Consulting-Specifying Engineer - September 2007 - (Page 42)

unsatisfactory, so the architect would not approve the subcontractor on future projects until the subcontractor could prove to the architect’s satisfaction that it was reliable. • Issuing contradictory instructions • Changing plans and specifications without regard to the contractor’s schedule • Withholding funds arbitrarily, or approving less than the requested amount on payment requisitions. has all the same claims (and is subject to the same defenses) as the contractor. Sureties taking over for defaulting contractors want to minimize their out-of-pocket costs and often look beyond the assets of their defaulting contractor client for ways to recover their costs. For that reason, sureties might be even more aggressive at pursuing claims against engineers than contractors. The defense that the engineers statements are only opinions will not always succeed. Contractors also sometimes bring claims against engineers for failing to catch the contractor’s errors so as to benefit from the engineer’s obligation to “endeavor to guard the owner against defects and deficiencies in the Work.” 11 They claim that a engineer who failed to catch the contractor’s error was negligent in fulfilling a contractual duty, even though that duty was to the owner, not to the contractor. Because that negligence caused the contractor to incur additional cost, the contractor thinks the engineer should be liable to the contractor in that amount. Engineers have a powerful defense, however, based on the contractor’s contributory negligence. After all, the contractor is the one who did wrong in the first place. Skillful contract drafting that clarifies that the owner, not the contractor, is the only intended beneficiary of the engineer’s construction administration duties could head off these claims. Lenders, insurers and sureties Lenders, insurance companies and sureties rarely have contracts with the engineer they hope to sue. This group is probably the second largest class of potential third-party claimants. The essence of their claims is usually that they relied on some representation that the engineer made. These claims seek to apply a RESTATEMENT (SECOND) OF TORTS §552 analysis. If a surety takes over a job for a defaulting contractor, the surety stands in the shoes of the defaulting contractor and For the engineer to be liable under the RESTATEMENT view, the plaintiff’s reliance must be justifiable. For reliance to be justifiable, the plaintiff must be someone the engineer intended the information to influence [§552(2)] or who the engineer reasonably expects to have access to the information and will foreseeably take action on it (comment h). Lenders, insurers and sureties often ask engineers to provide a letter authorizing them to rely on some information the engineer has provided to another party, usually the client. Lenders, insurance companies, sureties and anyone else does not need permission or assistance from the engineer to decide whether to rely on information from the engineer or from any other source. These In Aliberti, LaRochelle & Hodson Eng. v. F.D.I.C.12, an engineer and construction manager provided information they knew a lender would use to evaluate the viability of a project and to help it decide whether to grant financing. The engineer and construction manager had a duty to be “honest when making representations to the Bank regarding the accuracy of the construction budget.” 13 The court found that this duty exists, even though the bank had retained its own expert, and the bank’s own expert had told the bank that “in his opinion there [was] some risk.14 The defense that the engineer’s statements are only expressions of opinion will not always succeed: ”[T]he relationship of the parties or the opportunity afforded for investigation and the reliance, which one is thereby justified in placing on the statement of the other, may transform into an averment of fact that which under ordinary circumstances would be merely an expression of opinion.”15 “[I]f one knows an opinion to be erroneous, the matter is as to him, not an opinion but a subsisting fact; and, if he makes a statement contrary to what he knows to be the fact, he should not be allowed to escape the consequences on the theory that his statement concerns a matter of opinion.”16 Aliberti, LaRochelle was an extreme case, where the engineer had direct dealings with the lender and participated in an unscrupulous developer’s misrepresentations. In many cases, lenders and sureties who want to rely on engineers’ judgments and certifications lenders, insurers and sureties often ask for authorizing letters for the basis of a future suit. people are all adults and are arguably at least as sophisticated as the engineer in business matters. The only reason these people want a reliance letter is to make sure they qualify to bring suit under RESTATEMENT §552 and similar bases for liability for negligent misrepresentation. Not only do engineers receive no benefit from these reliance letters, but also failure or refusal to issue a reliance letter does not change anything in the recipients’ decision making process. such as approvals on payment requisitions simply want free professional advice. Lenders and sureties argue that they need that information to do their jobs and the designers of record are in the best position to provide it. However, those are their problems, not the engineers’. Engineers are ordinarily under no obligation to create a situation where lenders and sureties justifiably rely on the engineers’ representations. However, as in the Aliberti, LaRochelle case, if engineers are aware of 42 Consulting-Specifying Engineer • SEPTEMBER, 2007

Table of Contents Feed for the Digital Edition of Consulting-Specifying Engineer - September 2007

Contents M/E Roundtable Cover Story: Airborne Superbugs Third-Party Liability Back to School Product Spotlight Codes & Standards Professional Practices How To New Products Jobs/Cliassifieds Specifier’s Notebook Pure Power Supplement New Technologies, Same Old Transmission Problems Wireless Battery Recharging Solar Concentration Renewables Tracking System A Mighty Wind The Importance of Load Bank Testing Quality Power for Security Systems

Consulting-Specifying Engineer - September 2007

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