On December 13, 2012, the Court of Appeals for the First District filed its opinion in Beacon Residential Community Association v. Skidmore, Owings & Merrill LLP et al. (No. A134542.)  The decision is bad news for architects and other design professionals since it holds they can be held liable in negligence to third party purchasers under both the common law and Senate Bill 800. 

Skidmore, Owings & Merrill LLP (SOM) and HKS Architects (HKS) provided architectural and engineering services for the Beacon Residential Condominiums, a 595 unit development in San Francisco.  Alleged construction defects caused problems with water infiltration, inadequate fire separations, structural cracks, and other life safety hazards.  SOM and HKS demurred to claims for negligence and statutory negligence.  The trial court granted the demurrer, reasoning that design professionals owe no duty of care to condominium associations or residents if the owner retains final decision-making power over the design.  Plaintiffs appealed.

The court of appeals reversed, finding that design professionals do, under some circumstances, owe a duty of care to third party purchasers and residents even when they do not have control.  The Court viewed the issue as “not whether a design professional owes a duty of care to purchasers but the scope of that duty.”  It applied the six policy factors from Biakanja to assess the scope of that duty: 1) extent to which the transaction was intended to affect the plaintiff, 2) foreseeability of harm to the plaintiff, 3) degree of certainty that the plaintiff suffered injury, 4) closeness of connection between defendant’s conduct and the injury suffered, 5) the moral blame attached to defendant’s conduct, and 6) the policy of preventing future harm.

The contract between HKS and the developer contained a clause intended to limit HKS’s liability.  Ironically, the court used this clause as evidence that HKS and the other defendant were “more than well aware that future homeowners would necessarily be affected by the work that they performed.”  The court noted other facts that grounded their analysis.  The defects posed a serious risk of harm to people or property.  The plaintiffs were purchasers/owners and not merely investors.  Due to the numerous cross-complaints filed among the approximately 40 defendants named in the action, it was unlikely that the design professionals would bear liability out of proportion to their fault.  SOM and HKS were allegedly paid over $5,000,000 for their work on the project, a factor speaking to proportional liability as well. 

The court further reasoned that the Legislature sets public policy and that the legislative intent of Senate Bill 800 (enacted in 2000 as the Right to Repair Act), was clear that design professionals are liable to third parties for negligence.  This reasoning served to show that the sixth factor of Biakanja was met, for a common law analysis.  However, the court noted further that “To the extent that a Biakanja/Bily policy analysis is not otherwise dispositive of the scope of duty owed by a design professional to a homeowner/buyer, Senate Bill No. 800 is.”  This sentence implies that even if a design professional is not liable under the common law, they are liable under the statute.  As the court noted, this decision will have an impact on the cost of housing.  It also will likely have an impact on the cost of professional liability insurance for design professionals who work on residential developments.  It will be interesting to see whether SOM and HKS appeal to the Supreme Court of California.

This was originally posted on January 3 on Jampol Zimet blog. Check out the original post here
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