In construction claims, Pennsylvania’s economic loss doctrine generally bars tort claims against parties to which the contractor has no privity of contract and has suffered only economic harm – i.e. lost profits, delay damages, etc. Until 2005, the economic loss doctrine prevented contractors and subcontractors from suing an owner’s design professional directly for economic losses resulting from defective designs. In 2005, the Pennsylvania Supreme Court, in Bilt-Rite Contractors, Inc. v. The Architectural Studio, held that a design professional may be liable for economic losses to a contractor or subcontractor under a negligent misrepresentation theory in situations “where it is foreseeable that the [design documents would] be used and relied upon by third persons, even if the third parties have no direct contractual relationship with the supplier of information.”
On both sides attorneys involved in Bilt-Rite claims questioned whether a contractor in alleging a Bilt-Rite claim needed to plead an express misrepresentation or whether allegations that the design documents themselves were incorrect was sufficient. Recently, in Gongloff Contracting v. L. Robert Kimball & Associates, the Pennsylvania Superior Court answered the question in favor of contractors. Under Gongloff, a design professional may be liable simply for including faulty information in its design documents.
In Gongloff, the sub-subcontractor, Gongloff, provided work related to the erection of the structural steel supporting a roof on a convocation center project at California University of Pennsylvania. During construction, Gongloff asserted that the roof design was faulty and defective, and submitted over 80 change orders for additional work. Eventually, Gongloff sued the design professional for negligent misrepresentation to recover its additional costs.
In deciding a motion for judgment on the pleadings, the trial court reasoned that the design professional’s plans and designs were not “express misrepresentations,” as necessary to establish a negligent misrepresentation claim, and that Gongloff needed to assert a specific communication provided by the design professional that was false.
To the benefit of Gongloff and other contractors similarly situated, the Superior Court reversed and held that Bilt-Rite did not require a plaintiff to assert an “express misrepresentation,” but only an “actual misrepresentation,” meaning deficient plans alone without any communication between the parties were sufficient to maintain a Bilt-Rite claim. Per the Court:
[t]he design itself can be construed as a representation by the architect that the plans and specifications, if followed, will result in a successful project. If, however, construction in accordance with the design is either impossible or increases the contractor’s costs beyond those anticipated because of defects or false information included in the design, the specter of liability is raised against the design professional.
In sum, Gongloff establishes that a design professional can be liable for economic damages in Pennsylvania under Bilt-Rite based upon its design documents alone, even where there has been no communications between the design professional and the contractor, if the contractor relied on those design documents to its detriment.