Liability in Washington: Who Pays for Construction Defects that Pose Safety Risks?
The rule of thumb in Washington state has been that contractors and developers cannot be held liable in negligence for construction defects.[1] However, an unpublished decision filed December 12, 2022, by the Washington Court of Appeals in SOP, LLC v. DWP General Contracting, Inc. casts new light on this line of thought.[2]
In SOP, a subsequent owner of an apartment complex brought claims for breach of contract and negligence against a number of entities involved in the original development and construction of the complex for construction defects in the apartments. The subsequent owner's claims were dismissed on summary judgment by the trial court. The Court of Appeals upheld the ruling.
Regarding the breach of contract claim, the Court of Appeals determined that although the addendum to the purchase and sale agreement ("PSA") assigned "all construction warranties" to the subsequent owner, the PSA itself stated that the seller of the complex made no warranties regarding the building and, thus, there were no warranties to assign.[3]
As for the negligence claim, the Court of Appeals did not reject it outright on the grounds that there are no negligence claims against developers or contractors in Washington for construction defects. Rather, it started its analysis by stating that the "economic loss rule is no longer the correct analysis" for determining whether a negligence claim can be brought in a construction defect case. It clarified that "[w]here a court must determine whether a plaintiff is limited to contract remedies or whether they may recover in tort, 'the court's task is not to superficially classify the plaintiff's injury as economic or noneconomic.'"[4] Instead, the "court must apply the independent duty doctrine."[5]
The Court of Appeals then stated as follows:
In the construction context, a party owes a duty in tort independent of the contract where it creates a defect that causes a significant safety risk and its professional role puts it 'in the best position to prevent harm.'[6]
It then went on to cite to cases where plaintiffs were able to maintain negligence claims against engineers for causing harm involving safety risks (e.g., fire on the Seattle monorail; structural engineering errors that led to defects that rendered a building dangerously unsafe in a large seismic event), due to the duty of those engineers to exercise reasonable skill and judgment in performing engineering services to avoid safety risks.[7] However, in SOP, the Court of Appeals did not limit the duty to prevent safety risks to engineers.
Instead, it first acknowledged that the entities involved in the original development and construction had "no independent tort duty to avoid construction defects." But then, in response to the subsequent owner's position that the defects have caused it to face extensive repairs to various parts of the structure, it went on to state that the subsequent owner "presented no evidence that the defects in Phase 2 caused or could cause significant safety risks to a large number of people" and that "none of the defendants here were responsible for the design of Phase 2 such that they were in the best position to prevent major safety risks."[8]
Takeaways
The Court of Appeals' reasoning in SOP raises the question of whether a developer or contractor could be held liable in negligence for construction defects. That is, if (1) a developer or general contractor arguably causes or contributes to construction defects, (2) those defects cause or "could cause" safety risks, and (3) the developer or general contractor was arguably in a position to prevent such risks, could they be liable in negligence to an owner of a building, structure, or home? We shall see how this plays out at the trial court level and whether we will gain clarity on this issue from the Washington Court of Appeals or Supreme Court in the years to come.
If you have questions about construction defects, or how to address them in construction contracts, please contact the government contracts and construction team at Davis Wright Tremaine.
[1] See, e.g., Stuart v. Coldwell Banker Commercial Group, Inc., 109 Wn. 2d 406, 411, 745 P.2d 1284 (1987).
[2] 24 Wn. App. 2d 1046 (2022), 2022 WL 17590865.
[3] The subsequent owner made another argument that the warranties for a different phase of the project (Phase 1) applied to the phase at issue (Phase 2) due to option language, which stated that the sale of Phase 2 would occur on the same terms as the sale of Phase 1, which had construction warranties. The Court of Appeals disagreed, citing to the express language in the PSA itself stating that seller "makes no representations or warranties" regarding the Phase 2 property and that the addendum assigned warranties for just the Phase 2 property. 2022 WL 17590865, *3 - *4.
[4] Id. at *4, citing Affiliated FM Ins. Co. v. LTK Consulting Servs., Inc., 170 Wn. 2d 442, 449, 243 P.3d 521 (2010).
[5] Id.
[6] Id. at *5, citing to Affiliated, 170 Wn. 2d at 453.
[7] Id., citing to Affiliated, 170 Wn. 2d at 456-57, and Pointe at Westport Harbor Homeowners’ Ass’n v. Engineers Northwest, Inc., P.S., 193 Wn. App. 695, 700, 704-05, 376 P.3d 1158 (2016).
[8] Id.