Fifth Circuit Expands Liability of Engineers and Architects
Recently, in Lyndon Property Insurance Co. v. Duke Levy and Assoc., LLC, No. 05-60898 (5th Cir. 2007), the United States Court of Appeals for the Fifth Circuit found that a project engineer could be held liable to a project owner’s surety for negligently failing to inspect the workmanship of a contractor and improperly recommending payment, despite the absence of a contractual obligation of the engineer to guarantee workmanship on the project.
In that case, the contractor was terminated for failing to perform, and the project owner’s surety stepped in to complete the project. After completion of the project, the surety filed suit against the project engineer for negligence, breach of contract and breach of warranty, alleging that it was required to spend in excess of $900,000.00 to fix and test work that was done by the prior contractor. The district court granted summary judgment to the engineer on all counts. On appeal, the Fifth Circuit held that the surety was entitled to “stand in the shoes” of the project owner’s surety and bring the claim against the engineer, based on the doctrine of equitable subrogation. The court rejected the engineer’s argument that an exculpatory clause in the contract relieved it of liability, and instead held that the owner could not “bargain away the engineer’s potential duty to a surety that would step into the [owner’s] shoes under the doctrine of equitable subrogation.” The court further found that while the contract did not clearly impose a duty on the engineer to guarantee the workmanship of the contractor, it did support a duty of the engineer to inspect the work before recommending payment. The court also left open the possibility of imposing liability in egregious cases even where there is no contractual duty to guarantee a contractor’s work, if the engineer failed to “meet the standard of employing ordinary professional skills and diligence.”
As a result of this holding, engineers and architects can now be subjected to liability for negligent inspection of a project even when no contractual obligation to inspect or guarantee workmanship exists. While this expanded liability is apparently limited only to “egregious” cases, the determination of whether a particular case is “egregious” will almost always be a question of fact that will be decided by a jury or ultimate finder of fact.
For more information, please contact Rob Dodson.
