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LEGAL ISSUES FOR OHIO PROFESSIONAL ENGINEERS Dayton, OH – December 18, 2007 William M. Mattes, Esq. Dinsmore & Shohl LLP 175 S. Third Street, Suite 1000.

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Presentation on theme: "LEGAL ISSUES FOR OHIO PROFESSIONAL ENGINEERS Dayton, OH – December 18, 2007 William M. Mattes, Esq. Dinsmore & Shohl LLP 175 S. Third Street, Suite 1000."— Presentation transcript:

1 LEGAL ISSUES FOR OHIO PROFESSIONAL ENGINEERS Dayton, OH – December 18, 2007 William M. Mattes, Esq. Dinsmore & Shohl LLP 175 S. Third Street, Suite 1000 Columbus, Ohio 43213 (614) 628-6880

2 PART ONE Ohio Engineering Law Dayton, OH – December 18, 2007 William M. Mattes, Esq. Dinsmore & Shohl LLP 175 S. Third Street, Suite 1000 Columbus, Ohio 43213 (614) 628-6880 Session 1 8:30-9:30

3  Engineering is defined by statue in ORC §4733.01(D) – Any professional service – i.e. consultation, investigation, evaluation, planning, design, inspection, compliance – deals with utilities, structures, buildings, mechanics, equipment, processes which require a qualified engineer. (ORC §4733.11)  Engineering is also defined by common law – practice of functions which education and qualifications are required to protect the health, safety and property of the public. It is not Architecture. Fanning v. College of Steubenville, (1963) 174 Ohio St. 343. Current State of Professional Liability Law for Engineers in Ohio Key Concepts & Cases

4 Statue of Limitations On contract in writing – fifteen years (ORC §2305.06) Oral – six years (ORC§2305.07) Tort – two years (ORC§2305.10) Fraud – four years (ORC§2305.09) Statute of Repose – ten years (ORC§2305.13)

5 Key Concepts Standard of Care – reasonable in your geographical area - qualified to do the work Public Works – Must have P.E. (ORC§4733.17) Discipline – ORC§§4733.20 Illegal Use of Stamp - ORC §4733.22 and §4733.99 Crime $100-$500 fine OR 90 days in jail OR both

6 Sources of Professional Liability Breach of Contract Always have your contracts reviewed by an appropriate professional Understand/outline all duties Know the applicable standards and codes Cure the defect ASAP A phone call is better than a letter/e-mail Consider what you write, e-mail and/or say Limit your liability Arbitration - mediation

7 Sources of Professional Liability "Malpractice" "[E]ngineering is a licensed profession in the layman's use of the word 'profession', but nowhere does the law bring that profession within the benefits or handicaps afforded law and medicine in defining the extent to which the word malpractice may be interpreted in a statute of limitations… the conduct complained of may be a breach of contract but cannot be construed as malpractice…" Wishnek v. Gulla (1953), 52 Ohio Op. 111, 67 Ohio L. Abs. 49, 114 N.E.2d 914. One-year statute of limitations an on action for "malpractice" is limited to areas specifically enumerated therein and to the common-law definition of "malpractice," which was restricted only to physicians and lawyers; thus negligence by a professional engineer does not constitute "malpractice" within meaning of the statute. Hocking Conservancy Dist. v. Dodson-Lindblom Assoc., Inc. (1980), 62 Ohio St.2d 195, 404 N.E.2d 164 (applying the four- year statute of limitations).

8 Sources of Professional Liability EXPERT TESTIMONY REQUIRED Expert testimony is necessary to establish professional negligence of design professionals - whether the designer exercises reasonable care in preparation of his designs depends upon the standard of care which licensed architects/engineers must follow. Simon v. Drake Constr. Co. (1993), 87 Ohio App.3d 23, 621 N.E.2d 837; Vosgerichian v. Mancini Shah & Associates (1996), Nos. 68931, 68943, 1996 WL 86684 (Ohio App. 8 Dist., Cuyahoga County). Simon v. Drake: A worker was injured after falling from a fixed ladder inside a city parking garage. The worker sued the project architect alleging negligent design in the fixed ladder. However, the worker failed to present any expert testimony that the architect did not meet the standard of care required of a licensed professional architect in Ohio; thus his claim was dismissed.

9 Sources of Professional Liability Expert testimony required: Capital Dredge & Dock Corp. v. City of Avon Lake (1978), No. 2627 & 2728, 1978 WL 215279 (Ohio Ct. App. 9th Dist., Lorain County): Two consulting engineers to the City could have been primarily liable for the negligently-prepared plans and for negligently approving shop drawings for an outfall sewer project in Lake Erie, but the plaintiff did not retain an expert witness to testify as to the standard of care required of an engineer in similar circumstances. Thus, the claim failed.

