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Design Professional Denied Protection of Contract’s Liability Limit by Florida Court
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January 31, 2011
By William S. Hale
A geologist's corporation contracted with a country club for consulting and project coordination services for a reverse osmosis water treatment plant. The plant, to provide irrigation water for the club’s golf course, was to be designed and built by another company, ITT Industries, Inc. The geology contract contained a liability limitation clause capping the geologist corporation's “total aggregate liability” to its fee for all services provided. The liability limitation clause specifically extended to "negligence, professional errors or omissions, strict liability, breach of contract, and warranty."
When the water treatment plant failed to operate properly and ITT was unable to fix the problems, the country club sued the geologist individually, the geologist corporation and the designer-builder. The club accused the geologist corporation of breach of contract and accused the corporation and geologist individually of professional malpractice. The trial court found the geologist individually and geologist corporation liable for professional malpractice. It held that the geologist himself was not a party to the contract and, therefore, did not get the benefit to the liability limitation. The trial court also questioned whether individual professionals in Florida could shield themselves with liability limitation clauses. The trial court entered a personal judgment against the geologist for more than $4 million.
A Florida District Court of Appeal affirmed. Witt v. La Gorce Country Club, Inc., 35 So.3d 1033 (2010).
The appeals court held that Florida Statutes §492.111 recognizes a cause of action for professional negligence against individual professional geologists for their individual actions or inactions even if they practice through corporations. The statute provides: “The fact that a licensed professional geologist practices through a corporation or partnership shall not relieve the registrant from personal liability for negligence, misconduct, or wrongful acts committed by her or him."
The appeals court rejected the geologist’s argument that the contract’s liability limited shielded him personally. It held that even assuming the liability limitation extended to him personally, it would be unenforceable as a matter of law. The appeals based its conclusion on Florida Statutes §492.111 and a Florida Supreme Court decision, Moransais v. Heathman, 744 So.2d 973 (1999), involving claims against an engineering firm. In that case, the Florida Supreme Court held:
| [T]he economic loss rule does not bar a cause of action against a professional for his or her negligence even though the damages are purely economic in nature and the aggrieved party has entered into a contract with the professional's employer. We also hold that Florida recognizes a common law cause of action against professionals based on their acts of negligence despite the lack of a direct contract between the professionals and the aggrieved party.
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The appeals court noted that the Florida Supreme Court had written that one reason for the economic loss rule was to “prevent parties to a contract from circumventing the allocation of losses set forth in the contract” by bringing tort actions for economic loss. But, the appeals court wrote, the Florida Supreme Court, citing the Moransais case, had held that claims for professional negligence did not get the benefit of the economic loss rule for reasons of public policy. In so ruling, the Florida Supreme Court had tacitly recognized that contractual remedies alone might not be sufficient, the appeals court wrote.
Thus, the appeals court held, on the basis of Florida Statutes §492.111 and Moransais, "a cause of action in negligence exists [against the geologist] irrespective, and essentially independent of a professional services agreement." Moreover, it held that any liability limitation in the contract is unenforceable as a matter of law because of the statute.
While Florida Statutes §492.111 is specific to geologists, the appeals court’s analysis was broader. Under its reading of Moransais, any person licensed as a Florida professional is potentially subject to unlimited liability under Florida common law for his professional actions even if the retention agreement for him or his business contains a liability limitation clause.
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