Beware of Implied Warranties as the Assertion of Such Claims Can Lead to Expanded Liability

By Sarah A. Johnson, Esq.

While several jurisdictions only allow recovery of economic loss from design professionals, including engineers, in breach of contract,¹ many jurisdictions allow alleged injured parties to recover under a negligence theory.² In the jurisdictions limiting recovery to claims for breach of contract, only those parties in privity with the engineer can recover against the engineer, while in those jurisdictions that allow negligence claims against engineers, strangers to the contract can recover against the engineer.

While most engineers are generally aware of whether the jurisdiction in which they practice may allow a negligence claim for economic loss, they often have not considered the application of implied warranties. Creative claimants may attempt to use the application of implied warranties to expand who can recover from the engineer or what type of recovery can be had against the engineer.

Some jurisdictions specifically reject the application of these implied warranties to design professionals, such as engineers, finding that design professionals provide a service and do not warrant the accuracy of their plans and specifications and that implied warranties in a construction context are limited to the parties doing the actual construction.³ However, other jurisdictions have allowed claimants to pursue claims for implied warranties against design professionals, which often results in expanding the scope of persons who may bring claims against them and/or expanding the scope of damages recoverable against them.

In Tommy L. Griffin Plumbing & Heating Co. v. Jordan, Jones & Goulding, Inc., the Supreme Court of South Carolina found that a contractor for the construction of a water trunk could bring causes of action not only for professional negligence but also for breach of implied warranty against the engineer that the County contracted with to oversee and design the project.⁴ The court found that the engineer’s duty to the contractor arose independently of any contract and that therefore the contractor could bring a cause of action for professional negligence against the engineer despite a lack of privity between the contractor and the engineer.⁵ Moreover, the court found that the engineer impliedly warranted that its plans and specifications were sufficient for their purpose, and therefore, the contractor could assert a cause of action for breach of implied warranty against the engineer.⁶

In North Peak Construction, LLC v. Architecture Plus, Ltd., the Court of Appeals of Arizona held that architects can be sued for breach of the implied warranty that they exercised their skill with care and diligence and in a reasonable, non-negligent manner.⁷ The case involved claims for negligence and breach of implied warranty by a contractor against the architect hired by property owners to design a house on a particular lot.⁸  The trial court found that the negligence claim was barred by the applicable statute of limitations and that the breach of implied warranty claim was duplicative of the negligence claim with the addition of a request for attorneys’ fees under Arizona statute, which allows for an award of attorneys’ fees to the prevailing party on a claim arising out of contract, express or implied.⁹ The trial court then granted the architect’s motion for summary judgment on all counts.¹⁰

The Court of Appeals reversed the trial court finding that the contractor could pursue a claim for breach of implied warranty and that such was not barred by application of the statute of limitations for negligence as breach of implied warranty sounds in contract.¹¹ While the Court of Appeals in North Peak refused to decide the question of whether the contractor could be awarded attorneys’ fees pursuant to Arizona statute if it prevailed on its breach of implied warranty claim against the architect,¹² a subsequent decision by the Arizona Supreme Court in Sirrah Enterprises, LLC v. Wunderlich seems to suggest that an award of attorneys’ fees is recoverable in connection with a claim for breach of implied warranty.¹³ Therefore, a claimant can evade the statute of limitations for negligence and potentially obtain its attorneys’ fees by asserting a claim for breach of implied warranty against a design professional in Arizona.

If an engineer practices in a jurisdiction that allows for application of implied warranties to its work, it should consult its local attorney regarding the inclusion of express disclaimers of any such warranties in its contracts to avoid the expanded liability exposure that can flow from claims for breach of implied warranties. While not foolproof, such disclaimers should at least provide the engineer with an argument that it did not make any implied warranties and therefore cannot be held liable for breach of same.

CITATIONS

¹See, e.g., Indianapolis-Marion County Public Library v. Charlier Clark & Linard, P.C., 929 N.E. 2d 722, 739 (Ind. 2010) (finding that the economic loss doctrine barred the plaintiff library from pursuing tort action against the engineers that performed the design and inspection of the library’s parking garage, which was allegedly defective); Fireman’s Fund Insurance Co. v. SEC Donahue, Inc., 679 N.E.2d 1197, 1201 (Ill. 1997) (holding that the economic losses may not be recovered in tort against an engineer who prepares plans and specifications for a construction project).
²See, e.g., City of Cairo v. Hightower Consulting Engineers, Inc., 629 S.E.2d 518, 525 (Ga. Ct. App. 2006) (finding that a “misrepresentation exception” to the economic loss doctrine allowed the city to pursue a negligence claim against the engineering firm that evaluated a site for building a wastewater disposal system that malfunctioned after construction); Waldor Pump & Equip. Co. v. Orr-Schelen-Mayeron & Assocs., Inc., 386 N.W.2d 375, 377-78 (Minn. Ct. App. 1986) (finding that a subcontractor could sue an engineer in tort for negligently rejecting sludge pumps, resulting in increased costs to the subcontractor and that the economic loss doctrine does not apply to the rendition of professional services); Lord v. Customized Consulting Specialty, Inc., 643 S.E.2d 28, 33 (N.C. Ct. App. 2007) (finding that because there was no contract between the plaintiff homeowners and the subcontractors, the economic loss doctrine did not apply to preclude the homeowners from pursuing negligence claims for construction defects against the subcontractors).
³See, e.g., Bd of Managers of Park Point at Wheeling Condo. Ass’n v. Park Point at Wheeling, LLC, et al., 2015 IL App (1st) 123452, ¶¶ 15, 22, 29-31 (finding that architects do not have any implied duty to perform their takes in a workmanlike manner and  that an architectural firm was not subject to the implied warranty of habitability of construction); City of Mounds View v. Walijarvi, 263 N.W.2d 420, 424-25 (Minn. 1978) (finding implied warranties, including the implied warranty for fitness for an intended purpose, did not apply to an architect’s services).
⁴Tommy L. Griffin Plumbing & Heating Co. v. Jordan, Jones & Goulding, Inc., 463 S.E.2d 85, 55-57 (S.C. 1994).
⁵Id. at 55-56.
⁶Id. at 56.
⁷North Peak Construction, LLC v. Architecture Plus, Ltd., 254 P.3d 404, 408 (Ariz. Ct. App. 2011).
⁸Id. at 405-06.
⁹Id. at 406.
¹⁰Id.
¹¹Id. at 407-08.
¹²Id. at 408-09.
¹³Sirrah Enters., LLC v. Wunderlich, 339 P.3d 89, 94 (Ariz. 2017).