I. SUMMARY CURRENT SITUATION

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Kerry Berry
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1 RPPTL SECTION WHITE PAPER: PROPOSED AMENDMENT TO ABOLISH ESTABLISHED CAUSES OF ACTION AGAINST ARCHITECTS, ENGINEERS, SURVERYORS AND MAPPERS FOR PROFESSIONAL NELIGENCE I. SUMMARY Citizens and businesses in the State of Florida rely upon the services of professionals to design their homes and businesses and accurately survey their personal and business properties. Florida law has long recognized causes of action to protect consumers from economic harm arising from professional negligence, even in the absence of a contractual relationship with the professional. HB 701 and SB 1964 would effectively abolish these well-established protections without providing any alternative remedy to Florida s citizens and businesses. This proposed change in the law is unwarranted, harmful to the public, and should be opposed. II. CURRENT SITUATION Application of the duty imposed by law upon professionals to perform their services in accordance with the applicable standard of care has for many decades resulted in liability for damages foreseeably caused by the professional s negligence including liability for purely economic damages. See, e.g., Luciani v. High, 372 So.2d 530 (Fla. 4th DCA 1979) (involving suit against engineer based on negligently performed tests resulting in economic loss to plaintiff's property); Audlane Lumber & Builders Supply, Inc. v. D.E. Britt Assocs., Inc., 168 So.2d 333 (Fla. 2d DCA 1964) (involving suit against design engineer based on alleged negligent design and preparation of wooden trusses); Hewett- Kier Construction, Inc. v. Lemuel Ramos & Asssocs., Inc., 775 So.2d 373, 375 (Fla. 4 th DCA 2001) (involving suit against architect based on negligent preparation of design documents and negligent administration of project); Carr Smith & Associates, Inc. v. Fence Masters, Inc., 512 So.2d 1027, 1028 (Fla. 3d DCA 1987) (involving suit by tenant against surveyor based on negligent preparation of survey). This accords with common sense. An architect, engineer or surveyor performing professional services will rarely if ever cause physical injury or damage to property. Instead, the damages caused by the negligent performance of their services almost always will be economic in nature. For example, the surveyor misses the easement that makes the property worth substantially less than the purchaser paid for it. Or the engineer misses the contamination in the groundwater that will cost the buyer millions to remediate. Indeed, one may wonder what sort of personal injury a surveyor s services might be expected to cause a paper cut, perhaps? In Moransais v. Heathman, 744 So.2d 973 (Fla. 1999), the Supreme Court confirmed the status of the law, providing certainty by considering and rejecting the argument that the relatively new assertion of the economic loss rule first announced in Florida law in the Page 1 of 6

2 decision in Florida Power & Light Co. v. Westinghouse Elec. Corp., 510 So.2d 899 (Fla. 1987) was applicable to claims for economic damages arising from professional negligence. The Moransais decision states, on that point: We agree with the observations of those who have noted that because actions against professionals often involve purely economic loss without any accompanying personal injury or property damage, extending the economic loss rule to these cases would effectively extinguish such causes of action. This is not what this Court had in mind many years ago when it applied the economic loss rule in Florida Power & Light. 744 So.2d at 983 (citations omitted) (emphasis added). Thus, under current law, the economic loss rule does not bar a cause of action against a professional for his or her negligence even though the damages are purely economic in nature and the aggrieved party has entered into a contract with the professional's employer. See id. at III. ANALYSIS OF HB 701 / SB 1964 A. THE BILL IS OVER-INCLUSIVE AND CONTRARY TO PREVIOUSLY EXPRESSED LEGISLATIVE POLICY HB 701 and SB 1964 implicitly seek to overturn the Moransais decision, which is now more than ten years old. But, the bill does not stop there. While there have been efforts at great lengths to distinguish between contract law and tort law in the materials submitted in support of the bill, the bill itself, as drafted, contains no such distinction. Instead, the bill broadly states that a person does not have a cause of action against a licensee if it is one for economic damages resulting from malpractice or professional negligence. This could be read to eliminate contract claims for economic damage as well as statutory duty and tort claims. The bill also would overturn long standing legislative policy, and citizens and businesses common law rights. When allowing design professionals the opportunity to incorporate as a professional service association, creating Chapter 621, F.S., the legislature expressly prohibited the Chapter to be used to shield professionals from personal liability: Liability of officers, agents, employees, shareholders, members, and corporation or limited liability company. Nothing contained in this act shall be interpreted to abolish, repeal, modify, restrict, or limit the law now in effect in this state applicable to the professional relationship and liabilities between the person furnishing the professional services and the person receiving such Page 2 of 6

