Still Room for Hope after Beacon

Blogs serving the legal industry, design professionals, and insurers have been a-buzz since July 3, 2014 with news from the California Supreme Court.  A number of headlines sensationalize the holding in Beacon Residential Community Assn. v. Skidmore, Owings & Merrill – but what impact does it truly have on the construction industry and architect liability in particular?

In Beacon, a homeowners association on behalf of its members sued a condominium developer and various other parties including two defendant architectural firms alleging the homes were unsafe and uninhabitable for significant portions of the year.[1]  The question presented to the California Supreme Court was essentially whether an architectural firm who makes recommendations but not final decisions on construction owes a duty of care to future homeowners with whom it has no contractual relationship.  The Court concluded: yes, it may. 

A number of posts have made worst-case scenario predictions for the future of design professional liability based on the Beacon holding.  However, it is important to note that Beacon involved a demurrer at the trial court level meaning that on appeal the Supreme Court was accepting the facts presented in plaintiff’s complaint as true.  The Court was not examining defenses pled by the architect firms, proven facts of the case, the parties’ discovery, nor did the Court offer an opinion as to whether the defendant architectural firms in fact had liability.  Rather, the opinion focused on whether contractual privity was necessary for the HOA to pursue claims against the architects.  The court held that the design contract was not the sole source of the architects’ duty and the case was sent back to the trial court for further proceedings.

A number of posts interpreting Beacon appear to have a chicken-little type quality.  In my opinion, Beacon does not deserve the hype.  At least in Colorado, prime designers have long owed an independent duty of care to homeowners/future users and have faced liability under the Colorado Construction Defect Action Reform Act for defective residential design even where they do not make ultimate construction decisions.  Moreover, the California Supreme Court’s opinion does nothing to diminish defenses otherwise available to design professionals such as apportionment of liability and defenses based upon failure to follow the design.

While Beacon may continue to make headlines this summer, it should be business as usual for design professionals.  Design professionals should remain vigilant about documenting changes to the plans made by the owner, value engineering recommendations, and input during the Construction Administration phase of the project but Beacon does not signal the beginning of the end.