Build On This!

Congratulations to attorney John Slagter, who was named one of the Best Lawyers in America for 2007 in the area of Real Estate Law.

Construction law and business litigation attorney Mark F. Craig reports on a significant new court of appeals decision:

Sometimes the conduct of a design professional injures someone other than an owner. For instance, a defect in the plans or specifications may cause a contractor additional work or expense. Can the injured contractor obtain damages from the design professional? The answer, in Ohio, is not usually.

The problem is that the contractor's injury is likely to be only economic: He has spent more money than he originally planned because of the design professional's shortcomings. So the "Economic Loss Doctrine" applies, and it says that economic losses should be handled through contract actions, not tort (negligence) actions. That is the Supreme Court's lesson in Floor Craft Floor Covering, Inc. v. Parma Community General Hospital Assoc. (1990), 54 Ohio St.3d 1, a very significant case.

The only exception is a narrow one: When a design professional exercises unusual control of the construction project, this may be seen as a sufficient "nexus" to substitute for a contractual relationship. For instance, in Clevecon, Inc. v. Northeast Ohio Regional Sewer District (1993), 90 Ohio App.3d 215, the Eighth District Court of Appeals (Cuyahoga County) held that a contractor’s lack of a contract with the Architect was no obstacle to an action for professional malpractice. In a decision based on Floor Craft, the court still found that “liability for economic loss exists in a malpractice action against a design professional.”

Construction law and business litigation attorney Mark F. Craig reports that a claim of breach of duty to act in a workmanlike manner (defective workmanship) may be an occurrence for purposes of triggering an insurer’s obligation to defend and indemnify under a CGL policy, at least to the extent it includes collateral or consequential damages.

Stansley Group v. Fru-Con Construction Corp., et al., 2006 U.S. Dist. LEXIS 67718 (N.D. Ohio, W. Div., Sept. 21, 2006) provides a great analysis of Ohio law when it comes to insurance coverage issues for defective workmanship on a construction project. The issue in this case is to decide whether Defendant Insurer (Burlington) is obligated under a commercial general liability policy to defend and indemnify Plaintiff Subcontractor (Stansley) for defective workmanship related to the cement it provided to create pylons on a public bridge construction project.