3 professional service and to the standards for professional conduct; provided, however, that any officer, agent, member, manager, or employee of a corporation or limited liability company organized under this act shall be personally liable and accountable only for negligent or wrongful acts or misconduct committed by that person, or by any person under that person's direct supervision and control, while rendering professional service on behalf of the corporation or limited liability company to the person for whom such professional services were being rendered; and provided further that the personal liability of shareholders of a corporation, or members of a limited liability company, organized under this act, in their capacity as shareholders or members of such corporation or limited liability company, shall be no greater in any aspect than that of a shareholder-employee of a corporation organized under chapter 607 or a member-employee of a limited liability company organized under chapter 608. The corporation or limited liability company shall be liable up to the full value of its property for any negligent or wrongful acts or misconduct committed by any of its officers, agents, members, managers, or employees while they are engaged on behalf of the corporation or limited liability company in the rendering of professional services. Sec , F.S. (emphasis added). The duty of a design professional to act with proper care, not as a guarantor or insurer, has been a right relied upon by those retaining design professionals. From individuals and families improving their homesteads, to multinational corporations building their offices, all rely on design professionals to fulfill their duty. Similarly, citizens buying homes and corporations purchasing land to expand their businesses rely upon surveyors to prepare accurate surveys and engineers to prepare reliable reports of property conditions upon which they can base their purchase decisions. The Legislature provides professionals special protections. The legislature has limited the time for seeking redress to half the time of many other claims, see sec (4)(a), F.S. But even then, the legislature has consistently recognized the need for professionals, such as design professionals, to fulfill their duties section 95.11(4)(a), F.S., recognizes that claims against a professional may be founded on contract or tort. A purported justification for the bill, that non-professionals providing design services are protected from liability, while professionals are not, is not only incorrect, but the facts undermine the bill s justification. If a non-licensed individual even attempts use another s license or a revoked license, that attempt would subject to the person to a battery of criminal and civil penalties for engaging in the unlicensed practice of such professions. See, e.g., Sections , , , , F.S. Thus, the implication of unfair treatment of professionals is contrary to the facts. A better comparison would be the liability treatment of architects, engineers, surveyors and mappers as compared with other professions such as attorneys and accountants. No justification on that basis has been advanced. Page 3 of 6

4 B. THE BILL, AS DRAFTED, IS UNCONSTITUTIONAL Clearly, Article I, Section 21 of the Florida Constitution requires that The courts shall be open to every person for redress of any injury, and justice shall be administered without sale, denial or delay. This provision of the Florida Constitution guarantees the continuation of common law causes of action. Johnson v. R.H. Donnelly Co., 402 So.2d 518, 520 (Fla. 1981). With regard to the power of the legislature to abolish traditional common law causes of action, the Florida Supreme has held: We hold, therefore, that where a right of access to the courts for redress for a particular injury... has become a part of the common law of the State pursuant to Fla. Stat. s.2.01, F.S.A., the Legislature is without power to abolish such a right without providing a reasonable alternative to protect the rights of the people of the State to redress for injuries, unless the legislature can show an overpowering public necessity for the abolishment of such right, and no alternative method of meeting such public necessity can be shown. Kluger v. White, 281 So.2d 1, 4 (Fla. 1973) (emphasis added). This constitutional issue is not addressed by the materials supporting the proposal. The bill would abolish long standing rights of citizens and businesses to bring claims, upheld by the Florida Supreme Court decision in Moransais v. Heathman, 744 So.2d 973 (Fla. 1999). In Moransais, the Supreme noted the traditional personal responsibility of professionals for their negligent acts recognized throughout the law and quoted in particular existing provisions of the Florida Statutes which explicitly recognize this concept namely, s (3) and , F.S. Section (3), for example, states: The fact that a registered engineer practices through a corporation or partnership shall not relieve the registrant from personal liability for negligence, misconduct, or wrongful acts committed by him... (Emphasis added). There is nothing in the statute which suggests or implies such personal liability is limited to actions for personal injury or damage to other property. Indeed, the Moransais decision itself expressly held that Florida recognizes a common law cause of action against professionals based on their acts of negligence despite the lack of a direct contract between the professional and the aggrieved party. 744 So.2d at 984. Even if the bill were amended to preserve contract claims, the amended proposal would still abolish the common law cause of action for professional negligence recognized by the Moransais decision. The analysis submitted in support of the bill does not acknowledge the fact that a common law right would be abolished, nor address the required factual findings of an overpowering public necessity for such a radical change in the law. Nor Page 4 of 6

