Insight

Claims Against Architects and Engineers - New York Law Journal

Claims Against Architects and Engineers - New York Law Journal

Kenneth M. Block

Kenneth M. Block

September 21, 2021 03:17 PM

One of the unfortunate realities of the construction process is the prevalence of claims and disputes among owners, design professionals, contractors and subcontractors. To aid in the understanding of the fundamentals of claims against construction professionals and contractors, and helping to achieve a favorable outcome if litigation becomes necessary, we offer a two-part primer on construction litigation for owners. This first part deals with claims against architects and engineers (collectively, “A/E”). The second part, to be published this September, will deal with contractors.

A typical claim of an owner against an A/E involves an error or omission in the design of an element of the project. In the case of an architect, the error may involve the faulty design of the roof or façade of the building. In the case of a mechanical engineer, the error may involve the defective design of the building’s HVAC system. In both instances, once the error is identified and remedial steps are taken, the owner will face additional cost in the form of a change order from its contractor and the general delay and disruption of the project. It is usually at that point that the owner asks the questions: How did this happen? Who is responsible? What recourse do I have?

The Theory of A/E Liability

The theory of liability against an A/E is based on the breach of the Standard of Care, that is: Did the A/E perform its services in accordance with the standard of care exercised by professionals in the community? In order to answer this question, the nature of the error must be examined as well as the consequence to the owner. An A/E is not required to be perfect, but if the error results in damage to the owner, and would not have occurred had the A/E exercised reasonable care, the A/E will be liable for the owner’s damages. However, in order to establish malpractice, expert testimony will be required, both as to liability and damages.

Recoverable Damages

Generally speaking, all damages which naturally flow from the malpractice of an A/E are recoverable, subject to any contractual limitations. There are also distinctions between the amount of damages which can be recovered as a result of an error or omission. In the case of an error, where previously installed work needs to be rectified or retrofitted, the full cost of the remedial work is recoverable. In the case of an omission, where additional work or equipment is necessary, only the incremental cost of the work or equipment is recoverable, under the theory that, had the A/E not omitted the work, the owner would have had to pay for the work in the first instance, and that the A/E is not responsible for a “betterment.” In this case, the A/E would be responsible for the upcharge due to the purchase of the work on a “retail” basis, rather than the cost the owner would have paid had the work initially been specified.

In addition to the recovery of the “hard” costs arising from the error or omission, an aggrieved owner is also entitled to recover other actual damages incurred, such as additional general conditions and consulting costs. Moreover, unless there is a waiver of consequential damages in the underlying contract, the owner can recover delay damages, such as lost rent and, where applicable, continuing real estate taxes and finance charges.

Practical Recoverability of Damages

The foregoing establishes the theoretical bases for cost recovery from the A/E, but the question of more practical import is: What is the likelihood of recovery from the A/E? The answer lies in the insurance being carried by the A/E. Without adequate insurance, it is rare for the owner to be made whole from the assets of the A/E.

Before delving into the question of insurance, it bears noting that principals of A/E firms formed as professional corporations may bear personal liability for the errors or omissions of their firms. It is, therefore, incumbent on the principals to maintain adequate professional liability insurance. Often, counsel for A/E firms seek to limit the liability of the firms and their principals to available insurance proceeds at the time of judgment or settlement.

We counsel owners against this and insist that any limitation of liability relate to the amount of insurance required to be maintained by the contract. In this manner, if there is an erosion or termination of the policy, the firm (and the responsible principals) will be liable for damages found due to the aggrieved owner.

Coverage under professional liability insurance policies is very broad and usually includes all damage resulting from the negligent acts of the A/E, whether considered direct or consequential. It is for this reason that we oppose requests for waivers of consequential damages, such as the owner’s lost income; the typical professional liability policy covers such losses. It also should be noted that most professional liability policies provide that legal fees incurred in defending claims against the A/E are deducted from the face of the policy, thereby diluting the available proceeds for settlement.