10 Sources of Professional Liability Breach of Contract – Case Study EXPRESS: Violate terms of written contract IMPLED: Violate terms understood in the contract i.e. by signing contract you imply you have the minimum knowledge, training and skills to complete the work. Broyles v. Brown Engineering Co., 275 Ala.35 (1963)

11 PRIVITY REQUIREMENT Parties suing in negligence may not recover economic damages in the absence of a direct contractual relationship, or a sufficient nexus between the parties which could serve as a substitute for contractual privity. Floor Craft Floor Covering, Inc. v. Parma Community Gen. Hosp. Ass'n (1990), 54 Ohio St.3d 1, 560 N.E.2d 206. Plaintiff entered into a floor installation contract with the hospital. After the installation, bubbling began to appear. After investigation and repair, the plaintiff sued the hospital and the architect, believing the problem was caused by improper concrete curing and excessive moisture. However, the Court found the plaintiff and the architect were not in contractual privity, nor was there any nexus between the parties to substitute for the lack of privity. "Tort law is not designed to compensate parties for losses resulting from a breach of duties assuming only by agreement.“

12 PRIVITY REQUIREMENT (cont’d) BUT, if the supervising architect or engineer wields enough control over a contractor, a duty arises on the part of the design professional to perform duties without negligence as they affect the contractor. This serves as a substitute for contractual privity. Clevecon, Inc. v. Northeast Ohio Regional Sewer Dist. (1993), 90 Ohio App.3d 215, 628 N.E.2d 143 (where project architect exercised substantial control and gave orders at a tunnel construction site); East Ohio Gas Co., Inc. v. Kenmore Const. Co., Inc. (2001), No. CIV.A. 19567, 2001 WL 302818 (Ohio Ct. App. 9 Dist., Summit County) (where engineers exercised direct control and supervision over location of utilities). Corporex Development, et al. v. Shook, Inc. (2005), 106 Ohio St.3d 412. Plaintiff, the owner and developer of a hotel, sued a subcontractor for breach of contract, breach of express and implied warranty and negligence. The Ohio Supreme Court held that due to no direct contract with subcontractor, the owner was precluded from suing for purely economic damages based on the economic loss rule. However, the owner could sue contractor directly, who could then sue subcontractor. No privity or substitute for privity shown.

13 Contribution & Indemnity An architect or an engineer may be made liable for indemnity or contribution, as where a contractor has been sued by the landowner or a third party and, in turn, sues the design professional. 5 Am.Jur.2d § 28 (Where the negligence of the design professional is the primary cause of the injury for which the owner is sued, the owner is entitled to indemnification from the design professional).

14 BREACH OF CONTRACT CASE STUDY Breach of Contract Existence of a contract The plaintiff fulfilled his obligation(s) under the contract The defendant failed to fulfill his obligation(s) under the contract Damages resulted from the failure Bates & Rogers Constr. Co. v. Cuyahoga County Board of Commissioners, 274 F. 659 (N.D. Ohio 1920): The county hired a contractor to build the Detroit-Superior Bridge in Cleveland. The contractor was unable to begin the project on time because the county allegedly failed to deliver possession of the sites to the contractor. Further, the contractor alleged that the county's repeated alterations and modifications of the plans and specifications caused the project great delay. The Court held there was an implied, if not express, covenant in the contract requiring the county to furnish and deliver the site in a condition to permit the work to be done, and that failure was a breach of contract.

15 Breach of Contract Cases (cont’d) Breach of Express Contract Nicholson v. Turner/Cargile (1995), 107 Ohio App.3d 797, 669 N.E.2d 529: A group of construction workers were killed when the structural steel on a project collapsed while they were installing cantilevered beams. The project's engineers allegedly observed the workers utilizing an unsafe leveling procedure as they were installing the beams prior to the collapse. The workers' families filed wrongful death actions against the engineers (the firm and the individuals) based on negligence and breach of contract. The Court, however, held that none of the contracts imposed a duty upon the engineers to make the construction site safe for the workers. (Further, the Court found the engineers had no common law duty to the workers as well.) The Court reasoned that because the duty to make a project safe is typically imposed upon the general contractor, the project's design professionals have no such duty unless the professional actually participates in the subcontractor's work or the contract explicitly provides such a responsibility. The Court found neither situation in this case.

16 Breach of Contract Cases (cont’d) South Union Ltd. v. George Parker & Associates (1985), 29 Ohio App.3d 197, 504 N.E.2d 1131: An apartment complex owner filed a lawsuit against an architect after it filed a Certificate of Substantial Completion without adequately inspecting the building. According to its contract with the complex's owner, the architect was required to, among other things: Review all of the Plans and Specs for completeness and accuracy; Provide all engineering, architectural and consulting services during construction; Determine whether the work complied with the Plans and Specs; and Certify to the Owner that the work had been completed according to the terms and conditions of the contract documents. After the work had been completed and the architect filed the Certificate, a second inspection noted various paving and electrical deficiencies. The Court held that the architect's actions were not only a breach of the standard of care, but also a breach of its contract with the owner. The Court awarded the owner $150,000 after setoffs and counterclaims to pay for the deficiencies ignored by the architect.

17 Breach of Contract Cases (cont’d) Third Party Beneficiary Liability Terrace Creek Ass'n v. Woolpert Engineering Co. (2002), No. 19170, 2002 WL 1832917 (Ohio Ct. App. 2nd Dist., Montgomery County): A homeowner's association sued a retention pond designer and the county engineer for breach of contract after having to pay for more than 150 truckloads of silt to be removed from the retention pond during construction of its residential complex. Conceding it was not in privity of contract with the designer or engineer, the association brought its action under a third-party beneficiary theory. The Court, however, found no evidence that the association was more than an incidental beneficiary. Rather evidence showed the contract was intended to benefit the developer, who needed retention ponds to complete construction. Ohio courts have repeatedly held that only a party to a contract or an intended third-party beneficiary of a contract may bring a contract action. CMC Electric Co., Inc. v. J.D. Williamson Constr. Co., Inc. (1999), No. 98-A-0076, 1999 WL 1073685 (Ohio Ct. App. 11th Dist., Ashtabula County) (holding that the plaintiff-electrical contractor had no evidence that it was an intended beneficiary in the engineer's contract with the general contractor).

