How Limited Is a Claim For Negligent Misrepresentation Against A Design Professional?
We’ve been lax lately in getting our readers interesting district court opinions on topics that are facing the industry. Today we’re pleased to rectify a small portion of that delinquency with this written opinion from Judge Goldberg regarding an engineer’s motion to dismiss a negligent misrepresentation claim.
The facts of the case from the opinion detail the parties’ involvement in the City of Chicago’s Façade and Circulation Enhancement Project (“FACE Project”). After it was apparently sued by the City for breach of contract in connection with the construction of the FACE Project, a general contractor on the project brought a suit against an engineer hired by the City. The general argued that the engineer was hired by the “City to provide testing and review of welds and steel related to the FACE Project.” The general contended that this created a duty on the part of the engineer to advise the general, among others, of any defects that it found. Although its not apparent from the order, you can guess that the general was trying to pass through some form of damage liability, likely based on defects or errors in the welds, to the engineer.
Why is this important? In short, it is important because the economic loss doctrine usually allows architects and engineers in the state of Illinois to avoid suits based in negligence where part or all of what they were contracted to do involved creating plans and specifications and providing information that was ancillary to the construction of a building – a final project. The doctrine forces those seeking recovery against a design professional to bring an action based on the breach of the contract, the breach of the commercial expectation in the end product, the building. One of the exceptions to this rule is carved from an enterprise where the design professional is hired, not to render some end product, but to provide information with no tangible result.
Perhaps the most-cited Illinois appellate authority for not allowing a suit against a design professional in negligence when their job has involved both the creation of plans and specifications and the provision of testing and information is a 1st District case from 1999, Tolan and Son, Inc. v. KLLM Architects, Inc, et al (Doc. No. 1-98-2581). Tolan recognized the distinction between the different activities of the design professional and chose not to split hairs when both inspections and plan design performed by a design professional took place during construction of the project. Tolan ultimately held that the dual tasks of both design and inspection could not be bifurcated where the design professional created an end product:
“Based on the foregoing, we find that KLLM and Walter's work cannot be bifurcated. They were not retained to provide an analytical end product. They were retained to design and construct the townhomes. The information supplied by them during the course of construction was incidental to the tangible object--the townhomes. Therefore, the circuit court properly granted their motions to dismiss.”
What is interesting about the Tolan decision is that it extended the economic loss rule to a situation involving the design professional both prepared plans and rendered an opinion outside the scope of the plans, but within the scope, temporally, of the construction project as a whole.
This temporal factor finds its way into the analysis in the instant opinion. The opinion does not state that the engineer in this case prepared plans and specifications – “[the engineer’s] work on the FACE Project was to provide testing and review of the work performed by [the welder], to ensure compliance of the work with the Contract Documents and the approved shop drawings.” The analysis finds that because this work was taking place during the construction process, it was ancillary to the construction and design of the project and therefore the economic loss doctrine barred a negligent misrepresentation suit against the engineer pursuant to Tolan.
This raises some unique issues.
What if the construction had concluded and the test was being performed after substantial completion? One year? Three years?
Does the portion of the Tolan opinion relative to the defendant “Reiss” imply that a design professional who supplies an opinion but not plans and specifications will not be exempt from negligent misrepresentation claims when the information is not supplied during construction?
Does this opinion create a distinction between an opinion for the guidance of others in their business transactions and “inspection information and review” for the purpose of insuring compliance of the end product to the Contract Documents?
It is likely that we will be seeing answers to some of these new questions now that we’ve broached the topic.
