CLIENT ALERT: Design Professionals Receive Limited Statutory Immunity
On April 24, 2013 Governor Scott signed Senate Bill 286 into law creating section 558.0035, Florida Statutes. This new law grants individual design professionals employed by a business entity or an agent of the entity immunity from liability for economic damages resulting from negligence occurring within the course and scope of a professional services contract under the following conditions: (a) the contract is made between the business entity and a claimant or another entity for the provision of services to the claimant; (b) the contract does not name an individual employee or agent as a party to the contract; (c) the contract prominently states that an individual employee or agent may not be held individually liable for negligence; (d) the business entity maintains any professional liability insurance required under the contract; and (e) any damages are solely economic in nature and do not extend to persons or property not subject to the contract. The law takes effect on July 1, 2013 and does not state that it is retroactive.
The bill amends sections 471.023(3), F.S. (engineers), 472.021(3), F.S. (surveyors and mappers), 481.219(11), F.S. (architects and interior designers), 481.319(6), F.S. (landscape architects), and 492.111(4), F.S. (geologist). These statutes are now amended to incorporate the new limitation of liability created by section 558.0035. The bill adds geologists as “design professionals.”
The new law limits claims for economic damages but not claims for personal injury or property damage. As a result, the law is most likely to impact contractors and owners who suffer economic injury due to negligent design. Design professional negligence can cause owners and contractors to incur economic losses including the costs of construction delays.
This new law erodes Florida’s common law which has allowed professional negligence claims against an individual design professional based on the professional’s violation of her duty of care to those who may be foreseeably injured. Florida’s common-law imposes a duty of care on all individual professionals that exceeds the duty of care of the general public. Professionals, such as doctors, lawyers, accountants, and design professionals, have always been held to a higher standard of care and associated individual liability for professional negligence. This new law will afford design professionals protections that other professionals do not enjoy.
The new law also extends the reach of contractual limitations of liability. Existing case law does not allow contracting parties to limit a third-party design professional’s common-law liability for professional negligence. For example, Florida’s Third District Court of Appeals ruled that an individual design professional was not protected by the contractual limitation of liability in the contract between an owner and a design firm. See Witt v. La Gorce Country Club, Inc., 35 So. 3d 1033 (Fla. 3d DCA 2010). This new law will supersede existing case law.
In order to enjoy this new limitation of liability, section 558.0035 does require that the business entity must maintain “any professional liability insurance required under the contract.” Read plainly, the new law does not require that the business entity maintain any professional liability insurance. Nor does the law require the individual design professional to obtain or maintain professional liability insurance. The new law does not include any minimum or maximum amounts of coverage that the business entity must maintain pursuant to the contract. Likewise, the statute does not specify the type of coverage, how long the coverage must be maintained, whether the coverage can be increased, or whether the coverage can be moved to a different insurer.
This new law may be susceptible to a constitutional challenge. Section 21, Article I, of the Florida Constitution provides all persons with constitutional right of access to court. “The courts shall be open to every person for redress of any injury, and justice shall be administered without sale, denial or delay.”
The Florida Supreme Court has ruled that the Legislature cannot abolish a common-law cause of action “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). Similarly, the Third District has stated that “access to courts guarantees the continuation of common law causes of action and those causes of action may be altered only if there is a reasonable substitution which protects the persons protected by the common law remedy.” Johnson v. R. H. Donnelly Co., 402 So. 2d 518, 520 (Fla. 1st DCA 1981).
Design professionals should take advantage of the new protections afforded by this new law. To do so, each design professional should take care to meet the specific requirements set forth in section 558.0035(1)(a)-(e). First, the design professional should make sure that all professional service contracts are made with her business entity for the provision of services. Second, the professional services contract should not name an individual design professional as a party to the contract. Third, the professional services contract must be modified to add a prominent statement that “an individual employee or agent may not be held individually liable for negligence.” Finally, the individual must make sure that her business entity maintains any professional liability insurance required under the professional services contract.
Anyone involved in a construction project should take care to consider the effect of this new law. There are many project delivery methods that can be used to facilitate a construction project and the parties that bear the risk of loss due to design errors varies considerably according to the project delivery method selected and the contract documents that are used. Understanding this new law should allow educated parties to identify how financial risks are shifted by the new law so that the financial risks can be managed. Some of the ways the risks can be managed include contract modifications, insurance, and operational controls. Construction professionals evaluating how this new law impacts their business should be encouraged to speak with a qualified construction attorney familiar with project delivery methods, professional liability insurance, construction contracts, and Florida’s common law.