The Design and Construction Management Professional Reporter: April 2008

Inside this Issue

New York Court Imposes Duty on Design Professional to Third-Party Owner in Light of Certifications to City Building Department

By Douglas M. Marrano, Esq.

In a reported decision, a New York trial court recently denied an architect’s request to dismiss a suit by an adjacent property owner claiming damage to his building. The owner claims that excavation on the adjacent project in which the architect prepared design plans caused his building to settle. The architect argued that he owed the adjacent property owner no duty of care and that his services did not otherwise cause the property owner any harm. The trial court disagreed, citing certifications the architect made to the city building department regarding underpinning adjacent buildings. As a result, the trial court found the design professional owed a duty to an adjacent property owner to ensure that inspections which directly affected the adjacent owner’s property were performed properly.

Arizona Court of Appeals Upholds a Limitation of Liability Clause, but Rules that a Jury Must Decide the Enforceability of the Clause

By Daniel C. Poteet, Esq.

The Arizona Court of Appeals recently upheld a limitation of liability clause in a professional services contract and, in the same case, 1800 Ocotillo, LLC v. The WLB Group, Inc., No. 1 CA-CV 07-0037 (opinion filed Jan. 29, 2008), interpreted the Arizona Constitution to require submission of the enforceability of the limitation of liability clause to a jury.

Nebraska Federal Court Denies Summary Judgment for Architect on Professional Negligence Claim

By Douglas M. Marrano, Esq.

In a June 2007 Federal Court decision in Nebraska, the court denied summary judgment, requiring a defendant architect to stand trial on a professional negligence claim for noncompliance with the building code where the architect failed to hire a special inspector as mandated by the code. Turner v. Moen Steel Erection, Inc., 2007 U.S. Dist. LEXIS 40957 (D. Neb., June 5, 2007). The court found a triable issue of fact on the issue of the architect’s compliance with the applicable standard of care. Specifically, the court determined that there were triable issues of fact as to whether the architect had a duty and, if so, whether any breach of that duty was the proximate cause of the accident and subsequent injury.

Surety is not Responsible for its Principal’s Punitive Damages

By Sa’adiyah Masoud, Esq.

The Massachusetts Appeals Court recently declined to bind a surety, who had notice of a punitive damages claim and the opportunity to defend, to an arbitral award for punitive damages against its principal. In C&I Steel, LLC v. Travelers Cas. & Sur. Co. of America, the court reasoned that the terms of the underlying bond agreement (“bond”) and the lack of arbitral findings against the surety were decisive in determining the surety’s liability for such an award, and supplanted the manner in which the surety approached the arbitral proceedings. 70 Mass. App. Ct. 653 (2007). As the surety did not explicitly or implicitly agree to arbitration in its bond agreement, was not asked to and did not participate in arbitration, it was not bound by an arbitral punitive damages award against its principal.

Public-Private Partnerships: Opportunities and Risks for Engineers and Constructors Involved in Subsurface Projects

By David J. Hatem, P.C.

Increasingly, Public-Private Partnerships (“PPPs”)—a delivery approach under which a Public Owner engages a Private Sector entity to develop, fund, design, construct, operate and maintain a public use project—are being explored and selected by Public Owners as mechanisms for realizing public projects for which funding, and other public capabilities and resources, are not available to support the funding, project management, operational, maintenance, and other traditional roles of the Public Owner. Sewerage outfall and transportation-related tunnels, as well as other projects having significant subsurface work, are candidates for the PPP approach. Interest in and utilization of the PPP approach is expected to continue and increase, especially as public funding availability and Public Owner appetite for design and construction risk continue to decline. Given the substantial Owner risk, funding contingency exposure, and management skill and experience involved in subsurface projects, it should not be surprising that the PPP approach will be attractive to Public Owners contemplating those projects. The future will present both significant opportunities and potential risks for Engineers and Constructors who are interested in (and capable of) participating in PPPs. This paper will address some of the principal risk issues for Engineers and Constructors on PPP subsurface projects.

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