BACKGROUND
As the construction industry continues to play a major role in Florida’s economy, there are a variety of entities involved in this industry who need to be concerned about liability issues in the event that a particular construction project does not proceed or is otherwise not completed according to plan. From the signing and sealing of plans to defects discovered after a project is completed, engineering firms and the professionals employed by them should be cognizant of their duties and liabilities in the performance of their jobs.
The general issues of liability with which an engineering firm should be concerned are the individual and vicarious liabilities of the firm and persons employed by the firm, the existence of a contract (and the terms thereof in the event a contract exists) and the parties thereto, claims by third-parties, the existence of defects (latent or patent) and the time periods contained in the applicable statutes of limitation. Unfortunately, under the mildly convoluted present state of Florida law it is unclear whether a professional’s duty extends to all people who may foreseeably be injured by its actions; people in a “close nexus” with the professional or people who have a “special relationship” with the professional as defined in the Restatement.
STATUTORY BASIS FOR LIABILITY
Fla. Stat. Chapter 471 governs the profession of engineering. In general, compliance with this section does not relieve a business organization of responsibility for the conduct of its agents, employees or officers. Moreover, an individual practicing engineering is not relieved of responsibility for professional services performed by virtue of his employment or relationship with a business organization. Fla. Stat. §471.023(1).
As to the particular issue of liability, Fla. Stat. §471.023(3) specifically provides that:
- a licensed engineer practicing through a business organization does not relieve the licensee from personal liability for misconduct, negligence or wrongful acts committed by him or her.
- partnerships and all partners are jointly and severally liable for the misconduct, negligence or wrongful acts committed by their agents, employees or partners while acting in a professional capacity.
- any agent, employee or officer of a business organization (other than a partnership) is personally accountable and liable only for misconduct, negligent acts or wrongful acts committed: (1) by him; or (2) by any person under his direct control and supervision, in the course of rendering professional services on behalf of the business organization.
- the personal liability of an owner or a shareholder in a business organization, in his capacity as owner or shareholder, is no greater than that of a shareholder-employee of a corporation incorporated under Chapter 607.
- the business organization is liable up to the full value of its property for any misconduct, negligent acts or wrongful acts committed by any of its agents, employees or officers while they are engaged on its behalf in the rendering of professional services.
If there is one lesson to be taken from the statutory framework laid out above, it is that that the issue of liability should be taken seriously, as both the firm and an individual rendering services in the course of his employment with the firm may be liable for damages arising from their negligent or wrongful acts .
SIGNING AND SEALING PLANS
In general, a seal is meant to serve as an authentication of an instrument and as the badge of a specialty. See Caruthers v. Peninsular Lines Ins. Co., 7 So.2d 841, 842 (Fla. 1942). In terms of engineers, Fla. Stat. §471.025 (“Seals”) identifies the procedure by which a professional engineer may authenticate his drawings. See Fla. Stat. §471.025(1)(“Such signature, date and seal shall be evidence of the authenticity of that to which they are affixed”); Cape Dev. Corp. v. City of Cocoa Beach, 192 So.2d 766, 769 (Fla. 1966)(stating the above rule in discussing the predecessor statute to Section 471.025 and noting further that the statutory procedure does not purport to affect the admissibility of such drawings into evidence).
In particular, under this procedure all documents, final drawings, plans, reports or specifications issued or prepared by the licensee and being filed for public record, and all final documents provided to the owner or the owner’s representative, are to be signed by the licensee, dated and sealed in a form prescribed by the Board of Professional Engineers. See Fla. Stat. §471.025(1).
The most direct (and, seemingly, only) case to directly address the issue of an engineer’s liability for signing and sealing plans is O.P. Corp. v. Lewis, 373 So.2d 929 (Fla. 4th DCA 1979). In O.P. Corp., the court declared that:
The requirement that a registered engineer stand behind and be responsible for his structural plans and specifications is no idle precaution; most especially when dealing with a building some 12 stories high. The designer of such structures owes a duty of care not only to the owner of the property but to the public as well. The signing and sealing of such plans fixes the responsibility for assistance during construction and ultimate liability for negligent design.
O.P. Corp., 373 So.2d at 931 (emphasis added).
In the context of negligence, the signing and sealing of a plan would relate to establishment of the duty element. While a duty may be found to exist in the absence of signing and sealing, it would be difficult to argue that no duty exists when such is the case. While the O.P Corp. case broadly extends the scope of duty to the general public, the confusing and uncertain status of subsequent cases which discuss a professional’s duty of care in the context of providing professional services makes it difficult to pinpoint with exactness the class of persons to whom such a duty is owed. At a minimum, and as discussed in depth further below, either general principles of foreseeability, the “close nexus” test or the “special relationship” test of Restatement Section 522 would provide some guidance as to the possible class of persons to whom such a duty would be owed.
