A Massachusetts trial court recently ruled that a Construction Manager at Risk could not sue the owner for design defects even thought the owner provided the plans and specifications for the project. This ruling is a substantial shift from the Spearin doctrine which has historically made the party providing the plans responsible for any shortcomings or problems with the plans.
In the case of Coghlin Electrical Contractors, Inc. v. Gilbane Building Company, the Massachusetts Department of Mental Health engaged Gilbane Building Company as the Construction Manager at Risk. Gilbane subcontracted the electrical work to Coghlin Electrical Contractors. Coghlin Electrical experienced problems on the job and sued Gilbane, alleging that Gilbane mismanaged the project, including design changes to walls and ceilings throughout the structure. Gilbane then filed a third-party action against the owner, asserting that the owner is responsible for any damages caused by design changes and design errors. The owner responded claiming that the Construction Manager at Risk contract, including a broad indemnity clause, made Gilbane responsible for any damages sought by Coghlin Electrical.
The court agreed with the owner, finding that the Construction Manager at Risk contract made Gilbane responsible for Coghlin Electrical’s claim. The court quoted a few section from the 59 page contract:
- The CM shall review, on a continuous basis, development drawings, specifications and other design documents. The design reviews shall be performed with a group of architects and engineers, who are either employees or independent consultants under contract with the CM. . . . The CM shall review the design documents for clarity, consistency, constructability, maintainability/operability and coordination among the trades . . .
- The CM shall indemnify the owner against all claims, damages, losses and expenses . . . arising or resulting from: labor performed or furnished . . . regardless of whether or not such claims, damages, losses and/or expenses, are caused in whole or in part by the actions or inactions of a party indemnified hereunder.
In ruling for the owner, the court found it significant that this was not a typical design-bid-build project, but was rather an “alternative delivery method.” The Construction Manager at Risk project delivery method allows a public entity to benefit from the Construction Manager at Risk’s expertise during the design phase of the project. The Construction Manager at Risk, in essence, takes on additional duties and responsibilities for the project, which may subject a Construction Manager at Risk to additional financial exposure. This material change in the role of a Construction Manager makes the Construction Manager at Risk responsible for design deficiencies.
Take Away: If you are serving as Construction Manager at Risk, the contract may expose you to more liability than simple cost overruns. The contract may also make you responsible for any problems with the plans and specifications.