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Economic Loss Rule Knocks Out Claim Against Engineer

In this diversity case claiming damages for failure to properly design a building foundation, the individual defendant, a principal in the defendant engineering firm, wins judgment on the pleadings because the damages claim is barred by Virginia’s economic loss rule and lack of privity of contract, a Big Stone Gap U.S. District Court says.

Plaintiff hired defendant Servinsky Engineering PLLC (SE) to design a post foundation for a fabric-roofed building for his farm. Defendant Mark Servinsky is a professional engineer licensed in Virginia and other states, and a principal of SE. McConnell and SE entered into a written contract in which SE agreed to provide the requested design services. Plaintiff alleges Servinsky personally performed these services for SE. Plaintiff alleges the designed foundation and structural posts were insufficient to handle local topography, wind and snow loads, despite SE being hired to take area conditions into account. Soon after the building was constructed, the concrete piers surrounding the structural posts began to crack, and the nuts fixing the posts to the concrete loosened. The posts began to split and two posts broke. The fabric of the roof tore. It is alleged the building is now too unstable to be safely used for its intended purpose as a feed barn and that four contract addenda in which SE designed fixes for the structural deficiencies have been insufficient to bring the building into compliance with the contract and applicable code requirements.

In count II, plaintiff asserts claims against Servinsky individually for breach of professional standard of care, breach of implied warranty and breach of implied contract. Plaintiff contends Servinsky is personally liable for the damages alleged because he attached his Virginia engineer’s seal to the design plans and failed to comply with the standard of care for licensed engineering professionals. Plaintiff also asserts that because Servinsky practices engineering as a member of a professional LLC registered in Michigan, he is personally liable under a Michigan statute for his breaches of the professional standard of care.

Plaintiff seeks money damages in order to remove the existing building and erect a new building sufficient to withstand local conditions, as originally bargained for in the contract. This is an economic loss, which occurs when a product “injures itself” because one of its component parts is defective and is a loss for which no tort action will lie. The economic loss rule holds that when the bargained-for level of quality in a contract is not met, the law of contracts provides the sole remedy. Tort recovery is not available because the contract defines the breach and the damages. A structurally deficient building is an economic loss rather than injury to property. Here, plaintiff has not alleged any damages beyond economic loss.

Further, because there is no privity of contract between plaintiff and Servinsky, plaintiff cannot recover economic loss from Servinsky. The outcome does not change because Servinsky actually performed the design work. And there is no support under Virginia law for the argument that an engineering seal creates an independent tort duty, or that providing a professional service creates an independent tort duty.

Since all duties owed to plaintiff arise from the contract with SE, and since Servinsky is not a party to this contract, plaintiff cannot recover economic loss from Servinsky by asserting a professional negligence claim against him.

Finally, Servinsky is not individually liable under Mich. Comp. Laws Ann. § 450.4905(2) because he provides services through a Michigan professional LLC. Virginia has two statutes similar to the Michigan statute, but under Virginia law, statutes are not intended to abrogate the common law and give rise to new causes of action absente clear legislative intent.

Servinsky’s motion for judgment on the pleadings is granted.

McConnell v. Servinsky Eng’g PLLC (Jones) (Published) No. 2:13cv048, May 20, 2014; USDC at Big Stone Gap, Va. VLW 014-3-269, 16 pp.

VLW 014-3-269

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