On July 3, 2014, the California Supreme Court, in Beacon Residential Community Association v. Skidmore, Owings & Merrill LLP (2014) 59 Cal.4th 568, held that
architects owe a duty of care to future homeowners of residential
buildings, particularly if they act as principal architects on a
project, and are not subordinate to any other design professional.
Until now, design professionals were rarely held liable, if at all, for
third-party claims for design deficiencies.
In Beacon, architectural and engineering firms provided sole
design services for The Beacon residential condominium project, a 595
unit project located in San Francisco. The condominiums were initially
leased after construction, but were eventually sold to individual
owners. The design firms claimed their role was limited to only
providing design recommendations to the project's owner, who ultimately
controlled and directed which design elements to construct. Not long
after completion of the project, the homeowners' association sued the
design firms (among others) for construction defects and damages related
to alleged water infiltration, inadequate fire separations, structural
cracks, and other purported safety hazards. The claims included
allegations under SB 800 (the "Right to Repair Act," Civil Code ยง895, et
seq.) and common law negligence theories. The design firms demurred to
the complaint, which the trial court sustained. On appeal, however, the
Court of Appeal reversed the trial court's ruling, concluding that the
design firms owed a duty of care to third parties. The Supreme Court
affirmed.
Historically, liability for deficient goods and services
hinges on whether there is a contractual relationship between a buyer
and seller. However, the Supreme Court recognized that in certain
circumstances a contractual relationship is not required. In its
ruling, the Supreme Court relied on fifty year old precedent, Biankanja v. Irving (1958) 49 Cal.2d 647. In Biankanja, the California Supreme Court outlined several factors to determine whether a duty of care is owed to non-contracting third parties. Although Biankanja
analyzes many factors, emphasis was placed on whether a purported harm
is foreseeable by a defendant's conduct and how close of a connection
there is between that conduct and an injury. Here, the Court recognized
that even though the design firms did not actually build the project,
they did conduct weekly inspections, monitored contractor compliance,
altered design elements when issues arose, and advised the owners of any
nonconforming work. In applying the Biankanja factors to these
circumstances, the Supreme Court determined the homeowners were
intended beneficiaries of the design work and the design firms' primary
role in the project bore a close connection to the alleged injuries. As
a result, the Supreme Court held that the allegations in the complaint
were sufficient and, if proven, establishes the defendants owed a duty
of care to the homeowners' association.
Interestingly, the Supreme Court
sidestepped the issue of whether SB 800 was intended to exclusively
capture design defects in its scope, even though the Court indicated it
may. Nevertheless, the Supreme Court's ruling is significant. The case
will affect how design professionals allocate risk on future residential
projects, perhaps by raising design prices or insuring around the
liability exposure. The likely outcome, however, is that design
professionals are now targets in construction defect lawsuits.
Stephen A. Sunseri and Aarti S. Kewalramani
represent real estate developers, contractors, and subcontractors in
construction defect litigation. For more information, please contact
them directly at: 760.431.9501.
Design Professionals Owe a Duty of Care to Homeowners
by Stephen Sunseri on Jan. 16, 2015
Summary
Design Professionals Owe a Duty of Care to Homeowners