A property owner cannot sue an architectural firm for economic losses because of negligent design in a construction defect case, the Arizona Supreme Court has ruled.
Issuing its decision in Flagstaff Affordable Housing Limited Partnership v. Design Alliance Inc., the state Supreme Court reversed a state appeals court decision that held that the economic loss doctrine does not bar negligence claims against design professionals.
In 1995, Flagstaff Affordable Housing contracted with Design Alliance to design eight apartment buildings and a community center to qualify as a low-income housing project that complied with the federal Fair Housing Act’s accessiblity guidelines. The owner contracted with Butte Construction Co. to build the apartments. In 2004, the U.S. Department of Housing and Urban Development filed a complaint against Flagstaff, alleging the apartments violated the accessibility guidelines. After settling with HUD, the owner sued the architect and contractor, alleging they had breached their contracts and acted negligently. The contractor was dismissed from the action.
The architect argued that the negligence claim should be dismissed because “the economic loss doctrine precludes recovery of economic losses in teh ‘construction defect setting.'” The owner disagreed, arguing that “a claim for ‘professional negligence’ is based on the special relationship between architects and their clients, and therefore is excepted from the economic loss doctrine.”
The superior court dismissed the complaint. And the appeals court reversed.
“[I]n the context of construction defects, we adopt a version of the economic loss doctrine and hold that a plaintiff who contracts for construction cannot recover in tort for purely economic loss, unless the contract otherwise provides,” the high court wrote. “The doctrine does not bar tort recovery when economic loss is accompanied by physical injury to persons or other property.”
Source: Arizona Court
Topics Profit Loss Construction
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