General Professional Negligence and the Economic Loss Rule
The Existence of a Contract is Not Determinative of Tort Liability
Florida law imposes a duty upon a professional to “perform the requested services in accordance with the standard of care used by similar professionals in the community under similar circumstances”. Moransais v. Heathman, 744 So.2d 973, 975-76 (Fla. 1999). As with other professionals, an engineer has a responsibility to its client to exercise reasonable care and skill in the performance of its duties. See Lee County v. Southern Water Contractors, Inc., 298 So.2d 518, 520 (Fla. 2d DCA 1974).
In the case of professionals, such as engineers, the existence of a contract will not necessarily preclude an action in tort by a party in contractual privity (i.e. the economic loss rule does not bar such actions) or a third party not in privity (i.e. the economic loss rule is inapplicable). See Moransais, 744 So.2d at 977 n.5 (lack of contractual privity between an engineer and the injured party does not necessarily relieve the engineer of its liability for any negligence committed while performing professional services). The rationale for this rule is that public policy dictates that liability should not be limited to the terms of the contract. See Indemnity Ins. Co. of North America v. American Aviation, Inc., 891 So.2d 532, 537, 543 (Fla. 2004)(reaffirming that the exception to the economic loss rule for professional malpractice is still applicable).
Thus, beyond any duties owed to an engineering firm’s client with whom it is in privity, Florida courts recognize a common law action for negligence against professionals based on acts of negligence despite the absence of a direct contract between the professional and the complaining party. See Hewett-Kier Constr., Inc. v. Lemuel Ramos and Assocs., Inc., 775 So.2d 373, 375 (Fla. 4th DCA 2000), citing to Moransais v. Heathman, 744 So.2d 973, 983 (Fla. 1999).
The court in Moransais held that: (1) where the purchaser of a home contracts with an engineering corporation, the purchaser has a cause of action for professional malpractice against an employee of the corporation who performed the engineering services; and (2) the economic loss rule does not bar a claim for professional malpractice against an individual engineer who performed the inspection of the residence even though no personal injury or property damage resulted. See Moransais, 744 So.2d at 974 (in which the only damage alleged was undetected and undisclosed defects in the house). Thus, an employee-professional who actually renders the professional services may be liable for the negligent performance of such services. See Moransais, 744 So.2d at 977. But see Monroe v. Sarasota County School Board, 746 So.2d 530, 531 (Fla.2d DCA 1999)(“Moransais merely authorizes a client of a professional corporation to sue a specific professional employee of the corporation for economic damages arising from the employee’s breach of his or her professional standard of care” and noting that, contrary to dicta in Moransais which suggests the a claim of negligence may be alleged without allegations of personal injury or property damage, in general bodily injury or property damage continues to be an essential element of a negligence cause of action).
In another line of reasoning, where there is no contractual privity between the complaining party and the engineering firm, an action for purely economic losses is not barred by the economic loss rule where a special relationship (as defined by Section 552 of the Restatement (Second) of Torts ) exists between the professional and the third party who has been affected by the professional’s negligent acts. See Hewett-Kier Constr., 775 So.2d at 375; Moore v. PRC Engineering, Inc., 565 So.2d 817, 820 (Fla. 4th DCA 1990)(consulting engineering firm and its agents may be held liable in negligence for supervising construction resulting in personal injuries despite the absence of privity between the engineer and the injured person). See also Ocean Ritz of Daytona Condominium v. GGV Assocs., Ltd., 710 So.2d 702 (Fla. 5th DCA 1998)(the economic loss rule will bar a negligence action in the context of a third-party beneficiary of a professional consultant’s contract when the plaintiff seeks only recovery for economic losses because Section 552 of the Restatement limits liability to those whom the professional knows will receive the report and rely upon it).
For instance in Hewett-Kier Constr., which involved a suit by a general contractor against an architectural firm and its architect employee for professional malpractice, the court found that allegations that the architectural firm prepared erroneous design documents with the knowledge that its client (the school board) would supply them to the successful bidder, and that the successful bidder would be injured if the documents were inadequate, were sufficient to establish a special relationship between the general contractor and the architectural firm. See Hewett-Kier Constr., 775 So.2d at 375.
Claims By Contractors, Owners and Third Parties Against Engineers in Further Detail
In addressing questions of Florida state law posed by the United States Court of Appeals Fifth Circuit, the court in A.R. Moyer, Inc. v. Graham, 285 So.2d 397 (Fla. 1973) stated: (1) a third party general contractor has a cause of action against an allegedly negligent architect, notwithstanding absence of privity, where the contractor may foreseeably be injured or sustain an economic loss proximately caused by the negligent performance of the architect’s contractual duty; and (2) in the absence of a clear intent to the contrary manifested in the owner-architect or owner-engineer contract, a general contractor is not a third party beneficiary of a contract between the owner and the supervising architect or engineer where the general contractor, under his contract with the owner, is obligated to construct the project in accordance with the architect’s or engineer’s plans and specifications. See Moyer, 285 So.2d at 398, 402, 403.
