A significant number of the courts have held that when a contractor or owner/developer suffers damages as a result of errors by a design professional, the economic loss doctrine bars negligence claims, unless such negligence causes either personal injury or damage to “other property.” What constitutes “other property” is often the central issue analyzed by the courts in these types of cases. “Economic loss” is the result of the failure of the product to perform to the level expected by the buyer, which is the core concern of traditional contract law.
Two recent court decisions in Nevada and Arizona, both involving professional soils engineering services, examine situations involving claims for purely economic damages resulting from the delivery of professional services. In Nevada, the Court refused to allow the owner to make a negligence claim against a design professional for economic losses in the absence of physical injury or damage to “other property.” In the more recent Arizona case, the Court allowed the owner to assert a claim for negligent design services and concluded that the economic loss doctrine did not apply where the design professional’s services resulted in physical damage to “other property.”
Nevada Update: Economic Loss Rule Bars Negligence Claim Against Engineering Firm.
In Terracon Consultants Western, Inc. et al. v. Mandalay Resort Group, et al., the Nevada Supreme Court applied the economic loss doctrine to bar a negligence claim against a design professional that provided engineering services for the development of a casino resort where the plaintiffs’ damages were purely financial. Terracon provided geotechnical engineering advice about the subsurface soil conditions and recommended a foundation design for the property but was not involved in constructing the property. During construction, the soil settled more than Terracon’s predictions and the municipal building inspector required the developer to repair and reinforce the foundation before proceeding with construction.
[ Read more ]
Arizona Update: Economic Loss Rule Not a Bar to Negligence Claim Against Engineer Because Negligent Act Damaged "Other Property".
In Hughes Custom Building, LLC v. Davey, the Arizona supreme Court recently declined to apply the economic loss doctrine to bar a negligence claim against a design professional that provided soils engineering services, based on facts distinct from those in the Terracon case. In Hughes Custom Building, the developer of a residential subdivision engaged a civil engineering firm to perform various engineering services, including the preparation of a grading and drainage plan. After construction of the residences, the soil under the houses subsided and resulted in structural damage. The developer then asserted a claim against the engineer for financial damages that it alleged resulted from the engineer’s negligence.
[ Read more ]
Update: Other State Law Discussing the Economic Loss Rule
Click here to learn more about Kansas, Missouri, Colorado or Illinois law on this issue.
For More Information:
Feel free to direct comments or questions to:
About Polsinelli Shughart PC
With more than 480 attorneys , Polsinelli Shughart PC is a national law firm that is a recognized leader in the areas of business litigation, financial services, real estate, business law, labor and employment, construction, life sciences and health care. Serving corporate, institutional and individual clients regionally, nationally and worldwide, Polsinelli Shughart is known for successfully applying forward-thinking strategies for both straightforward and complex legal matters. The firm can be found online at www.polsinelli.com. |
