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Relationship of Parties Exception

Other jurisdictions look to whether there is a “special relationship” between the design professional and the third party in determining whether the third party can sue the design professional for negligence.

In West Virginia, for example, it has been held that “[w]here a special and narrowly defined relationship can be established between the tortfeasor and a plaintiff who was deprived of an economic benefit, the tortfeasor can be held liable.[1]  The special class of plaintiffs must be particularly foreseeable to the tortfeasor and the economic losses proximately caused by the tortfeasor's negligence.  The court noted that because contractors must rely upon design documents to bid upon and complete their projects and design professionals may provide oversight during the construction phase, the relationship between a contractor and a design professional is such a “special relationship” allowing the contractor to sue for damages despite a lack of privity.  This holding was subsequently extended to sureties, not just contractors.[2]

Functional Equivalent of Privity Exception

New York law allows negligence and misrepresentation claims in the absence of privity if the relationship between the plaintiff and the design professional creates the “functional equivalent of contractual privity.” The New York Court of Appeals in Ossining Union Free School District v. Anderson LaRocca Anderson held that an engineering consultant can be held liable to someone that it is not in privity of contract with if there is the “functional equivalent of privity.”[3]The Court held that the functional equivalent of privity exists if:

  1. a defendant knows that its plans or specifications will be used for a particular purpose by a known plaintiff;
  2. the known plaintiff relies upon the services for that particular purpose; and
  3. the conduct between the parties evidences an understanding of this reliance.

The functional equivalent of privity standard is more limited than the Restatement (Second) of Torts negligent misrepresentation standard discussed above and is to be strictly applied.[4]  The Court in Travelers Cas. & Sur. Co. v. Dormitory Auth. stated “[n]ot only does New York not permit recovery of economic loss on the basis that a plaintiff was "foreseeable," but the New York Court of Appeals has repeatedly “rejected even a somewhat narrower rule that would permit recovery where the reliant party or class of parties was actually known or foreseen but the individual defendant's conduct did not link it to that third party.”   The Court explained that in order for the functional equivalent of privity to exist, the design professional "must have known" at the time the services were performed or the statements made "that the particular plaintiff bringing the action would rely on its representations."

A more recent case in New York, albeit at the trial court level, held that an engineer further owes a duty not to endanger the general public if it has the requisite “participation” and “control” of the design of the item that caused the harm.[5]  Fried v Signe Nielsen Landscape Architect, PC involved allegations of negligence against engineers involved in designing a pier without vehicle-resistant barriers to prevent motorist from driving into the water.  The plaintiffs in Fried were the family and guardian of a woman injured after driving off the pier.  After a trial on the merits, the jury found that the engineer was negligent.  The engineer, in a motion to set aside the verdict, argued that it did not owe a duty to the injured plaintiff because there was no privity of contract.  The Court disagreed and held that, given the requisite degree of participation and control, an engineer will be deemed to owe a duty to the general public to use reasonable care in the design of a roadway.  Specifically, the Court held that an engineer “owe[s] a duty to motorists and pedestrians to use reasonable care in the design so as not to expose them to an unreasonable risk of foreseeable harm.”  This case does not discuss the “functional equivalent of privity” rule discussed in the Ossining and there was no subsequent appellate history on such issue.

[1] Eastern Steel Constructors, Inc. v. City of Salem, 209 W.Va. 392, 402-03, 549 S.E.2d 266, 275-77 (2001).

[2] Mid-State Sur. Corp. v. Thrasher Eng'g, Inc., 2006 U.S. Dist. LEXIS 32342, at *27-28 (S.D. W. Va. May 16, 2006).

[3] Ossining Union Free School District v. Anderson LaRocca Anderson, 73 N.Y.2d 417, 425, 541 N.Y.S.2d 335, 339, 539 N.E.2d 91, 95 (1989). 

[4] Travelers Cas. & Sur. Co. v. Dormitory Auth., 734 F. Supp. 2d 368, 380-81 (S.D.N.Y. 2010).

[5] Fried v Signe Nielsen Landscape Architect, PC, 34 Misc. 3d 1212(A) (N.Y. Sup. Ct. 2012).

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