(978) 979-1223

ccobb@silverlakelegal.com

Silver Lake Legal

Construction, Insurance & Business Attorney Boston

Owner Warrants Some Design Adequacy to CM At Risk

Massachusetts top Court issued a much awaited decision Coughlin Electric v Gilbane Building Co ruling on construction contracting methods and the scope of duty between Owners/ Designers and Construction Managers under the relatively new Construction Manager at Risk arrangement. New contracting methods involve the builder sooner, during the design process. The Court had to allocate risk of design flaws under the agreement and determined the Owner makes a warranty that the plans it turns over to the Construction Manager are to some extent adequate.


Facts – The Owner, State of Massachusetts hired Gilbane as construction manager at risk (CM) while plans for a new hospital were still being drawn. The contract had Gilbane consulting regarding the design and agreeing to protect the owner from claims.

During the work an electrical subcontractor claimed a change order saying it was owed money, partially due to design changes. The CM got sued on this claim, the owner refused to pay, so the CM made a claim in court against the Owner.

The Owner moved to dismiss the claim filed by the CM on the theory that the contract required the CM to pay for any kind of claims arising out of design. The CM argued that it did not create the design and could not be tagged with every kind of responsibility for it. The trial court sided with the Owner and dismissed the case.

ISSUE – Has a public Owner any responsibility to a CM under the CM at risk contract for design issues?

HOLDING – The Owner giving plans to a Construction Manager at Risk has some responsibility to warrant the adequacy of those plans. Dismissal reversed.

REASONS – Contractors under the CM at risk contract are involved with the design team’s efforts but not to such an extent that owners can shut off all liability for the drawings no matter what. The question for the Court in this case was – does an Owner have any duty at all? The court said there is a duty and gave some guidance for its determination.

The Court discussed design-bid-build, design build and CM at Risk contract forms and the way the agreements allocate design risk. The scope of the owner’s warranty of its plans varies under the different contract forms.

CM at Risk is widely used by private owners for big jobs due to the benefits flowing from integration of the efforts of participants. The Legislature allowed Massachusetts to put up public buildings under this contracting style. Designers have insurance and the Court found the lawmakers could not have intended to shift all design risk onto builders.

The CM agreed to study and review the plans and consult with the designer but this did not amount to an express disclaimer by the Owner of some warranty liability exposure.

The implied warranty by the Owner of the adequacy of the design overpowered even the indemnity provision. The CM agreed to protect the Owner from claims about “the Work”, which the Court said did not include the designer’s responsibility for design. The indemnity clause did not bar the CM’s third party complaint.

 

COBB COMMENT – Owners want protection from all claims but that is not a real world goal. Early involvement by builders with designers has established itself as a useful way to get work done.

Get A Consult

Charles W. Cobb

Attorney at Law


ADDRESS

320 Nevada Street Ste 301,

Newton MA 02460

EMAIL

ccobb@silverlakelegal.com

PHONE NUMBER

(978) 979-1223

Silver Lake Legal Privacy Policy

This site was created using WordPress and uses Google Analytics to understand how posts are being received.

• This site has Google Analytics Advertising Features implemented involving Google Analytics cookies.

• Some of the ads you receive on pages across the internet are customized based on predictions about your interests generated from your visits over time and across different web-sites. This type of ad customization — sometimes called “interest-based” or “online behavioral” advertising — is enabled through various technologies, including browser cookies as well as other non-cookie technologies.

• Sliver Lake Legal has no policy or intent to use first and third party cookies together.

• Visitors can opt-out of the Google Analytics Advertising Features, including through Ads Settings, Ad Settings for mobile apps, or any other available means (for example, the NAI’s consumer opt-out).

• Users should also visit Google Analytics’ currently available opt-outs for the web.