SW Legal studies in Business

Economic Loss Rule May Apply in Tort for Professional Negligence
Description

Arizona appeals court held, in a case of first impression, that an architect could be sued in tort for negligence for failing to use due care in the design of a building that required renovation to correct errors that were revealed years after completion and when there was no possibility of a breach of contract action.

Topic Torts
Key Words

Professional Negligence; Architect; Economic Loss Rule; Compensatory Damages

C A S E   S U M M A R Y
Facts

Design Alliance, an architect firm, was hired to design Mountainside Village Apartments in Flagstaff, Arizona. The apartments were built according to the design specifications in 1996. Eight years later, the Department of Housing and Urban Development filed a complaint against the owner of the apartments for violating the Fair Housing Design Construction requirements that were in effect at the time of the construction (concerning handicap access). The apartment building owner was forced to make expensive renovations to meet the code. The owner then sued the architect for professional negligence and sought economic losses as compensatory damages. The district court held that the economic loss doctrine barred the professional negligence claim. The owner appealed.

Decision

Reversed and remanded. This is the first time a case of this nature has arisen in Arizona. The economic loss rule precludes a party from recovering economic damages in tort unless accompanied by physical harm. The purpose of the rule is to maintain the difference between claims that fall under contract and those that fall under tort. The statute of limitations has run out for a contract claim, so there is only the possibility of a tort claim. Design professionals, such as architects, have a duty to use ordinary care in rendering their services. This duty arises out of tort, not contract, and therefore the economic loss rule does not foreclose the cause of action for professional negligence against an architect even if the claim seeks only economic compensatory damages.

Citation

Flagstaff Affordable Housing LP v. Design Alliance, ---P.3d--- (2009 WL 755285, Ct. App., Ariz., 2009)

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