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January 2013

California Court of Appeals Expands and Clarifies Architect's Duty of Care to Third Party Purchasers/HOAs

In Beacon Residential Community Association. v. Skidmore, Owings & Merrill, LLP, the First District of the California Court of Appeals held that architects can be held liable to condominium owners for negligently prepared plans.  In doing so, the court enlarged the scope of duty owed by design professionals to third party purchasers, distinguishing the prior duty limitations for design professionals established in Weseloh Family Ltd. Partnership v. K.L. Wessell Construction Co., Inc.(2004) 125 Cal. App. 4th 152 .

In Beacon, plaintiff Beacon Residential Community Association alleged multiple construction defects including “solar heat gain,” a condition causing the condominium units to be uninhabitable due to excessively high temperatures.  The association alleged the defendant architect should be held liable to the condominium owners for negligence arising from its substitution of less expensive, non-operational windows in conjunction with a design that lacked adequate ventilation.  The architect demurred to the association’s complaint arguing it owed no duty to the association or the condominium owners.  The lower court sustained the architect’s demurrer finding that under Weseloh the architect owed no duty of care to the association or its condominium owners.  The lower court held that absent such a duty, liability could not be imposed for negligent design.  The lower court also held that the owners had the burden to show the architect  had control in the construction process beyond providing recommendations to the developer.

The Appellate Court, in overruling the trial court and finding that the architect owed a duty of care to the condominium owners even though it had no direct connection to the owners, applied the six prong Biakanja factor analysis widely used in California courts for deciding construction defect scope of duty disputes.  The six prongs are: (1) the 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) the closeness of connection between defendant’s conduct and the injury suffered; (5) the moral blame attached to the defendant’s conduct,  and (6) the policy of preventing future harm.

The first and sixth Biakanja factors were the focus of the Appellate Court’s ruling.  Insofar as the first factor, the Appellate Court rejected the architect’s argument attempting to limit its liability based on provisions in its contract with the developer that expressly denied any duty to the condominium owners.  The architect/developer agreement reads in pertinent part: “the architect is solely responsible to the Owner [developer] and not to such condominium associations.”  [t]he Court held that “while a duty of care arising from contract may perhaps be contractually limited, a duty of care imposed by law cannot be disclaimed” by contract.  Moreover, the Appellate Court found this provision implicitly recognized the architect’s awareness that future owners would be affected by its work.

The Appellate Court’s analysis of the sixth factor held that the policy of preventing future harm “weighs heavily in favor of recognizing liability.”  For this the Court looked at: (1) the potential imposition of liability out of proportion of fault; (2) the possibility of private ordering of the risk; and (3) the effect of imposing third-party liability on the defendant(s). Bily v. Arthur Young & Co (1992) 3 Cal App 4th 370. 

The Appellate Court’s analysis specifically recognized that the architect would probably be involved in the case eventually (whether or not a direct relationship to the condominium owners existed given the complexity of construction defect cases with multiple parties and indemnity actions).  The Court found the architect’s future involvement coupled with its substantial project fee was indicative that its liability would not be out of proportion with its potential fault.  In assessing the likelihood the burden of liability could be privately ordered, the Court held individuals in the, “development process may have the ability to privately order allocation of liability by contract or through insurance, the buyers do not.”  Lastly, the Court down-played the effect of expanding the architect’s exposure to third party liability claims by emphasizing that design professionals will only be held liable for negligence “if they fail to meet the requisite standard of care” and will not incur liability “when performance meets the required standard.”

All told, the Beacon case seems to expand an architect’s (and likely other design professionals as well) exposure by potentially opening the door to construction defect claims by third party property purchasers.  Express contract provisions attempting to limit this exposure by third party purchasers may not succeed, depending on the circumstances.  This increased exposure is a factor that design professionals need to consider in future contracts, especially new multi-resident type projects.  What’s more, Beacon makes it more challenging to successfully defeat a claim by third-party purchasers/owners in the early phases of litigation.