Claims and Disputes

III. CLAIMS AND DISPUTES

A. Dispute Resolution

There are a number of different methods available for design professionals to utilize in resolving their disputes. These methods include arbitration, mediation, and litigation, among others. If the terms of the parties' agreement do not prescribe the particular method for resolving the parties' disputes, then the parties must assess factors such as costs involved in resolving the dispute, the speed of the resolution, and the finality of the decision. The design professional should also consider the nature of the dispute and the background of the decision-maker. Arbitrators or mediators, for example, whether they are construction attorneys or design professionals, may have specialized experience and expertise that would assist in understanding and resolving, or helping the parties to resolve, complex design and construction issues or disputes. Judges or layperson juries, on the other hand, may not have the same innate industry knowledge. For a more detailed discussion of these alternative dispute resolution techniques, see Chapter 16: Mediation, Arbitration, and Other ADR Techniques.

B. Mechanic's Liens

A mechanic's lien is an in rem action in equity that a design professional can utilize to secure a debt associated with a building's construction or repair owed to the design professional by the owner of the land upon which the building is erected. For purposes of this chapter, it is sufficient to note that the Maryland Mechanic's Lien Statute explicitly provides that architects and engineers may obtain a mechanic's lien for the unpaid value of their services.⁴⁶ For a more detailed discussion of mechanic's liens, see Chapter 12: Mechanic's Liens and Statutory Remedies.

C. Public Procurement

The Maryland legislature has enacted the Maryland Little Miller Act,⁴⁷ which patterns the federal Miller Act, and requires a general contractor to provide security on all construction contracts in excess of $100,000.⁴⁸ Much like mechanic's liens, if a design professional performs work on a public project on behalf of the prime contractor or its subcontractors for which he or she is not paid, then he or she can file suit on the payment bond posted by the contractor. For a more detailed discussion of bond claims, see Chapter 11: Surety Bonds.

D. Contractual Limitations

Maryland courts have yet to specifically address the enforceability of limitation of liability provisions in construction or professional services contracts. Generally, though, in the absence of legislation to the contrary, Maryland public policy encourages parties to contract as they see fit.⁴⁹ Courts have interpreted this policy to allow parties to include limitations of liability in their contracts with the caveat that those provisions typically will not be read to cover situations beyond their express terms.⁵⁰ Courts have similarly found valid contractual provisions which limit a party's entitlement to damages.⁵¹ Neither the limitation of liability provisions nor the limitation of damages provisions, however, will be construed to protect against willful, wanton, or gross negligence.⁵²

The question often arises in the converse situation, though, where the contract terms do not expressly limit the design professional's liability, but instead, a claimant seeks to impose duties on the design professional which are outside the scope of the express terms of his or her contract. The Supreme Court of Maryland answered this question in the case of Krieger v. J.E. Greiner Co.⁵³ In Krieger, an injured workman sought to impose liability on an engineer responsible for the design of a bridge and overall supervision of its construction and his consulting engineers as a result of the alleged negligence on the part of a subcontractor in erecting steel reinforcing bars.⁵⁴ That Court held that the engineers' contracts did not require the engineers to supervise construction methods or supervise the work of the subcontractor for compliance with safety laws and regulations.⁵⁵ In arriving at this holding, the court reasoned that:

One skilled contractor may prefer one method for performing a given task while another such contractor may choose what seems to him a simpler, less expensive way of reaching the same end result, either of which procedures would be a proper method. It could well be, however, that one method might not have occurred to an engineer or another contractor.⁵⁶

There is, however, one issue relating to contractual limitations that has been addressed by both the Maryland legislature and the courts. That issue relates to contractual limitations of remedy for non-payment, commonly called "pay if paid" clauses. Real Property § 9-113 prohibits a contractor from including a provision in an executory contract which waives the right of the subcontractor to pursue a mechanic's lien claim or sue on a contractor's bond, (1) "that is related to construction, alteration, or repair of a building, structure or improvement and [2] that conditions payment to the subcontractor on receipt by the contractor of payment from the owner or any third party." Although this section is not typically relevant on a traditional design-bid-build project, it is easy to envision a design-build scenario in which a design-builder could include one or both of these provisions in its subcontract with the design professional. In such a case, the provisions would be "void as against the public policy of th[e] State."⁵⁷

E. Certificate of Qualified Expert

In order for a claimant to pursue an action in Maryland court against a licensed professional,⁵⁸ such as an architect, interior designer, landscape architect, professional engineer, professional land survey, or property line surveyor, in which the claimant alleges that the professional deviated from the standard of care for the profession,⁵⁹ that claimant must file a certificate of qualified expert⁶⁰ with the court which has jurisdiction over the action. The certificate of qualified expert must contain a statement from a qualified expert attesting that the licensed professional failed to meet an applicable standard of professional care, must be filed within 90 days after the claim against the licensed professional is filed, and must be served on all parties to the claim or their attorneys of record.⁶¹

Typically, if the claimant fails to file the certificate of qualified expert with the court within the statutory period, then the statute provides that the claim against the design professional shall be dismissed without prejudice.⁶² There are, however, two instances under which a claimant might either avoid the obligation to file a certificate or might obtain an extension to the 90-day time frame. The first occurs if the claimant files a written request for documentary evidence that is "reasonably necessary in order to obtain a certificate of qualified expert . . . within 30 days of the date the claim is served."⁶³ In that case, the time frame for filing the certificate does not begin until the date on which the defendant's document production is completed.⁶⁴ The second occurs if, prior to the expiration of the 90-day period, the claimant requests in writing, or the court finds good cause for, a waiver or modification of the requirement for filing of a certificate of qualified expert.⁶⁵

The case of Heavenly Days Crematorium, LLC v. Harris, Smariga and Associates, Inc., addressed the issue of whether a claimant must file a certificate of qualified expert in every action filed against a licensed professional or the licensed professional's employer. There, the Supreme Court of Maryland rejected this proposition and held that "[t]he certificate requirement is triggered only when the complaint raises the issue of whether that licensed professional deviated from the standard of care for the profession."⁶⁶

F. Damages

When a dispute arises with regard to alleged deficiencies in a project undertaken by a design professional, the owner may seek to recover damages from the design professional in the form of economic losses and/or property damage. Economic losses have been defined by this state's highest court as "the loss of value or use of the product itself, the cost to repair or replace the product, or the lost profits resulting from the loss of use of the product."⁶⁷ Property damage has been defined as physical harm to property other than the product itself.⁶⁸

1. Economic Loss Doctrine

The seminal Maryland case on the issue of an owner's entitlement to recover economic losses against a design professional is Council of Co-Owners Atlantis Condominium, Inc. v. Whiting-Turner Contracting Co.⁶⁹ In that case, a condominium association and its unit owners filed suit against the architects of the building, general contractor, and developer alleging that their negligence resulted in construction deficiencies in the condominiums. The architects and general contractor filed successful demurrers based upon their lack of privity of contract with the association or unit owners or, alternatively, the fact that the nature

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