Assertion of the Claim

We have found that the best course for an owner to seek redress for the damages caused by A/E malpractice is the assembly of a team of experts and consultants to analyze the perceived errors, and prepare a detailed claim against the culpable A/E. We usually start by first examining the direct and indirect costs incurred by the owner, as well as the delay damages which were a consequence of the errors. Plans, bulletins, change orders and other job records are then examined and experts reports, such as engineering, scheduling and financial, are gathered. The documentation is gathered into a comprehensive report for submission to the A/E, its counsel and insurance carrier.

Many insurance carriers take a proactive approach to dispute resolution and may request an informal settlement conference, failing which mediation may be suggested (even where the relevant contracts may provide for litigation). Where appropriate, we will agree to mediation, but reserve the right to pursue litigation if mediation fails.

As should be apparent from the foregoing, the A/E claims process can be complex and costly, but may be necessary to provide the aggrieved owner some degree of cost recovery. The key, however, is understanding the full extent and validity of the A/E claim, and the detailed preparation, presentation and prosecution of that claim.

-

Reprinted with permission from the June 16, 2021 edition of the NEW YORK LAW JOURNAL © 2021 ALM Media Properties, LLC. All rights reserved.

Related Articles

Building a Greener Future on Unsolid Ground


by William S. Thomas

As climate change only intensifies, natural disasters are becoming more frequent and shifting how construction legal professionals conduct litigation.

Multi-level house in the process of being built

IN PARTNERSHIP

Heroes Among Men: How Adam Leitman Bailey, P.C. Saved Lives of the Lifesaving


by Rebecca Blackwell

When a 911 Center in New York City was put in danger, Adam Leitman Bailey, P.C. went to work against the unlawful and hazardous actions of a developer whose construction threatened the peace and safety of all who worked for the Fortune 500 company.

Danger construction site no trespassing sign on fence

A Look Ahead


by Jarred Boyer

The future of U.S. rental markets may seem uncertain as we continue to grapple with the after-effects of COVID-19, but renters and landlords alike can look toward a more hopeful few years as inflation already begins to recede and the promise of stabilization is on the horizon.

Paper houses and crane sitting amongst coins and money

Out of the Sky: What Construction Workers Can Do if Injured on the Job


by Justin Smulison

Construction zones with unsafe working conditions have long been the sites of injuries for workers. The Perecman Firm, P.L.L.C. fights for victims in New York City and Long Island.

Advice for Injured Construction Workers

Property Rights...and Wrongs


by Chad Cooper and Steven S. Kaufman

Winning a legal battle often boils down to finding and targeting the weakest part of an opponent’s case. Four recent real estate disputes in northeast Ohio are good examples.

Strategies for Real Estate Litigation

Wearing a Hard Hat Significantly Reduces Risk of Injury, Death on NYC Construction Sites


by Michele Mirman

Construction Injury Prevention From Hard Hats

Sharpening the Sword: What You Need to Know About CASPA


by Eric B. Smith

How the Contractor and Subcontractor Payment Act (CASPA) can radically change the stakes of how you build. Learn what CASPA means for your construction projects and contract disputes.

How CASPA Impacts Commercial Real Estate

Teamwork and Strategy


by Justin Smulison

In 2018, Block O'Toole & Murphy continued to secure multimillion-dollar results for injured victims and workers.

Block O'Toole & Murphy Gets Results

When the Levy Breaks


by Warren Friedman

Tariffs against China on construction materials are capricious, unpredictable, and often spectacularly ill-timed. How can the industry prepare?

How Tariffs on China Hurt U.S. Construction

In the News: Georgia


by Nicole Ortiz

A summary of newsworthy content from Colorado lawyers and law firms.

In the News Georgia 2018

Trending Articles

2025 Best Lawyers Awards Announced: Honoring Outstanding Legal Professionals Across the U.S.


by Jennifer Verta

Introducing the 31st edition of The Best Lawyers in America and the fifth edition of Best Lawyers: Ones to Watch in America.

