The Subrogation Strategist

By: Edward Jaeger and Michael Wolfer

In Gongloff Contracting, L.L.C. v. L. Robert Kimball & Associates, Architects and Engineers, 119 A.3d 1070 (Pa. Super. 2015), the Pennsylvania Superior Court recently held that a negligent misrepresentation claim against an architect does not require a plaintiff to make allegations of an express misrepresentation by the architect in order to survive a motion for judgment on the pleadings based on the economic loss doctrine. The court held that, pursuant to Bilt-Rite Contractors, Inc. v. The Architectural Studio, 581 Pa. 454 (2005), a plaintiff may sufficiently plead a negligent misrepresentation claim by asserting that the architect’s design documents contained false information.

The Gongloff Contracting case involves the construction of California University of Pennsylvania’s convocation center. The university hired Robert Kimball & Associates, Architects, and Engineers, Inc. (Defendant) as its architect and design engineer in 2009. Defendant prepared the designs that were supplied to, and relied upon by, the contractors and subcontractors bidding on the project. The prime construction contract was awarded to Whiting-Turner Contracting Company, who subcontracted Kinsley Construction (Kinsley) to supply and erect the structural steel for the project. Kinsley entered a subcontract with Gongloff Contracting L.L.C. (Plaintiff), under which Plaintiff agreed to provide all labor, materials, and equipment necessary to erect the structural steel. Kinsley also entered a subcontract with Vulcraft Inc. (Vulcraft) to detail and fabricate the long-span steel trusses, which would then be delivered to the site and erected by Plaintiff. In addition, Kinsley hired professional engineer Josh Carney of Carney Engineering (Carney) to assist in the design of the structural steel.

Concerns over Defendant’s designs were initially raised by Vulcraft and Carney, who claimed that the design for the roof system was faulty. They warned that the header beams that supported the roof trusses were dramatically undersized. Notwithstanding these warnings, Plaintiff began to erect the steel structure. Vulcraft subsequently issued a letter maintaining that Defendant’s designed roof system “was not adequate to bear the construction loads.” After about one month of construction, Defendant acknowledged its roof design was faulty. The deficient designs resulted in multiple shutdowns, substantially increasing Plaintiff’s costs. Unable to fully pay its vendors, Plaintiff ultimately laid off its crew and left the jobsite in 2011.

On August 6, 2012, Plaintiff filed a complaint alleging negligent misrepresentation in the Court of Common Pleas of Pennsylvania, Allegheny County. Plaintiff specifically alleged, among other things, that Defendant either “expressly or impliedly” represented the structure could safely sustain all required construction loads. Defendant filed a motion for judgment on the pleadings on the basis of the economic loss doctrine.

Pennsylvania law generally bars claims brought in negligence that result solely in economic loss. In Bilt-Rite, however, the Pennsylvania Supreme Court recognized an exception, which is set forth in Section 552 of the Restatement (Second) of Torts. The Court held that Section 552 applied in:

cases where information is negligently supplied by one in the business of supplying information, such as an architect or design professional, and where it is foreseeable that the information will be used and relied upon by third persons, even if the third parties have no direct contractual relationship with the supplier of information.

Bilt-Rite, 581 Pa. at 482 (2005).

The trial court granted Defendant’s motion, reasoning that the Bilt-Rite exception to the economic loss doctrine required Plaintiff to identify an “express representation” by Defendant.

On appeal, Plaintiff argued that the trial court erred in concluding that Section 552 required a design professional to make an explicit negligent misrepresentation before a party can recover economic damages. Defendant, to the contrary, asserted that Plaintiff must identify some particular communication or document provided by Defendant that was false.

The Pennsylvania Superior Court reversed the lower court, holding that the lower court’s reasoning was legally erroneous because the Bilt-Rite court did not identify an “express representation” as an element required to establish liability under Section 552. The court, citing State College Area School District v, Royal Bank of Canada, 825 F. Supp. 2d 573 (M.D. Pa. 2011), explained that Section 552 merely requires that Defendant actually made a misrepresentation. It ruled that Defendant’s roof design, composed of tangible documents, constituted an actual misrepresentation. Thus, while Bilt-Rite requires an actual misrepresentation, it does not require an express misrepresentation.

Under the Superior Court’s interpretation of Bilt-Rite, architects are subject to liability under Section 552 if faulty information is included in their design documents because the design itself can be construed as a representation by the architect that the plans and specifications, if followed, will result in a successful project. However, in order to properly plead a Section 552 negligent misrepresentation claim, the claimant needs to do more than contend, in conclusory terms, that the defendant-architect supplied design documents to participants in a construction project. In addition, the claimant must plead, with some specificity, that the documents included false information. After identifying several instances set forth in the pleadings that questioned the feasibility of Defendant’s roof design, the Superior Court found that, because Plaintiff’s allegations permitted an inference that the design included false information, Plaintiff’s sufficiently stated a claim under Section 552. Thus, the Superior Court reversed the trial court’s decision.

The Superior Court’s decision in Gongloff Contracting clarifies that plaintiffs seeking to invoke a Section 552 negligent misrepresentation exception to the economic loss doctrine need only identify an actual misrepresentation, not an express misrepresentation. It also offers limited guidance with respect to how a plaintiff, including a subrogating insurer, should plead a Section 552 claim. These clarifications should assist subrogating insurers  who seek to bring claims against design professionals because, based on the analysis in Gongloff Contracting, plaintiffs should be able to pursue claims against design professionals where deficiencies in their designs cause only economic loss.