In Beacon Residential Community Association v. Skidmore, Owings & Merrill LLP, et al., a residential condominium community association sued two firms that provided architecture and engineering services during construction. The association claimed that the firms’ design was negligent, resulting in water infiltration, structural cracks, solar heat gain, and other defects and safety hazards, and that the firms were liable to the association and its members for these defects.
At the trial court level, the firms argued that they owed no duty to the association or its members. The trial court sustained the design firms’ demurrers, holding that liability could not be based on negligent design, and that the association needed to prove that the firms had “control” of the construction process.
The Court of Appeal reversed, finding that the firms could be liable to the association and its members for negligent design. The Court of Appeal rested its decision primarily on an analysis of Biakanja v. Irving (1958) 49 Cal.2d 647, Bily v. Arthur Young § Co. (1992) 3 Cal.4th 370, and a discussion of Senate Bill 800. Two aspects of the court’s analysis have important implications for architectural and other firms that render design services.
First, the Court of Appeal found that design firms could be liable to the third-party residential association despite a contract between the firms and the developer designed to protect the firms from just such liability to purchasers. The Court of Appeal determined that the firms were well aware that future homeowners could be affected by their work. Thus, the firms had a duty to those future homeowners and could be liable for negligent design.
Second, the Court of Appeal identified an important public policy in favor of protecting purchasers against negligent design. The court reasoned that purchasers are usually ill-equipped to discover structural defects and do not have the opportunity to negotiate or enter into contracts related to liability with design firms. These principles, underscored by the court’s finding that Senate Bill 800 (which set standards for what constitutes a defect in residential housing construction) revealed the legislature’s assumption that liability could reach to design professionals, supported the court’s decision to extend the design firms’ liability to the third-party purchasers.
The court’s analysis and holding suggests that it may now be difficult for firms that render design services to contractually insulate against liability to third-party purchasers, and that purchasers now appear to have a reinvigorated public policy argument when pursuing legal action against design firms.
Ultimately, the decision on appeal did not find the design firms liable for negligent design; rather, the Court reversed the demurrers and allowed the case to proceed at the trial court level. Nor did the Court address what effect its finding should have on other types of construction projects such as public works construction projects. Petition for review was filed on January 23, 2012, but the Supreme Court has not yet granted review. Unless the Supreme Court decides otherwise, to the extent this decision expands or clarifies the liability of design professionals, it sets a precedent that may be applied in other situations involving alleged negligent design.