Development Law Group Update: ALERT!!! SB 955 Would Limit Designers' Liability
4/23/2009
Oregon Senate Bill 955 (available here) is an attempt by design professionals to abolish claims by those not under direct contract with the designer. Private and public owners and developers should voice their opposition to SB 955 if they have not already.
Many types of design consultants, including civil and structural engineers, for example, may be subconsultants to a prime contractor or prime architect. If for any reason the owner's remedy against the prime entity is not adequate (something we see quite often), then the owner will want a direct avenue to assert claims against the subconsultant for its own negligence.
Like most states, Oregon courts have adopted an "economic loss rule" to deal with negligence claims against parties not under privity of contract with the claimant. The design professionals are trying to codify their own version of the economic loss rule to prevent non-privity owners or others hurt by design negligence from bringing suit. While such a law would help designers and their insurance companies, it would hurt everyone else who might be harmed by design negligence.
For those under contract with designers, the designers often insist on limitations of liability in the contract. Owners should obviously resist or least restrict these clauses through negotiation, which usually cap the designers' liability to either nominal dollar amounts, the amount of the design fee, or the available limits of professional liability insurance. All such limitations can be small in comparison to the damages occasioned by design negligence.
If SB 955 passes, then designers will effectively have very limited liability statewide for their mistakes. Ironically, these same designers, through their statutory lien rights, can themselves assert direct claims for compensation against non-privity owners, even if the owners have already paid the prime entities for the sub-designers' work. Why should the designers have rights against the owners, but the owners not have rights against the designers? Defects in design and construction are not declining, and commercial and residential consumers need to speak up against SB 955 to prevent financial disasters on their projects.
The Chair of the Judiciary Committee hearing the bill is Senator Floyd Prozanski. The bill has had one hearing (with only the architects appearing) and is scheduled for another this week. Senator Prozanski's phone number is (503) 986-1704 and his email address is sen.floydprozanski@state.or.us. You are encouraged to contact him by phone or in writing.
For more information on issues related to SB 955, please contact: