In a recent decision decided on a narrow 5-to-4 vote, the Washington Supreme Court declined to bar a couple’s negligence claims against an engineering firm based on a contractual limitation of liability, permitting the couple to continue pursuing their damages claims in King County Superior Court.
The parties to the case, Donatelli v. D.R. Strong Consulting Engineers, Inc., entered into a contract for Strong to assist with a short plat approval for the Donatellis’ King County property. The contract limited Strong’s liability to the greater of $2,500 or its professional fees charged to the Donatellis. Strong secured preliminary approval for the Donatellis’ short plat, but final plat approval did not issue prior to the County’s 60-month deadline, so the preliminary plat approval lapsed. The Donatellis lost the property through a foreclosure before a new plat application could be processed. The Donatellis then sued Strong on a number of legal theories, including breach of contract, professional negligence, and negligent misrepresentation, seeking an award exceeding 1.5 million dollars for lost profits and other damages.
Strong sought dismissal of the negligence claims based on Washington’s “economic loss rule,” which the Court has more recently restyled the “independent duty doctrine.” While there is a great deal of case law applying this rather nebulous doctrine, it generally bars a plaintiff from bringing a tort claim for economic damages where there is a contract between the parties that allocates risk for the claims asserted. Prior Court decisions have characterized the rule as an “attempt to describe the dividing line between the law of torts and the law of contracts.” One policy advanced by this doctrine is preventing parties from “sidestepping” the terms of their contract by suing in tort for a matter that was already covered by a written agreement. But in prior decisions, Washington courts have made it clear that contractual limitations of liability cannot limit claims arising from duties that arise independently of the parties’ written contract.
The Court found that the independent duty doctrine did not bar the Donatellis’ negligence claims against Strong, based on an analysis of the Court’s precedents and the contours of the independent duty doctrine. Notably, in reaching this conclusion, the Court focused on a number of factors outside the Donatellis’ written contract with Strong. For example, the Court acknowledged that it was not clear, based on the record before the Court, whether Strong’s contractual duties were limited to the tasks listed in the written contract, or whether Strong’s contractual duties were expanded through oral agreements or its affirmative conduct in handling additional tasks for the Donatellis. In permitting the Donatellis’ negligence claim to proceed, the Court stated that “[b]ecause we do not know the scope of D.R. Strong’s contractual obligations, we cannot determine if any of D.R. Strong’s duties to the Donatellis arose independently of the contract.” The Court also allowed the Donatellis’ negligent misrepresentation claim to proceed, finding that “Strong’s duty to avoid misrepresentations that induced the Donatellis to enter into a contract arose independent of the contract.” In reaching this conclusion, the Court acknowledged that parties can limit their representations to one another in a written contract, but in this case the Donatellis claimed that their decision to enter into the contract in the first instance was based on Strong’s representations about the total cost and timeline for the project.
It is important to note that the Court did not address the merits of the Donatellis’ negligence claims, nor did it find any liability on Strong’s part. It simply found that the independent duty doctrine did not bar these claims, and the decision will allow the Donatellis’ negligence claims to be decided by the King County Superior Court. Lawyers drafting contracts for engineers, architects, and other professionals in the building and development industry should keep the lessons of the independent duty doctrine—and Donatelli v. D.R. Strong—in mind. While the Court’s decisions make it clear that contractual limitations of liability cannot extend to all tort claims, there are a number ways that more of the parties’ agreement can be brought within the four corners of the contract—for example, including express, limited representations and warranties, “merger” clauses, and execution of written contract amendments or change orders whenever a professional’s scope of work is expanded to tasks not covered by the initial contract.