August 11, 2014

California Supreme Court Expands Potential Liability for Architects and Design Professionals

The California Supreme Court last week issued a decision with potentially broad liability implications for architects and design professionals. In Beacon Residential Cmty. Ass’n. v. Skidmore, Owings & Merrill LLP (Beacon), decided on July 3, 2014, the California Supreme Court held that an architect owes a duty of care to third party homeowners in the design of residential buildings-even absent a contractual relationship. Thus, homeowners may sue a design professional directly for negligent design work.

In Beacon, two architectural firms designed a 595-unit condominium project in San Francisco. The homeowners association sued, alleging that the architects’ negligent plans resulted in various construction defects. The trial court sustained the architects’ demurrer, reasoning that an architect who makes recommendations but not final decisions on construction owes no duty of care to future homeowners with whom it has no contractual relationship.

The Supreme Court affirmed the court of appeal’s reversal of the trial court’s ruling. The Supreme Court observed that contractual privity has declined in significance over the past century, and courts increasingly have found that builders, contractors, and architects may owe a duty of care to third parties in various circumstances. The Supreme Court then emphasized three key points to reach its holding. First, the architects’ primary role in designing the project bore a close connection to the plaintiff’s injury. Second, the architects’ work was intended to affect a limited, foreseeable, and well-defined class of persons. Third, a typical homebuyer is ill-equipped to inspect for structural defects himself or to bring in his own architect to do so, and thus he relies on the skill of the developer’s architects.

Accordingly, the Supreme Court “held that an architect owes a duty of care to future homeowners in the design of a residential building where the architect is a principal architect on the project-i.e., not subordinate to other design professionals. The duty of care extends to such architects even when they do not actually build the project or exercise ultimate control over construction.”

The Supreme Court distinguished Weseloh Family Ltd. Partnership v. K.L. Wessel Construction Co., Inc., 125 Cal. App. 4th 152 (2004) (Weseloh),where the court held that a design engineer owed no duty of care to the third party owner of commercial property. The Supreme Court noted that, unlike the architects in Beacon, the defendants in Weseloh played a minor role and were subordinate to other design professionals.

Beacon expands the potential liability exposure of design professionals by allowing home purchasers to sue them directly. Design professionals should review Beacon and consider its implications for their future projects and insurance coverage.