18 Breach of Contract Cases (cont’d) Breach of Implied Contract Columbus v. Alden E. Stilson & Associates (1993), 90 Ohio App.3d 608, 630 N.E.2d 59: The City of Columbus and Stilson entered into a contract under which Stilson provided engineering services for construction of a water treatment plant. After JCI entered into a contract with the City to provide instrumentation and control systems for the treatment plant project, disputes arose between the parties regarding allegedly inadequate drawings, plans, and data furnished by the City (from Stilson). After JCI sued for inadequate performance of the contract by the City, the City sued Stilson under an indemnification clause in the contract. This case shows how an owner can effectively limit its liability when an engineer falls short of meeting its design responsibilities.

19 Breach of Contract Cases (cont’d) First Nat'l Bank of Akron v. Cann (N.D. Ohio 1980), 503 F.Supp. 419: The court acknowledged that the contract did not require the architect to make continuous, exhaustive site inspections. But the court held that the defects in construction were such that the architect either knew of them or should have discovered them if the inspections were even cursory. The expectations of the project’s owner were taken into consideration by the court in its decision. The court determined the architect was jointly and severally liable for the cost of repair, along with the contractor. Engineer can be liable for breach of promise that the project will be designed and constructed to be fit for a particular use or particular purpose. 17 Am.Jur. POF 3d 49, 63 (1988).

20 Sources of Professional Liability - Negligence Negligence  Failure to properly design a structure  Designing a structure that is unfit for its intended use  Negligent planning of the construction phases or sequences of construction activities  Failure to properly supervise the construction work, so that it is not completed in substantial compliance with the plans and specifications  Delays in the project which cause economic loss (also grounds for breach of contract)  Your actions fell below the applicable standard of care and injured another for whom you are legally obligated to protect.  Duty on the part of the engineer to use the degree of care and skill that a reasonably prudent engineer would use under like circumstances  Breach of that duty  Actual loss or damage to the plaintiff  Proximate causal connection between the engineer's negligence and the resulting damages to the plaintiff

21 Sources of Professional Liability - Case Examples - Negligence Cincinnati Riverfront Coliseum, Inc. v. McNulty Co., et al. (1986), 28 Ohio St.3d 333: An engineering company designed an outdoor elevated walkway, which cracked and deteriorated shortly after construction. The Court wrote that professional engineers contracted to provide the design for a particular structure generally may be held responsible for the foreseeable consequences of a failure to exercise reasonable care in the preparation of the design. The Court noted that a contractor's deviation from the plans will relieve the design engineer from liability for a negligently-designed walkway only if the deviations served independently to break the causal connection between the design and the damages. This would have served to completely remove the effects of any negligence by the design professionals. However, the Court found evidence that specifically attributed the deterioration to defects in the design. (Engineers admitted they did not sufficiently consider the effect of exposure to weather or the ability to disperse surface water in designing the walkway.)

22 Sources of Professional Liability - Case Examples - Negligence Clevecon, Inc. v. Northeast Ohio Reg’l Sewer District (1993), 90 Ohio App.3d 215, 628 N.E.2d 143: The contractor who ran a large sewer project filed a lawsuit against the project designers. One of the project architects was hired to design the sewer tunnel, including a two-part lining. Problems with the lining arose during installation, but the contractor claimed it was building the tunnel according to specifications and any problems were merely cosmetic, not needing repair. Nevertheless, the designer ordered the contractor to do additional work to complete the tunnel to its satisfaction. After determining the project architects exercised enough control to impose liability (to substitute for lack of contractual privity), the court found the plans and specifications were negligently prepared, drafted, and the designer negligently administered the project in general.

23 Sources of Professional Liability - Case Examples - Negligence  Valentine Concrete, Inc. v. Ohio Dept. Admin. Services (Ct. Cl. 1991) 62 Ohio Misc.2d 591: A general contractor encountered numerous difficulties and significant delay in renovating the engineering building at Ohio University. The contractor filed suit against the Ohio Department of Administrative Services, alleging that the extra expenses and delays on the project were the result of inadequate architectural drawings and specifications, unreasonably slow communications from the design professionals, and unclear documents and drafting errors. The Court awarded Valentine extra expenses incurred as a result of omissions in the architectural drawings.  See also John P. Novotny Electric Co. v. State of Ohio (1975), 46 Ohio App.2d 255, 349 N.E.2d 328; Bates & Rogers Constr. Co. v. Cuyahoga County Board of Commissioners, 274 F. 659 (N.D. Ohio 1920) (holding that because an owner is required to furnish sufficient plans and specifications for the contractor(s), the engineer/architect is generally regarded as an agent of the owner such that the owner is liable for any omissions/negligence by the design professional).

24 Sources of Professional Liability - Case Examples - Negligence Hines v. Kline Engineering (1998), No. 97-CA-123, 1998 WL 350592 (Ohio Ct. App. 2nd Dist., Greene County): Prior to plaintiffs purchasing the property at issue, a company who previously owned the land successfully sought a variance to permit the building of a residence, so long as the structure was built at an elevation of two feet above the 100-year flood-level. After completion of the home, an employee of Kline measured the flood level at 891 feet above sea level. However, after the plaintiffs moved into the home, it became apparent that the flood level was actually higher than the originally-measured level. The plaintiffs brought an action against the Kline surveyor. Even though the surveyor did not have a contractual relationship with the plaintiffs, the court held that because surveyors or civil engineers can foresee that subsequent purchasers of property will rely on their representations, they will owe those purchasers a duty of care. Thus, the claim survived the engineers’ motion for summary judgment.