Following the Moyer decision, a case arose in which homeowners claimed that an engineer, employed by the general contractor, negligently performed tests on land upon which a residence was to be built. See Luciani v. High, 372 So.2d 530, 531 (Fla. 4th DCA 1979). Relying on Moyer, the court noted that: (1) the engineer was not absolved of liability to the owner for negligent testing which resulted in damage to the owner simply because he was employed by the contractor, rather than the owner; and (2) an engineer is liable not only to those with whom he is privity but also to third persons who might foreseeably be injured as a result of his negligence. See Luciani, 372 So.2d at 531. Relying on Moyer and Luciani, in Southland Constr., Inc. v. Richeson Corp., 642 So.2d 5, 9 (Fla. 5th DCA 1994), the court stated that “As regards the tort liability of engineers, one who negligently performs a professional engineering service, knowing that another person will be injured if it is negligently performed, is liable in tort, even though there is no contract between the parties.”
However, to the extent that the holding of Moyer has been repeatedly distinguished in subsequent cases or otherwise limited, the enduring strength of its propositions (and the cases which rely upon them) is imprecise and vague. See generally E.C. Goldman, Inc. v. A/R/C Assocs., Inc., 543 So.2d 1268, 1271 n.4 (Fla. 5th DCA 1989), citing to Probert, Negligence and Economic Damage: The California-Florida Nexus, 33 U.Fla.L.Rev. 485, 491 (Summer 1981)(explaining that, based on an analysis and comparison of the opinion’s ambiguity with its facts, “the scope of the court’s holding [in Moyer] is uncertain”). In particular, under the present state of Florida law it is unclear whether a professional’s duty extends to all people who may foreseeably be injured by its actions; people in a “close nexus” with the professional or people who have a “special relationship” with the professional as defined in the Restatement.
Initially, Moyer has been restricted to its facts. See City of Tampa v. Thornton-Tomasetti, 646 So.2d 279, 282 (Fla. 2d DCA 1994). Moyer and Southland have also been distinguished because in those cases there was an “extremely close nexus” between the plaintiff and defendant. Cf. Thornton-Tomasetti, 646 So.2d at 282 (finding that a close nexus did not exist between the City and engineering consultants who were not in privity; the engineers were retained by the architects hired by the City to design a performing arts center).
Additionally, the underpinnings of Moyer have been dissected. In approving a cause of action for injury to a third person’s economic interests by the negligent performance of a contract, Moyer did not develop new legal principles but rather extended products liability law to economic losses. See E.C. Goldman, 543 So.2d at 1270. The E.C. Goldman court further distinguished Moyer on the grounds that in Moyer:
- there was an extremely close nexus between the general contractor and the architect.
- there was a direct nexus between the defendant and the “product” which caused the injury or economic loss.
- the decision was based on the supervisory responsibilities vested in the architect, which carried with them a concurrent duty not to injure foreseeable parties that were not beneficiaries of the contract.
- involved direct supervisory responsibility by the architect for the construction project and direct control over the contractor.
E.C. Goldman ultimately held that that an expert, who has no connection whatsoever with a construction project and is hired by the owner of the project for the sole purpose of evaluating the work of a subcontractor, may not be held liable to the subcontractor (with whom the expert is not in privity) for the negligent performance of its evaluations. See E.C. Goldman, 543 So.2d at 1268.
The Convoluted Status of the Proper Analysis to Use In Determining a Professional’s Liability to a Non-Privity Third Party
To the extent that Moyer has not been explicitly overruled, there are basically three methods which may be used in determining the potential liability of an engineering firm to a third party in the absence of contractual privity. First, under a strict reading of Moyer and Luciani, the test is whether the complaining third party may foreseeably be injured or sustain an economic loss proximately caused by the negligent performance of the professional’s contractual duty. Second, under the “close nexus” analysis used in E.C. Goldman and Thornton-Tomasetti, the factors to consider are: (a) the relationship or “nexus” between the third party and the firm; (b) the relationship between the firm and the product or service which caused the third party’s alleged damages; and (c) the level of the firm’s supervisory responsibilities under the terms of the contract and level of the firm’s control over the third party. Third, under the analysis used in Hewett-Kier Constr. and Ocean Ritz of Daytona Condominium, a professional’s liability to a non-privity third party may also be determined by whether a “special relationship” exists as defined under Restatement Section 552.
