Uncharted Territory: Are Geotechnical Inspectors Liable to Non-Contracting Parties – Including Property Owners?

Historically in California, professional negligence cases were limited to parties who had contracted with each other.[1] The theory was that if a professional didn't have a contract with the plaintiff, then the professional did not owe the plaintiff a duty of care and could not be liable in negligence. That historical practice has "been greatly liberalized."[2] A recent appellate case provides another example of this.

In Lynch v. Peter & Associates, Engineers, Geologists, Surveyors, Inc., a homeowner hired a general contractor to perform improvements and repairs to her home.[3] The general contractor then hired a geotechnical firm to perform a geotechnical inspection of a footing trench for $360.[4] The inspection contract: (1) did not mention the homeowner, (2) had broad liability disclaimers, and (3) purported to cap the inspector's liability at twice the contract price (i.e., $720).[5] The inspector performed the inspection and issued a one-page memo, addressed to the general contractor and homeowner, concluding that the footing trench was acceptable for its intended use.[6] Unfortunately, that proved inaccurate and the footing collapsed, causing significant damage to the house.[7]

The homeowner sued the inspector for professional negligence.[8] The trial court granted the inspector's motion for summary judgment on the ground that it did not owe the homeowner a duty of care, as its contract was with the general contractor.[9] The appellate court reversed.[10] The court cited six factors that must be balanced "in determining whether a duty of care exists outside of contractual privity[:] [1] the extent to which the transaction was intended to affect the plaintiff, [2] the foreseeability of harm to him, [3] the degree of certainty that the plaintiff suffered injury, [4] the closeness of the connection between the defendant's conduct and the injury suffered, [5] the moral blame attached to the defendant's conduct, and [6] the policy of preventing future harm."[11] The court concluded that all six factors supported finding a duty of care.[12] Among other things, the inspector's work was clearly done to benefit the homeowner and it was foreseeable that a poorly performed job would affect the homeowner's property, that there was evidence that the inspection was not done correctly, and that finding liability would promote the public policy of preventing harm.[13]

Takeaway

Those providing construction-related services to general contractors in California should assume that, if the project goes awry, the property owner will be able to assert a claim for professional negligence even though they did not contract with the owner—at least in the residential context.[14] They should also not count on liability disclaimers or limitations in their contract protecting them from the owner's negligence claim.[15]

For those navigating these complex legal waters, expert guidance is invaluable. construction and government contracts group at DWT is here to help. Our team is well-versed in the nuances of construction law and can provide the counsel you need to protect your interests. For more information or to discuss how these changes might impact your business, let us be your trusted partner in navigating the evolving legal landscape.