25 Sources of Professional Liability - Case Examples - Negligence Scott Hutchinson Enterprises, Inc. v. Rhodes, Inc. (2005), No. C-1- 01-776, 2005 WL 2000661 (Fed. Dist. Ct., S.D. Ohio): Rhodes and its engineers conducted land surveys and environmental assessments on a land parcel purchased by the plaintiffs. Under their contract, Rhodes engineers were to provide specific information regarding the environmental aspects, geographic area, and geologic and hydrologic conditions present on the property. Plaintiff bought the property specifically in reliance of such consultation, advice and warranties provided by Rhodes engineers. While the Court found the engineers liable for professional negligence, it also held that the breach of warranty claims were indistinguishable from the negligence claim and ruled that it was not a separate cause of action.

26 Misrepresentation/Liability Misrepresentation – intentional or negligent  You misrepresented facts, code, law and are thereby liable for damages caused to another. Liability for Negligent Misrepresentation will attach if  One who, in the course of his business or in any other transaction in which he has a pecuniary interest,  Supplies false information for the guidance of others in their business transactions  Causing to them pecuniary loss  By their justifiable reliance upon the information,  If he fails to exercise reasonable care or competence in obtaining or communicating the information.

27 Misrepresentation/Liability Case Examples Ohio Plaza Associates, Inc. v. Hillsboro Associates (1998), No. 96CA898, 1998 WL 394370 (Ohio Ct. App. 4th Dist., Highland County): The Court dismissed the landowner's negligent misrepresentation claim against the project engineer of a shopping center development project because there was no privity between the parties and because the engineer did not exercise sufficient control to warrant a substitution for privity. However, the court did not dismiss owner's fraud claim, citing evidence that the engineer told the owner the project was not in a flood plain when he knew a Federal Emergency Management Agency map showed otherwise. Stults & Associates, Inc. v. United Mobile Homes, Inc. (1998), No. 9-97- 66, 1998 WL 720471 (Ohio Ct. App. 3rd Dist., Marion County): In order to expand a mobile home park, United Mobile contacted Stults for engineering and design services in the park's construction. After the need for several new proposals and changes for which United Mobile did not pay, Stults sued for breach of contract. United Mobile counterclaimed for misrepresentation. However, the court found that United Mobile failed to prove that Stults made any untrue statements regarding the design services in the various agreements between the parties.

28 Misrepresentation/Liability Case Examples Todd County v. Barlow Projects, Inc., 2005 U.S. Dist. LEXIS 8648 (D. Minn.): Fraudulent misrepresentation claims against an engineer fail when they do not establish that the engineer misrepresented past or present facts at the time of creating a feasibility study. The city hired an engineer to conduct a feasibility study concerning the retrofit of a waste facility to comply with environmental regulations. The study showed that the facility could be operated at a financial gain but the city lost money, and fees for waste delivery increased each year. The city sued the engineer for fraudulent misrepresentation. However, the court found that despite the engineer's projections being erroneously underestimated, the city could not show the engineer knew or should have known the projections were false.

29 Sources of Professional Liability Strict Liability NON-DELEGABLE DUTY: Duncan v. Missouri Bd. for Architects, Prof. Engineers & Land Surveyors, 744 S.W.2d 524 (Missouri Ct. App. 1988): A walkway in the Hyatt Regency hotel collapsed in 1981, killing 114 and injuring nearly 200 others. The structural engineers were found to have approved a change in the shop drawings without conducting tests to determine soundness and safety. Shop drawing review by the engineers "was contractually required, universally accepted, and always done as party of the design engineer's responsibility." Additionally, they attempted to delegate the walkway's steel connections to the structural steel fabricator, who designed a faulty support system that was never tested by the engineers. The engineers were found to have breached nondelegable duties and lost their certificates.

30 Sources of Professional Liability – Case Examples –Strict Liability General Rule - No strict liability for professional services. Furthermore, strict liability is ordinarily not applied to architects because negligence can be proved. Jackson v. City of Franklin (1988), 51 Ohio App.3d 51, 554 N.E.2d 932. Exceptions in other jurisdictions. Serna v. N.Y. State Urban Dev. Corp., 586 N.Y.S.2d 413 (N.Y. App. Div. 1992): Builders and architects of defective buildings can be held liable in strict products liability if the building contains a latent defect or a concealed danger which injures a plaintiff. (NY now uses a "failure to exercise due care" analysis). Abdul-Warith v. Arthur G. McKee & Co., 488 F.Supp. 306 (E.D. Pa., 1980): Engineer may be held strictly liable where he enters into a design-build contract, and he participates in the manufacture or assembly of the project, as well as its building components.

31 Sources of Professional Liability PRODUCTS LIABILITY Engineering Product Liability: The manufacturer or seller of a product is liable for all injuries caused by an unreasonably defective product. Any person or entity in the chain of distribution can be held liable. Sette v. Benham, Blair & Affiliates (1991), 70 Ohio App.3d 651, 591 N.E.2d 871: An injured worker sued an architect-engineer for negligence and product liability in connection with alleged malfunction of a hot water system designed by the engineer. The Court acknowledged the threat of product liability to the engineer, but dismissed the case for violating the statute of limitations.

