Economic Loss Protection is Further Reduced in Louisiana

May 30, 2018

A contractor can hold a construction manager liable for its losses.

J. Kent Holland Jr.’s article at constructionrisk.com discussing Latham Company, Inc. v. State Dept. of Education, 2017 WL 6032333 (Louisiana 2017), outlines the continuing erosion of the economic loss doctrine in Louisiana.

Traditionally, the economic loss doctrine has protected architects and engineers from suits by contractors based upon the premise that design professionals contract directly with project owners not contractors.

This is no longer the case in Louisiana. “Previous court decisions in this state eliminated the use of the economic loss doctrine as a defense by architects and engineers against contractor suits. Now this decision further reduces the use of the economic loss doctrine by holding firms such as construction managers providing professional services have no protection by the economic loss doctrine either.”

The contractor alleged that the construction manager failed to perform its duties by refusing and/or failing to conduct any of it duties in a timely manner and by “overall interference with the progress and completion of the project.”

The construction manager’s argument that it had not contracted with, and therefore did not owe a duty to the contractor was rejected by the appellate court.

“The court found that if the CM failed to render its ‘management services’ during the design phase of the project or negligently provided those services it was reasonably foreseeable that faulty design documents could result and this could cause economic harm to the contractor.” In other words, the contractor was a “foreseeable third party that would be affected by the CM’s services.”

Based upon this finding, the court rejected the defendant’s request for a summary judgment.

This decision is a victory for contractors. Any professional providing information or services a contractor must rely upon should be held accountable for its actions and its work product when they adversely affect the contractor.

Source—

Construction Manager Owes Independent Duty of Care to Contractor—Economic Loss Affords no Protection, J. Kent Holland Jr., constructionrisk.com, April 2018.