Federal trial court addresses the use of the engineer’s standard of care as a contract term

Reprinted from the Summer 2015 BrickerConstructionLaw.com Newsletter
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Ohio Revised Code 2305.09(D) establishes the time limitation for suing somebody for most types of negligence (i.e. “tort”) as four years. That raises the question: Four years from when? The answer is four years from when the cause of action accrues, which, of course, leads to more questions about what constitutes an “accrual.” Sometimes the cause of action accrues long after the occurrence of a negligent act, such as when defective construction is discovered years after the work is completed. That is known as “delayed damages” or the “discovery rule.”

For professional negligence, a specific type of negligence committed by engineers, architects, accountants, and other certain licensed professionals (as opposed to “malpractice,” which is limited to attorneys and medical professionals) R.C. 2305.09(D) still applies. Professional negligence is generally defined as failing to meet the standard of care established by similar professionals in the same area and at the same time. It typically requires expert testimony to prove.

For some time now, Ohio courts have not given plaintiffs suing for professional negligence the advantage of the delayed damages theory, ruling that the cause of action accrues when the negligent act is committed. For engineers and architects, this usually means that the cause of action accrues when the drawings or report are issued. This creates problems for plaintiffs in negligence because it could be a while before a contractor gets around to building the design (and even longer for a defective design to be discovered), leaving a plaintiff with a negligence claim with a very short window to file suit, or perhaps none at all.

For someone with a contract with an engineer or architect, this is usually not a problem, because that person can sue in contract, which has an eight-year statute of limitations in Ohio. However, a complication often lies in determining what term in the contract has been breached when the construction project does not perform as desired. That can be hard to nail down. Many form contracts, including those published by the American Institute of Architects and the Engineers Joint Contract Document Committee, address this problem by incorporating the standard of care as an express “catch all” contract term.

That raises the question of how the courts in Ohio would treat the standard of care being used in a contract. Would they hold that a tort is a tort and should not be considered as an action in contract, applying the four year statute of limitations with no delayed damages for accrual of the cause of action? Or would they hold for freedom of contract and allow a tort concept to be enforced by contract, if the parties had agreed to it previously?

The U.S. District Court for the Northern District of Ohio recently addressed this issue in Life Time Fitness, Inc. v. Chagrin Valley Engineering, Ltd., 2014 U.S. Dist. LEXIS 168216. In this case, both an owner and its wholly owned general contracting company sued the engineering company hired by the owner to design a parking lot, alleging that the engineering company failed to follow the recommendations of the owner’s geotechnical engineer, who had evaluated the site prior to the owner hiring the engineer.

Despite having a contract with the engineer, the owner sued in tort as well as for breach of contract, citing to a provision in the contract requiring the engineer to perform its work using “high professional standards and good professional skill and judgment,” another way of stating the engineer’s standard of care. The engineering company asked the trial court to grant it summary judgment, arguing that the owner was impermissibly trying to characterize a tort claim as a contract claim in order to get by the statute of limitations for tort, which had passed. But the engineering company could cite no case law prohibiting the incorporation of the standard of care into a contract and the court had no problems with the concept. The court overruled the engineer’s motion with regard to the breach of contract claim and applied the longer statute of limitation to the claim, allowing the case to proceed to trial. At trial, expert testimony will likely be used by both parties to address the question of whether the engineer breached the standard of care required by the contract.