Digital map of the United States illuminated by numerous bright lights

Unveiling the 2025 Best Lawyers Awards Canada: Celebrating Legal Excellence


by Jennifer Verta

Presenting the 19th edition of The Best Lawyers in Canada and the 4th edition of Best Lawyers: Ones to Watch in Canada.

Digital map of Canadathis on illuminated by numerous bright lights

Legal Distinction on Display: 15th Edition of The Best Lawyers in France™


by Best Lawyers

The industry’s best lawyers and firms working in France are revealed in the newly released, comprehensive the 15th Edition of The Best Lawyers in France™.

French flag in front of country's outline

Announcing the 13th Edition of Best Lawyers Rankings in the United Kingdom


by Best Lawyers

Best Lawyers is proud to announce the newest edition of legal rankings in the United Kingdom, marking the 13th consecutive edition of awards in the country.

British flag in front of country's outline

Announcing the 16th Edition of the Best Lawyers in Germany Rankings


by Best Lawyers

Best Lawyers announces the 16th edition of The Best Lawyers in Germany™, featuring a unique set of rankings that highlights Germany's top legal talent.

German flag in front of country's outline

Prop 36 California 2024: California’s Path to Stricter Sentencing and Criminal Justice Reform


by Jennifer Verta

Explore how Prop 36 could shape California's sentencing laws and justice reform.

Illustrated Hands Breaking Chains Against a Bright Red Background

Celebrating Excellence in Law: 11th Edition of Best Lawyers in Italy™


by Best Lawyers

Best Lawyers announces the 11th edition of The Best Lawyers in Italy™, which features an elite list of awards showcasing Italy's current legal talent.

Italian flag in front of country's outline

Combating Nuclear Verdicts: Empirically Supported Strategies to Deflate the Effects of Anchoring Bias


by Sloan L. Abernathy

Sometimes a verdict can be the difference between amicability and nuclear level developments. But what is anchoring bias and how can strategy combat this?

Lawyer speaking in courtroom with crowd and judge in the foreground

Things to Do Before a Car Accident Happens to You


by Ellie Shaffer

In a car accident, certain things are beyond the point of no return, while some are well within an individual's control. Here's how to stay legally prepared.

Car dashcam recording street ahead

The Push and Pitfalls of New York’s Attempt to Expand Wrongful Death Recovery


by Elizabeth M. Midgley and V. Christopher Potenza

The New York State Legislature recently went about updating certain wrongful death provisions and how they can be carried out in the future. Here's the latest.

Red tape blocking off a section of street

Find the Best Lawyers for Your Needs


by Jennifer Verta

Discover how Best Lawyers simplifies the attorney search process.

A focused woman with dark hair wearing a green top and beige blazer, working on a tablet in a dimly

Tampa Appeals Court ‘Sends Clear Message,” Ensuring School Tax Referendum Stays on Ballot


by Gregory Sirico

Hillsborough County's tax referendum is back on the 2024 ballot, promising $177 million for schools and empowering residents to decide the future of education.

Graduation cap in air surrounded by pencils and money

Key Developments and Trends in U.S. Commercial Litigation


by Justin Smulison

Whether it's multibillion-dollar water cleanliness verdicts or college athletes vying for the right to compensation, the state of litigation remains strong.

Basketball sits in front of stacks of money

Is Premises Liability the Same as Negligence?


by Jeremy Wilson and Taylor Rodney Marks

In today's age, we are always on the move, often inhabiting spaces we don't own. But what happens when someone else's property injures you or someone you know?

A pair of silhouetted legs falling down a hole with yellow background

Woman on a Mission


by Rebecca Blackwell

Baker Botts partner and intellectual property chair Christa Brown-Sanford discusses how she juggles work, personal life, being a mentor and leadership duties.

Woman in green dress crossing her arms and posing for headshot

Best Lawyers Celebrates Women in the Law: Ninth Edition


by Alliccia Odeyemi

Released in both print and digital form, Best Lawyers Ninth Edition of Women in the Law features stories of inspiring leadership and timely legal issues.

Lawyer in green dress stands with hands on table and cityscape in background