A Texas Court of Appeals, in USA Walnut Creek, DST v. Terracon Consultants, Inc., recently ruled that an engineer owed a duty to the buyer of an apartment complex, even though the engineer had no contractual relationship with the buyer.  This is an expansion of the duty professionals owe on construction projects and could signal a change in the law.

In the case, Walnut Creek purchased a three year old apartment complex.  A few years after taking possession, Walnut Creek noticed problems with the apartments, including cracking foundations, walls, breaking windows, and out of square door frames.  Walnut Creek sued the developer and general contractor, alleging construction defects.  The developer claimed that the engineer, Terracon, was at fault and Walnut Creek added Terracon to the lawsuit, asserting that Terracon was negligent in performing engineering services during construction.  Terracon asked the court to dismiss the claim, arguing that it did not owe a duty to Walnut Creek.  Walnut Creek in turn argued that engineers do owe a duty to subsequent owners.  The trial court dismissed the case against the engineer and Walnut Creek appealed.

The appellate court reversed the trial court, finding that the engineer did owe a duty to subsequent purchasers.  The court seemed persuaded by the allegations that the engineer actually created the construction defects which were the basis for the litigation.

Ultimately, the court ruled that the engineer did have a duty to the subsequent buyer and the lawsuit against the engineer could proceed.

Why You Should Care: Courts are split on whether an engineer owes a duty to anyone other than the entity or person with whom it was contracted.  Nebraska and Iowa courts have generally held that engineers may not be sued by subsequent purchasers because the engineer does not owe a duty to the subsequent purchasers.  But, the Walnut Creek case may signal a change in court opinions.

This is an issue that we will monitor, much like the definition of an occurrence in a CGL policy.