Chapter VII Design Professional Liability

• Library: SC Construction Law Desk Book (SCBar) (2022 Ed.)

Chapter VII Design Professional Liability

Franklin J. Smith, Jr.

A. Introduction

Design Professionals provide services that are essential to the functioning of society. Without architects or engineers, we would have no homes, roads, commercial buildings, bridges, sewage and water treatment plants, manufacturing plants, and many other facilities that provide the comforts of modern civilization. Arguably, design professionals bear the greatest liability of the professional services industries because their work is often for the benefit of the general public. While doctors, lawyers, and accountants usually provide services to individual clients, architects and engineers design projects that are used by the masses. Hence, design professionals owe a duty to the general public and may be sued by members of the general public if the design professional fails to meet the standard of care and a person suffers damages because of that breach of the standard of care. Because of this, most architect/engineers are convinced that the ratio of risk exposure to compensation in the construction industry is greatest for the design professional.

In order to adequately represent an architect/engineer, a lawyer must be familiar with the design profession and the construction industry. Additionally, the lawyer must be familiar with the code of ethics, statutes, and regulations relating to the design professions. There are licensing requirements for architects, engineers and surveyors. Additionally, many of the provisions in the code of ethics and regulations for each profession stipulate various rules and requirements for the practice of that profession. All of these codes, statutes, regulations, and standards of the profession comprise the design professional's duty that is commonly referred to as "the standard of care."

The law recognizes that professional services involve highly educated and experienced professionals making judgments in performance of their services. Professional judgments are based on the specific facts of each situation and the knowledge and experience of the professional. Design professionals make judgments expecting a certain result. Often the result is not consistent with the intent and if the result causes damages, the design professional may be liable for those damages. The design professional is not liable if, in reaching a decision or performing his services, he conforms to the standard of care in the industry for performing those services. However, determining whether a design professional met the standard of care is not an objective determination. It is most often a jury issue.

The purpose of this chapter is to provide a general overview of design professional services that may create liability and the causes of actions and defenses that relate to design professional liability. The chapter is focused solely on design professional liability in South Carolina. However, there are references to cases outside of South Carolina that demonstrate principles that are generally accepted and would most likely be enforced by South Carolina courts.

B. Design Professional Liability

The design professional's responsibilities arise from three sources: (1) contract; (2) statutes and regulations; and (3) a professional standard of care. The professional standard of care requires a design professional to perform services with a level of care and skill possessed by a competent design professional performing similar services under similar circumstances. Hence, the professional standard of care encompasses all applicable statutory and regulatory responsibilities. It may also encompass some of the design professional's contractual responsibilities. In some instances, the contract may dictate a standard of care greater than the generally accepted standard of care and in such case the higher standard of care would govern the design professional's liability.

The breach of one or more of a design professional's responsibilities may result in liability. Claims against design professionals are usually pursued through negligence, breach of contract, or warranty causes of action. Negligence claims may be for professional or common law negligence, and the design professional is subject to whatever cause of action a creative Plaintiff's attorney may allege. However, regardless of the cause of action, a design professional's liability arises from the performance of services.

Design professional services typically consist of design and construction administration services. Design professionals that provide services in South Carolina are governed by statutes and regulations for each profession. Architects are governed by S.C. Code Ann. §§ 40-3-10, et seq. and S.C. Code Ann. Reg. 11-10, et seq.; engineers and surveyors are governed by S.C. Code Ann. §§ 40-22-10, et seq. and S.C. Code Ann. Reg. 49-301, et seq. Design professionals may also be subject to other project specific regulations, e.g., S.C. Code Ann. Reg. 61-58-1 relating to public water systems and S.C. Code Ann. Reg. 61-16 relating to minimum standards for licensing hospitals and institutional general infirmaries.

For design services, a design professional uses his education, experience, technical knowledge, creativity and imagination to create a building or some other type of facility on paper or on a computer. The design professional prepares a set of construction documents which usually consists of plans and specifications. The construction documents are used by a contractor to construct the facility.

The construction documents are the end result of the design process which in vertical commercial projects typically consists of the following stages: (1) schematics; (2) design development; and (3) construction documents. For horizontal projects such as highways and bridges, the construction documents are prepared in varying stages of completion; e.g., 30%, 60%, 90% and then IFC (issued for construction) drawings. Once the construction documents are completed, the design professional's design services are essentially complete. There may be additional design services required if significant changes are made during construction, but otherwise, design services are complete and construction administration begins.

Construction administration services consists of many activities such as shop drawing review, certification of payment applications, job site observations, arbitration of disputes between owner and contractor, preparation of construction estimates, and project closeout inspections. The scope of construction administration services is usually set out in the design professional contract, and the design professional is generally allowed to perform some, none, or full construction administration services.¹

The standard AIA Documents are often viewed as providing the "industry standard" for construction administration services.²

The irony of the design professional's services is that the services that generate the least revenue, i.e., construction administration services, create the greatest liability exposure. A typical fee structure for the design of a commercial vertical project is as follows:

Schematics 20%

Design Development 15%

Construction Documents 40%

Bidding and Negotiation 5%

Construction Administration 20%

Therefore, only about 20% of the design professional's fee is for construction administration services. However, a substantial portion of a design professional's liability exposure arises from construction administration services.

1. Design Errors and Omissions - Standard of Care - Negligence

The general rule in South Carolina is that design professionals, like doctors and lawyers, are required "to exercise such care, skill, and diligence as [people] in that profession ordinarily exercise under like circumstances."³ South Carolina has abolished locality standards for physicians and accountants.⁴ Design professionals in South Carolina may be held to a national standard regardless of any language to the contrary in the design services agreement.

Architecture and Engineering are not exact sciences. A/E's frequently exercise professional judgment without being able to guarantee a final result. For these reasons, the law has not required "perfect results" from design professionals.⁵South Carolina's courts have not imposed a higher standard of care on design professionals through "implied warranties."⁶ Absent an express warranty provision, therefore, South Carolina A/E's are held to the professional negligence standard of care. Under that standard of care, an error in the design does not necessarily amount to professional negligence for which the design professional may be liable. On the contrary, the correction of some errors and omissions must be expected as part of the construction process. However, violation of a building code may be held to be negligence per se on the part of a design professional, provided the building code has been adopted as a valid statute or ordinance.⁷

In Beachwalk Villas Condominium Ass'n v. Martin,⁸ the South Carolina Supreme Court held that "architects may be held liable to homebuyers for negligence in connection with home construction projects and breach of implied warranty."⁹In Tommy L. Griffin Plumbing & Heating Co. v. Jordan, Jones & Goulding, Inc.,¹⁰the Court clarified its ruling in Beachwalk Villas Condo. Ass'n and held that breach of a duty "arising independently of any contract . . . may support a tort action against a design professional."¹¹ While the difference between tort and contract may sometimes be a fine one, the courts have tried to keep the two causes of action separate. For example, in Koontz v. Thomas,¹² the Court of Appeals affirmed the dismissal of allegations of professional negligence that were "merely veiled breach of contract claims."¹³

In Cullum Mechanical Construction, Inc. v. South Carolina Baptist Hospital,¹⁴ an unpaid subcontractor sued the architect for payment on the theory that the "[a]rchitect owed a duty...