32 Sources of Professional Liability PRODUCTS LIABILITY (Continued)  Ohio Products Liability Act: ORC § 2307.71-75  § 2307.71(9): "Manufacturer" means a person engaged in a business to design, formulate, produce, create, make, construct, assemble, or rebuild a product or a component of a product.  (16) "Unavoidably unsafe" means that, in the state of technical, scientific, and medical knowledge at the time a product in question left the control of its manufacturer, an aspect of that product was incapable of being made safe.  § 2307.74: A product is defective in design or formulation if, at the time it left the control of its manufacturer, the foreseeable risks associated with its design or formulation… exceeded the benefits associated with that design or formulation

33 Sources of Professional Liability PRODUCTS LIABILITY (Continued)  Engineers are liable for injury caused by defective products to the extent they are "seller" in the stream of commerce that place the product in the hands of a consumer.  As innovators, engineers are at the very beginning of the process that places a product "for sale" in the stream of commerce. Inventors holding patents make the first "sale" in the commercial chain when they transfer their technical know-how. Engineers and inventors are also in a good position to understand the utility of their inventions and the extent to which that utility balances potentially unsafe characteristics.  If the courts find that engineers are "sellers" of technology embodied in hardware products, engineers may be personally liable for technology "defects" in products that harm users, regardless of whether or not their conduct is negligent.

34 Sources of Professional Liability PRODUCTS LIABILITY (Continued) State-of-the-art Defense: A defendant may avoid product liability if, in keeping with its superior ability to remain current with evolving scientific and medical knowledge, it fulfilled its duty to use reasonable design and give an adequate warning of any unsafe nature or dangers of its products to the foreseeable user. Steinfurth v. Armstrong World Industries (1986), 27 Ohio Misc.2d 21, 500 N.E.2d 409.

35 Sources of Professional Liability INSPECT AND KEEP A SAFE JOBSITE Chemstress Consultant Co., Inc. v. Cincinnati Ins. Co. (1998), 128 Ohio App.3d 396, 715 N.E.2d 208: Allegations that an engineering firm had breached its duty to insure safety of other workers at job site stated a claim that did not come within the professional liability exclusions in the firm's commercial insurance policy, and thus, triggered the insurer's duty to defend in worker's action against firm. The Court also noted that in addition to its duty to perform professional or supervisory services at a construction site, an engineering firm has a general, nondelegable duty of reasonable care toward the safety of other workers.

36 Sources of Professional Liability INSPECTING JOBSITE (Continued) Grogan v. U.S., 341 F.2d 39 (6 th Cir., 1965): Tecon Corporation was constructing a lock in a government dam project on the Cumberland River in Kentucky when a large, elaborate scaffold collapsed and injured several Tecon workmen. The plaintiffs sued the government and Tecon for several alleged violations, including negligent failure to discharge its duty of inspecting the scaffold. While the Court acknowledged the Army Corps of Engineers, as agents of the owner, had a nondelegable duty to see to the safety of the jobsite, there was not enough evidence to show a breach of that duty by the Corps of Engineers (the contract with Tecon imposed the duty upon the Corps).

37 Sources of Professional Liability Duty to Purchasers to Exercise Reasonable Care (Developer) Point East Condominium Owners' Assn. v. Cedar House Assoc. (1995), 104 Ohio App.3d 704, 663 N.E.2d 343: A condominium association sued several parties, including the developer for damage caused by a leaking sprinkler system. The developer prepared the plans and the specifications for the project, retained the general contractor, and was intimately involved in the construction's progress. The court held that a developer could not avoid its duties to exercise good workmanship and reasonable care simply by delegating construction work to contractors and subcontractors who are not in privity with the purchaser. ("Given the current trend of expanding the exceptions to the rule of nonliability of one who has employed an independent contractor, and given the policy considerations favoring the imposition of at least initial liability upon the person who sits at the top of the pyramid of those who create the improvement, a strong argument may be advanced in favor of the recognition of a nondelegable duty on the part of the developer…"). This is a possible developing trend.

38 Sources of Professional Liability  Follow Construction Industry Regulations (Prime Contractors)  Maynard v. Flanagin Brothers, Inc., 484 N.E.2d 71 (Ind. 1985): During the excavation of a sewer project the sides of a 16-foot trench, which had not been shored or sloped, collapsed upon an excavation laborer. Thereafter, the laborer sued three contractors including the prime contractor. The Court found in favor of the laborer, holding that the construction industry regulations imposed a specific, nondelegable duty upon prime contractors to insure that the safety regulations are followed.

39 Sources of Professional Liability Site Conditions Schwarz v. General Elec. Realty Corp. (1954), 99 Ohio App. 191, 132 N.E.2d 133: The duty of a person in possession of land or other fixed property to take reasonable care to keep the premises in such a state as not to unduly expose an invitee to danger is not delegable. (an employee of an independent contractor was injured while unloading steel beams at the defendant's premises underneath high tension electrical lines when the crane used for unloading the beams came into contact with the lines ).

40 Sources of Professional Liability  Keep highways safe for travel (Duty of the State)  Lattea v. City of Akron (1982), 9 Ohio App.3d 118, 458 N.E.2d 868: The plaintiffs filed wrongful death actions against the State, the City and the contractor after a bridge project collapsed upon a group of travelers. After judgment was granted against the contractor, the contractor sought indemnity from the state for furnishing inaccurate plans. The contractor argued that state had a nondelegable, statutory duty to see that the highway was safe for travelers, and that the state breached that duty by supplying on plans it should have known were inaccurate. The court agreed that if the state had constructive knowledge that the plans were inaccurate, it violated its nondelegable statutory duty to the public to keep its streets open, in repair and free from nuisance.

