Court of Pennsylvania, interpreting Bilt-Rite, held that the Bilt-Rite exception can be triggered when an architect or design professional negligently includes faulty information in its design documents.  The Gongloff court rejected the argument that, under Bilt-Rite, an injured party is required to identify an “express” misrepresentation in a particular communication or document in order to support a claim of negligent misrepresentation.

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Continue Reading Superior Court of Pennsylvania Holds that Negligent Misrepresentation Exception to Economic Loss Doctrine Under Bilt-Rite May Be Predicated on Implied Representation in Negligently Prepared Design Documents

USA Walnut Creek, DST v. Terracon Consultants, Inc. f/k/a HBC Engineering, Inc., 2015 Tex. App. LEXIS 1806 (Tex. App. 2015)

This cases arises out of the construction of a twelve building apartment complex in Austin Texas.  The builders, Creekstone Walnut, LP and Creekstone Builders, Inc., contracted with defendant Terracon for geotechnical engineering and inspection services.  As part of the services, Terracon performed test borings and provided the geotechnical recommendations for, among other things, the foundation design.  Terracon’s inspection services included providing testing and inspection of the construction materials, including compaction testing on the earthwork.

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Continue Reading Texas Court of Appeals Holds that Economic Loss Doctrine Does Not Bar Building Owner’s Negligence Claims Against Geotechnical Engineer

Fed. Ins. Co. v. Fredericks, Inc., 2015-Ohio-694, 29 N.E.3d 313, 2015 Ohio App. LEXIS 684 (Ohio Ct. App. Feb. 27, 2015)

This case arises from a construction project in Vandalia, Ohio that was damaged during a windstorm before construction was completed.  The project was for the construction of a “cross-dock facility” warehouse (the “Project”) on certain real property owned by Pasco Enterprises (“Pasco”), a company in the business of owning and leasing real estate holdings.  Pasco’s 100% parent, J.P. Holding Co., Inc. (“JP Holding”) also owned Carter Express, Inc. (“Express”) and Carter Logistics, LLC (“Logistics”).  Logistics was in the business of providing freight transportation services to its customers; it also contracted with freight carriers, including Express, to transport its customers’ freight.  Approximately 85% of Logistics’ freight shipments were transported by Express.

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Continue Reading Ohio Court of Appeals Holds that Economic Loss Rule Bars Claim by Affiliates of Owner Against Subcontractor

Wyman v. Ayer Properties, LLC, 469 Mass. 64,  2014 Mass. LEXIS 524 (July 10, 2014)

The Massachusetts Supreme Court ruled that the economic loss rule, which bars recovery of tort damages from the negligent supplier of a defective product when there is no claim of personal injury or damage to other property, does not apply to claims asserted by a condominium association or similar condominium organization seeking compensation for damage to common areas of a condominium building caused by defective construction.

This case arises out of a dispute between the Market Gallery Condominium Trust, the trustees responsible for management of a condo building, and Ayer Properties, the developer and builder of the condo building, after the trustees observed that Ayer had negligently constructed the window frames, the exterior brick masonry, and the roof of the building. The trustees commenced an action alleging that the negligent construction caused damage to both the common areas and the residential units in the building.

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Continue Reading Massachusetts Supreme Court Holds Economic Loss Rule No Bar to Condo Trustees’ Claim for Damages to Common Areas Caused By Building Defects

Bedwell Co. v. Camden County Improvement Auth., 2014 U.S. Dist. LEXIS 95510 (D.N.J. July 14, 2014)

The University of Medicine and Dentistry of New Jersey contracted HDR Architects and Engineers, P.C. (“HDR”) to design a medical school building. After the project went to bid, the Bedwell Company (“Bedwell”) contracted with the owner’s development and contracting agent for the performance of foundation, structural steel, and other construction work.

Bedwell and HDR did not have a contract with each other. According to the allegations in Bedwell’s complaint, however, HDR was aware that the design documents that it prepared under its contract with the owner would be used by contractors like Bedwell in their estimation of costs and time for completion of the work. In its complaint, Bedwell alleged that defects in HDR’s design documents—which led to 212 Requests for Information and 469 Change Order Requests—caused unexpected costs and numerous delays.

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Continue Reading Federal District Court in New Jersey Holds that Economic Loss Rule Does Not Bar Contractor’s Tort Claims Against Architect Where Parties Were Not in Privity of Contract