5 does the bill provide a reasonable alternative remedy for persons injured by professional negligence which does not cause them personal injury or damage to other property. The Moransais decision recognized that contract causes of action are not sufficient in-andof themselves to address such injuries and even suggested that professionals could not ethically limit remedies for their negligence in the same way a manufacturer of a product can limit remedies for its defective products. See id. at 983. In short, no showing has been made to support overturning decades of precedent providing for the personal responsibility of professionals for their breaches of the standard of care independent of contract that result in foreseeable damages, including economic damages. C. THERE IS NO APPARENT NEED FOR THE CHANGE SOUGHT IN THE BILL What is the wrong to the public that is sought to be remedied by the bill? The bill does not indicate, and the information communicated with the bill does not convey, the wrong to the public sought to be cured. Economic losses caused by professional negligence can be just as traumatic and real to the victim as a broken leg or other significant injury. Traditionally, whether the professional is a lawyer, an accountant, an architect or an engineer, the client has a remedy for economic losses caused by the professional s negligence. For several decades, professional liability insurance has been commercially available to such professionals to cover such liability. The bill fails to recognize the reason for such coverage or its availability. In short, there is nothing in the status quo that suggests a need to change the existing law. IV. FISCAL IMPACT ON STATE AND LOCAL GOVERNMENTS HB 701 and SB 1964 conceivably could have a negative fiscal impact on state and local governments, who are themselves consumers of professional services. Abolishing traditional common law remedies shifts the burden of government losses that otherwise would have been borne by professionals and their professional liability insurance carriers. Governmental construction programs are reportedly on the increase because of the need to put to work fast what is referred to as stimulus funds; thus, there is even more of a need to assure that improper professional conduct is deterred. V. DIRECT ECONOMIC IMPACT ON PRIVATE SECTOR HB 701 and SB 1964 would shift risk of loss for economic damages arising from professional negligence from the professional and his or her professional liability insurance carrier to the consumers of professional services. This would benefit professionals but harm the private sector by leaving businesses suffering catastrophic losses due to professional negligence without a remedy. Page 5 of 6

6 VI. CONSTITUTIONAL ISSUES See Section III.B. above. VII. OTHER INTERESTED PARTIES 1. Florida Home Builders. 2. Community Associations Institute and other organizations consisting of condominium associations and their members. 3. Associated Builders and Contractors Page 6 of 6

A R G U M E N T MORANSAIS IS A FORESEEABLE PARTY AS OPPOSED TO A THIRD PARTY BENEFICIARY THAT HAS BEEN DAMAGED BY THE NEGLIGENCE OF RESPONDENTS.

A R G U M E N T MORANSAIS IS A FORESEEABLE PARTY AS OPPOSED TO A THIRD PARTY BENEFICIARY THAT HAS BEEN DAMAGED BY THE NEGLIGENCE OF RESPONDENTS. A R G U M E N T I. MORANSAIS IS A FORESEEABLE PARTY AS OPPOSED TO A THIRD PARTY BENEFICIARY THAT HAS BEEN DAMAGED BY THE NEGLIGENCE OF RESPONDENTS. Respondents' arguments regarding the status of Moransais