41 Sources of Professional Liability  An engineer is a not a guarantor of a structure's "perfect" fitness/usability, but the engineer should prepare plans and specs that will give the project reasonable fitness for its intended use. 17 Am.Jur. POF3d 49, 67.  In City of Cincinnati v. Stanley Consultants, Inc. (1984), No. C-930815, 1984 WL 6597 (Ohio Ct. App. 1st Dist., Hamilton County), the First District Court of Appeals held there was no recognized implied warranty of suitability claim in Ohio.

42 Sources of Professional Liability Fraud  A material false representation or a concealment  Knowingly made or concealed  With the intent of misleading another into relying upon it  Justifiable reliance upon the representation or concealment by the party claiming injury, and  Injury resulting from the reliance Case Examples Gold v. National Savings Bank, 641 F.2d 430 (6th Cir. 1981): A landowner filed actions against a bank and its retained architect after the architect determined that an apartment complex was not constructed according to plans and specifications as required under terms and conditions of permanent loan commitment. The owner sued for breach of a financing agreement and alleged bad faith (fraud) on the part of the architect. The Court found that decisions of a design professional on whether work complied with plans and specifications will be upheld absent evidence of bad faith or gross negligence. The Court found no such evidence; further, the contract provided that the decisions of the architect on these issues would be final. Palmer v. Brown, 127 Cal.App.2d 44: A design professional who commits fraud in certifying a project's substantial completion is liable for damages.

43 Tortious Interference With A Contract  Tortious Interference with a Contract:  The existence of a contract  The wrongdoer's knowledge of the contract  The wrongdoer's intentional procurement of the contract's breach  Lack of justification  Resulting damages Oliver Design Group, Inc. v. Allen-Bradley Co. (2000), No. 75502, 2000 WL 235769 (Ohio Ct. App. 8th Dist.): An architect’s contract to provide an initial analysis of the owner's design needs, with hourly compensation and no express provision for the duration, was terminable at will by either party after reasonable duration and upon reasonable notice. Accordingly, the architectural firm could not recover from another firm, which was hired to design the project, for interference with contract rights or for misappropriation of intellectual property, or for breach of contract against the owner.

44 Tortious Interference With A Contract Cleveland Central Excavating, Inc. v. City of Westlake (1981), No. 48482, 1981 WL 4263 (Ohio Ct. App. 8th Dist., Cuyahoga County): A contractor was hired to construct a parking lot for a larger nursing home project designed by the city architect. The architect also served as the project engineer, with the responsibility to supervise construction. After the contractor completed the parking lot during the Fall of 1981 at the architect's request, the parking lot deteriorated during the winter months. While the architect blamed the contractor for poor workmanship, the contractor blamed the architect for defective design. Both parties conducted significant investigation, which ultimately led to the architect writing a letter to the city recommending termination of the contractor. After noting credible evidence suggesting improper conduct on the part of the architect, the court affirmed the jury verdict against the architect for intentional inference with the contractor's performance of the contract by inducing the city to terminate.

45 Professional Liability Insurance Issues Errors & Omissions Insurance  You must have specific insurance for an insurable risk  Review with your insurer semi-annually  Claims made v. occurrence  General Liability  Commercial Liability  If unsure, have a professional review it with you, then have your attorney review it.  State and Federal bids – know insurance requirements.

46  An E & O policy will not necessary cover a design professional for all services rendered. Heckert v. Stauber, 106 Wis.2d 545, 317 N.W.2d 834 (1982). In Heckert, the architect's policy was not obligated to indemnify when the claimed losses were the result of the architect's failure to obtain government financing and governmental approval for a housing project. The political and financial activities were not within the policy's definition of "professional services.“  Several significant exclusions in the typical design professional E & O policy: inaccuracies in cost estimates advising or counseling in environmental issues (asbestos, hazardous waste) failing to complete drawings in a timely fashion Professional Liability Insurance Issues

47 Fortney & Weygandt, Inc. v. Am. Mfrs. Mut. Ins. Co. (N.D. Ohio, 2005), No. 1:04 CV 48, 2005 U.S. Dist. LEXIS 13431. Insurers do not have a duty to defend a contractor against damage discovered during construction under a products-completed operations hazard exception to a CGL policy exclusion. The contractor built a restaurant, and in the process, oversaw the completion of the foundation. After completion of all construction and inspection of the foundation, the owner concluded the foundation was improperly designed and defectively constructed, and had the restaurant demolished. After a series of claims and counterclaims, the contractor notified its insurer regarding the lawsuits. The insurer refused to defend the contractor. The contractor carried a commercial general liability policy; among the policy's terms was an exception to a term exclusion, insuring all property damage arising out of the contractor's work, except for work that had not yet been completed. The pleadings alleged the damage was discovered during construction, making the operative exception inapplicable. Therefore, the insurer had no duty to defend against the owner's claims. Professional Liability Insurance Issues

48 Professional Liability Claims Process  Demand letter – involve the insurer ASAP  Arbitration/mediation requirements  Lawsuit filed – seek professional help

49 1.Practice Safe Engineering  Know your limits – only accept work in your area of expertise OAC §4733-35-03  Partnerships and joint ventures  Avoid conflicts of interest OAC §4733-35-05 2.Peer Review  Key to catching prior to Rev. 1 3.Time  Must have sufficient time to reflect and review  Must have schedule and manpower Strategies for Avoiding Professional Liability Claims

50 4.Clean Set of Eyes Prior to Submission  Hire an outsider if you must, but it needs to be someone who has not seen the drawings, the specifications, and/or the contract 5.Assign the Appropriate Expert  You are liable for assigning the wrong person 6.Non-delegable duties  Must know them 7.Review Timesheets Prior to Stamp  If you don’t, I will Strategies for Avoiding Professional Liability Claims

