Reprinted from the 10/04/2004 issue of ConstructionWebLinks:
By Brian Hennessy, Thelen Reid & Priest LLP
BRW, Inc., an engineering firm, contracted with the City and County of Denver to prepare the specifications and inspect the construction of two bridges. After preparing the specifications, BRW subcontracted its inspection obligations under the contract to Professional Service Industries, Inc.
Upon receiving BRW's specifications, Denver contracted with a general contractor to construct the project. The contract between Denver and the general contractor incorporated BRW's specifications and required the general contractor to complete the project in accordance with BRW's specifications.
The general contractor then subcontracted parts of its work to subcontractors, all of whom were contractually required to work in accordance with BRW's specifications. One of the subcontractors, Dufficy & Sons, Inc., subcontracted "for the fabrication, painting, and shipment of portions of the structural steel." After purchasing the specified paint from the manufacturer, Dufficy subcontracted its painting obligation to a second-tier subcontractor.
After allegedly "incurring additional expenses and delays related to the application of the paint," Dufficy sued BRW and PSI alleging three claims:
- 1. BRW was negligent in preparing, interpreting and administering the paint system specifications.
2. PSI was negligent in inspecting the paint and in directing Dufficy's paint subcontractor on how and where to apply the paint.
3. BRW and PSI negligently misrepresented that Dufficy's painting subcontractor was complying with the plans and specifications.
The Colorado Court of Appeals reversed the trial court's dismissal of all three claims. Dufficy & Sons, Inc. v. BRW, Inc., 74 P.3d 380 (Colo.App. 2003), cert. granted.
Negligent Preparation, Administration of SpecificationsThe trial court dismissed Dufficy's negligence claim against BRW on the basis of economic loss rule, "which states that "
Negligent InspectionRelying on the economic loss rule, the trial court also dismissed Dufficy's claim that PSI had negligently inspected work on the project. Again, however, the Colorado Court of Appeals reversed, finding that the economic loss rule was not applicable because, as the court explained, "inspectors owe the same professional duty of care as architects and engineers."
According to the court, "because PSI was an agent of BRW and performed the work of a design professional, specifically as the project's inspector, it owed Dufficy a duty to employ that degree of knowledge, skill, and judgment ordinarily possessed by members of that profession and to perform faithfully and diligently any service undertaken as an inspector in the manner a reasonably prudent inspector would under the same or similar circumstances."
Negligent MisrepresentationDufficy alleged that BRW and PSI falsely and negligently misrepresented that Dufficy's painting subcontractor was painting in conformance with BRW's specifications.
The trial court found that Dufficy's negligent misrepresentation claim was barred by the economic loss rule. Again, the Colorado Court of Appeals reversed. The court explained that generally when the "alleged negligent conduct is a breach of a duty that arises under the provisions of a contract, the duty is not independent of the contractual obligation" and, thus, recovery is limited to the contract and barred in tort under the economic loss rule.
Again, however, the court was willing to bypass the economic loss rule by finding that BRW and PSI owed an independent duty of care to Dufficy. The court explained that "although the alleged misrepresentations arose out of duties owed by BRW and PSI to the city pursuant to the contracts [with the city], a contractor or subcontractor has an independent tort claim for negligent misrepresentation."
Thus, the court concluded that "because Dufficy's negligent misrepresentation claims are based on an independent tort claim, Dufficy is not barred from recovery by the economic loss rule."
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