It would appear, however, that the incidental beneficiary discussion in Moyer continues to be viable. Courts have continued to be hesitant to extend protection to incidental third party beneficiaries, adhering to the rule that a contract benefits and binds only the parties themselves unless the contract has been entered into for the direct and substantial benefit of a third party. See, e.g., Thornton-Tomasetti, 646 So.2d at 282; Gray v. Executive Drywall, Inc., 520 So.2d 619 (Fla. 2d DCA 1988)(personal injury plaintiff, who was an employee of the general contractor, was merely an incidental beneficiary of contracts between general contractor and plastering and drywall companies regarding maintenance of the premises, safety precautions and compliance with applicable laws in the absence of a clear manifestation in the contracts of an intent to benefit the plaintiff).
Construction Defects
The seminal case of Slavin v. Kay, 108 So.2d 462 (Fla. 1958) involved a third party action for negligence of the contractor relating to the construction of an improvement. In considering the respective liabilities of a contractor and owner after the owner has resumed possession of the construction, the court held that a “contractor is relieved of liability for damages caused by a patent defect after control of the completed premises has been turned over to the owner.” Gonsalves v. Sears, Roebuck and Co., 859 So.2d 1207, 1209 (Fla. 4th DCA 2003) .
Thus the Slavin doctrine stands for the proposition that a contractor is relieved of liability caused by a patent defect after control of the completed premises has been turned over to the owner. See Easterday v. Masiello, 518 So.2d 260 (Fla. 1988). The reasoning behind this rule is that it would be unfair to the contractor if it continued to be held responsible for patent defects after the owner has accepted the improvement and undertaken its maintenance and repair. See Easterday, 518 So.2d at 261.
In Easterday, supra, the Florida Supreme Court held that the Slavin doctrine precludes recovery against an engineer for personal injury to a third party caused by a patent design defect in a structure. However, an engineer is not insulated from liability if there is a latent defect in the structure. See Easterday, 518 So.2d at 261. Accordingly, the Slavin doctrine does not apply where there has been no acceptance by the owner or if the defect is not discoverable by a reasonable inspection. See Easterday, 518 So.2d at 262. In this type of scenario, the nature of the defect and the issue of control are key to a determination of liability.
Statute Of Limitations
Other than the basic five year period for actions on a written contract and the four year period for actions founded on negligence, there are several specific provisions in the Florida Statutes relating to statute of limitations for engineering-related causes of action.
Fla. Stat.§95.11(3)(c) provides a four year limitations period for an action founded on the construction, design or planning of an improvement to real property:
- the time runs from (1) the date of actual possession by the owner; (2) the date of issuance of a certificate of occupancy; (3) the date of abandonment (if construction is not completed); or (4) the date of completion or termination of the contract between the professional engineer, registered architect or licensed contractor and his employer, whichever date is latest.
- exception: if the action involves a latent defect, the time runs from the time that the defect is discovered or should have been discovered with the exercise of due diligence.
- In any event, the action must be commenced within 15 years after (1) the date of actual possession by the owner; (2) the date of the issuance of a certificate of occupancy; (3) the date of abandonment of construction (if not completed); or (4) the date of completion or termination of the contract between the professional engineer, registered architect or licensed contractor and his employer, whichever date is latest.
Fla. Stat.§95.11(3)(e) provides a four year limitations period for an action for injury to a person founded on the design, distribution, manufacture or sale of personal property that is not permanently incorporated in an improvement to real property, including fixtures.
Fla. Stat.§95.11(4)(a) provides a 2 year limitations period for an action for professional malpractice (other than medical malpractice), whether founded on contract or tort. The period of limitations runs from the time the cause of action is discovered or should have been discovered with the exercise of due diligence. Note, however, that the limitation of actions for professional malpractice under this subsection is limited to persons in privity with the professional.
Finally, the respective one-year limitation periods for equitable lien claims and enforcement of payment bonds may be relevant in the professional practice of engineering as well. See Fla. Stat.§95.11(5)(b) and (5)(e).
General Conclusions
Under the present state of Florida law it is possible that an engineering firm and engineers in their individual capacity may be held liable in tort to both privity and non-privity parties. However, in light of the convoluted state of professional malpractice law in the state (Moyer, Moransais and their respective progeny), the establishment of the duty element as to non-privity third parties will alternately depend on whether an engineering firm owed a duty of care to foreseeable persons or the existence of a “close nexus” or “special relationship” between the firm and complaining third party. Accordingly, resolution of some of the specific issues discussed above, in particular duty and permissible damages, may depend on the interpretation of the law of the particular DCA of the district in which a case is heard and the respective cases upon which a court hearing such a cases chooses to rely.
This article was first published in the April 2008 issue of Structure Magazine.
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