51 8. STAMP  Must have personal professional knowledge and direct supervisory control and responsibility. OAC §4733-35-07 9.Correct mistakes in field ASAP  Don’t let a series of small mistakes turn into a lawsuit 10.Involve Owner & Architect  Gain their input  Seek their approval Strategies for Avoiding Professional Liability Claims

52 11.Monitor Current State of Law  National, state and local trade organizations  Insurance seminars  Legal seminars – CPD Seminars  Appoint one person if large organization  Review state board decisions (decisions on website) 12.Record Retention  Keep it forever and a day Strategies for Avoiding Professional Liability Claims

53 The only way to prevent claims is to view each job – and each task associated with each job - as a potential lawsuit. Your work must be treated with perfect hindsight. Do your professional best, document everything, and cover yourself with layers of insurance. Conclusion William M. Mattes, Esq. Dinsmore & Shohl LLP

54 Session 2 9:30-10:30 LEGAL ISSUES FOR OHIO PROFESSIONAL ENGINEERS Appearing as a Witness In a Civil Case William M. Mattes, Esq. Dinsmore & Shohl LLP

55 CIVIL LITIGATION LAWSUIT 1.Plaintiff files – Complaint 2.Defendant files – Answer  Counterclaims @ Plaintiff  Crossclaims @ Co-Defendant  Third-Party Claims @ Others 3.Answer has admissions, denials & affirmative defenses 4.Motions to Dismiss

56 Discovery 1.INTERROGATORIES – written questions answered under oath 2.DOCUMENT REQUESTS – produce all documents relevant to litigation or that may lead to the discovery of relevant information 3.REQUESTS FOR ADMISSION – fact and law based questions answered under oath 4.REQUESTS FOR INSPECTION – property, land, things 5.DEPOSITION – oral testimony under oath

57 Summary Judgment 1.Based on:undisputed facts issues of law one conclusion 2.May submit:affidavits depositions legal arguments expert testimony

58 Trial Plaintiff:  burden of proof on all claims  must present all evidence first Defendant:  cross-examines all evidence  burden of proof on all affirmative defenses  call witnesses and put on evidence at close of Plaintiff’s case Jury Trial:  8 jurors  2 alternates  decide all issues of fact  judge instructs on law Bench Trial:  judge decides entire case

59 Arbitration  Mini-trial  1 or 3 Arbitrators  Contractual provision  Can be laypersons, engineers, lawyers, judges, etc.  Cost concern  Time concern

60 Mediation  Neutral party hears both sides of story and tries to informally settle a case  Cost is low  Willing parties usually good results will occur

61 Depositions  Fact Witness – testify as to facts within your knowledge on any given project  Expert Witness – testify as an expert on facts, standard of care, causation, damages  Key Difference – experts, based on testimony, education and experience may offer opinions to help judge/jury decide issues i.e.:  cause/origin of fire  cause of failure of metal  state of art – product liability  whether plans, drawings and specifications were buildable  code compliance.

62 Depositions What is it?  Statement under oath  Everything is recorded How is it used?  to assess you as a witness  to gather all of your opinions/knowledge  as evidence in summary judgment  to limit your area of expertise  to limit your opinions  to blow up your case  to strengthen your case

63 Preparation 1. You must prepare for your deposition as if the entire case depends on your testimony…it does! 2. Meet early and often with counsel to prepare 3. To be prepared, understand, review and discuss the same things the lawyers will review:  complaint  answer & affirmative defense  contract  key documents  expert reports  literature  internet  all documents sent/received  time-line  all of your publications  all of your company’s advertising/promotional material

64 4.Time  you must be more prepared than opposing counsel  take several days to review and reinforce  no distractions  expert v. fact witness (more time needed and expected) 5.Set date, time & place – when and where you are most comfortable  clear your schedule days before and after  A.M. or P.M.  early or late in week 6.Eat, Drink & Sleep  all affect how you will testify  do not change any routine  a well rested witness is a good witness

65 Deposition Day 1. On the Record: remember it is all recorded 2. Dress: business casual 3. Discussions off Record: nothing about the case 4. Routines: keep them 5. Breaks: early and often no more than 1 hour without a break insist on a lunch break no more than 7 hours of testimony in a day 6. Video Deposition: if you know video – practice 7. Objections: listen carefully

66 Deposition Rules Rule #1 Be 100% honest Rule #2 Yes, No or I do not know Rule #3 Answer the question and only the question Rule #4 Do not assume anything Rule #5 Take your time Rule #6 Wait until the question is complete Rule #7 It is an interrogation, not a conversation Rule #8 Ask to see the document – then READ it Rule #9 Do not help opposing counsel Rule #10 Never forget rule #1

67 After the Deposition 1.Get copies of all exhibits 2.Read, correct and sign deposition transcript 3.Keep copies

68 “Acting” as an Expert Rule #1 Never Act. Either you are an expert or you are wasting everyone’s time and money. Juries and judges know actors and fools Rule #2 Limitations are Good – limit your area of expertise The Ohio Administrative Code that regulates Professional Engineers requires that any expert opinion be founded: -upon adequate knowledge of the facts -with technical competence in the subject matter -honest conviction of accuracy and propriety of the expert opinion

