Brace yourself. Legal jargon is coming. What is the economic loss doctrine? Simply put, the economic loss doctrine is a legal rule that bars tort claims (negligence claims) purely for economic loss. There must be some sort of personal injury or damage present in order for the claim to be valid. This doctrine has protected design professionals in the past from suits for damages for design documents that are never used for construction projects. Well, just like every other doctrine or rule, there are exceptions but not many. Watch out design professionals because Pennsylvania courts may be applying one of those exceptions to your line of work.
In Gongloff Contracting, LLC v. L. Robert Kimball & Associates, Architects & Engineers, Inc., 2015 Pa. Super 149 (Pa. Super. Ct. July 8, 2015), the Superior Court of Pennsylvania just overturned a trial court decision that could cause some worry for Pennsylvania design professionals. Gongloff filed suit against Kimball for negligent misrepresentation. Kimball was hired by Gongloff to prepare design documents for a university convocation center. The claim stated that the design plans prepared by Kimball contained faulty information that could render the convocation center structurally unsafe. Gongloff furthered claimed that it experienced increased costs and expenses to fix the defective design documents.
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Kimball moved to dismiss the claim based off the economic loss doctrine we discussed above. These plans were never used and never caused any personal injury or damage, so a claim of negligence must be barred. The trial court agreed, but the appellate court did not. The appellate court cited Bilt-Rite Contractors, Inc. v. The Architectural Studio, 581 Pa. 454 (2005). In Bilt-Rite, the Pennsylvania Supreme Court held an architect liable for negligent misrepresentation through the narrow exception found in Section 552 of the Restatement (Second) of Torts. The appellate court felt this was enough to overcome the economic loss doctrine and create a valid claim by Gongloff. Section 522 creates an exception to the economic loss doctrine for information negligently supplied to others. The section states
One who, in the course of his business, profession or employment, or in any other transaction in which he has a pecuniary interest, supplies false information for the guidance of others in their business transactions, is subject to liability for pecuniary loss caused to them by their justifiable reliance upon the information, if he fails to exercise reasonable care or competence in obtaining or communicating the information.
The court further stated that an express claim need not be stated in order for the claim to go further. An allegation of negligent misrepresentation is sufficient. In other words, the claim is valid and is not entitled to summary judgment. There are facts that must be proven and require discovery of evidence and possibly even a trial.
Looking to the Future
This is by and far not the end of this case. Kimball, the design professional in this case, may easily be able to prove there is no negligent misrepresentation or that Gongloff’s claim is too vague, but this decision alone may change the legal landscape for design professionals in Pennsylvania. The appellate court’s decision could mean that claims could increase the amount of claims filed against design professionals. This would hold design professionals in Pennsylvania to a higher standard when preparing design documents. Design professionals should be more diligent and professional in the preparation period if it is foreseeable that the information they provide may be utilized later on in the process (which is almost always foreseeable). Due diligence will help many professionals avoid these types of claims in the future.