69 Rule #3 Know what you have done Publications – remember public statements and certification are limited by the Ohio Administrative Code in a manner similar to expert opinions. Prior testimony Prior reports Draft reports Rule #4 Read all expert reports Rule #5 Draft, edit and review your report as if the case depended on it – it does. Rule #6 Review everything opposing counsel reviews Pleadings: complaint, answer, discovery responses Time-line: know it Key documents: know them Your report: typically the attorney knows it better than you do – do not let that happen

70 Rule #7 Admit the obvious – do not attempt to deny everything Rule #8 Do Not Help Opposing Counsel Rule #9 Meet with the real client and the attorney Know the case better than they do Seek input and help early and often Do not delegate if at all possible – do it yourself Rule #10 Know your own billing records

71 Expert Testimony Daubert  Supreme Court case on admissibility of expert testimony  The theory or technique must be reliable (i.e tested), peer reviewable, error rate must be known and there must be some scientific basis (i.e. generally accepted methodology in the scientific community)  To help, your opinions must be admissible  Must keep in mind when drafting your expert report

72 Rules of Evidence In Ohio, to testify as an expert your testimony must: Relate to matters beyond knowledge of common man or dispel a common misconception; and You must possess knowledge, skill, training, education and experience that qualify you; and The theory must be based on scientific or technical information that is reliable, can be tested or verified, and if a test was performed – it must be proper with accurate results.

73 SEMINAL ENGINEERING EXPERT CASES IN OHIO Miller v. Bike Athletic Co. (1998), 80 Ohio St.3d 607, 687 N.E.2d 735: This is a products liability case involving the design of a football helmet. The Court found the plaintiff's expert testimony – consulting engineer in the field of mechanical and biomedical engineering - was sufficiently reliable, as the opinion was based on tests that measured the helmet's compliance with nationwide standards governing the manufacture of athletic equipment, and evidence showed those standards existed to prevent head and neck injuries.

74 SEMINAL ENGINEERING EXPERT CASES IN OHIO The Court used four factors to evaluate the reliability of scientific evidence: (1) whether the theory or technique has been tested; (2) whether it has been subjected to peer review; (3) whether there is a known or potential rate of error; and (4) whether the methodology has gained general acceptance. (using Daubert as a framework).

75 SEMINAL ENGINEERING EXPERT CASES IN OHIO The Court expanded the scope of analysis, writing, "a trial court's role in determining whether an expert's testimony is admissible under 702(C) focuses on whether the opinion is based upon scientifically valid principles, not whether the expert's conclusions are correct or whether the testimony satisfies the proponent's burden of proof at trial."

76 SEMINAL ENGINEERING EXPERT CASES IN OHIO Shreve v. United Electric & Construction Co., Inc. (2002), No. 01CA2626, 2002 WL 1677491 (Ohio Ct. App. 4th Dist., Ross County) : An employee sued his employer after the wall of a ditch collapsed on his shoulder. In finding for the employer, the court held that the employee's expert testimony regarding the soil's propensity to slide was not sufficiently reliable to be admissible. The expert stated his testimony was based on the assumption that the soil was clay-based; however, the expert never tested the soil in question, nor did he provide an explanation as to why the clay-based soil carried a propensity to slide.

77 SEMINAL ENGINEERING EXPERT CASES IN OHIO In sum, t he court found that because the expert did not adequately examine the soil or adequately explain and support the theory underlying his opinion, and he did not set forth an objectively verifiable theory to support that opinion, his testimony did not meet the Daubert reliability test.

78 SEMINAL ENGINEERING EXPERT CASES IN OHIO Radford v. Monfort (2004), No. 10-04- 08, 2004 WL 1961674 (Ohio Ct. App. 3d Dist., Mercer County): A pedestrian sued a restaurant owner and the owner of a construction company, alleging he was injured when he slipped on a wet sidewalk outside the restaurant.

79 SEMINAL ENGINEERING EXPERT CASES IN OHIO Before granting summary judgment in favor of the defendants, the court excluded the pedestrian's expert testimony. The pedestrian's expert was a civil engineer and licensed surveyor hired to determine whether the walkway outside the restaurant was safe.

80 SEMINAL ENGINEERING EXPERT CASES IN OHIO He measured the coefficient of friction of the walkway in accordance with the nationally recognized standards; however, he then deviated from those procedures by factoring in the degree of slope on the surface.

81 SEMINAL ENGINEERING EXPERT CASES IN OHIO Such a deviation was not set forth in the standards, nor was it supported by any other recognized industry standard. So the court found his testimony was inadmissible because it was not based on a reliable method or industry standard.

82 EXPERT TESTIMONY - CONCLUSION- 1.Meet regularly with counsel 2.Do not delegate 3.Test accurately 4.Use standards – no deviations 5.Peer Review 6.Edit carefully 7.Meet with client before finalizing report 8.Understand your opponents position

83 Trial Testimony -- Key Tips 1.Be a Teacher - judges & juries want to be spoken to and taught. 2.Never talk down to the judge, jury or opposing counsel. 3.KISS – Keep it Simple Stupid 4.Relate to judge/jury - use everyday concepts 5.Dress the Part  Expert: Suit & tie for men, business attire for women  Fact: Business casual – fly the colors of the company

84 6.Honesty is still the best policy 7.Do not change your demeanor on cross and questions from the judge 8.The eyes of the world are following you 9.Confidence is key 10.RESPECT  the process  the parties  the judge  the jury  opposing party/counsel

85 Conclusion When called as a witness, please review what we discussed here today, meet with an experienced trial attorney, and be prepared. William M. Mattes, Esq. Dinsmore & Shohl LLP Appearing As A Witness In A Civil Trial 12/18/07

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