Jamison Rayfield and Brian Slome | Lewis Brisbois
The California Court of Appeal recently reversed a summary judgment ruling in favor of a geotechnical engineering firm that had conducted a brief inspection of a residential construction project’s footing trench for $360.
The case arose when homeowner Cheryl Lynch experienced significant property damage after her home’s foundation failed and the structure began subsiding into a slope. Lynch sued Peter & Associates for professional negligence and nuisance, despite having no direct contractual relationship with the firm, which had been hired by her contractor to perform the geotechnical inspection.
The court distinguished this case from Bily v. Arthur Young & Co. (1992) 3 Cal.4th 370, which had limited auditors’ professional duty to third parties, noting that Bily dealt with purely economic damages, whereas Lynch involved physical property damage, making Bily’s policy concerns about unlimited liability inapplicable. The court emphasized that construction professional negligence cases, particularly those involving residential property damage, warrant a different analysis than cases involving economic loss.
The Court’s analysis centered on whether Peter & Associates owed Lynch a duty of care despite the lack of contractual privity, and concluded that it did. The court reasoned that whether a duty of care is owed to third parties still requires a traditional duty of care analysis using the factors established in Biakanja v. Irving (1958) 49 Cal.2d 647, which includes: (1) the extent the transaction was intended to affect the plaintiff, (2) foreseeability of harm, (3) degree of certainty of injury, (4) connection between conduct and injury, (5) moral blame, and (6) policy of preventing future harm. Applying these factors, the Court found all six Biakanja factors supported finding a duty of care in this specific case, particularly given the residential context and the direct connection between the firm’s work and the resulting damage.
Why this case matters:
This ruling has significant implications for professional negligence cases in California, particularly in residential construction. While each case must be analyzed on its specific facts using the Biakanja factors, it strongly suggests courts will be more inclined to find duties of care owed by construction professionals to property owners in residential contexts, even without direct contractual relationships. We would expect this ruling to expand the pool of potential plaintiffs who can sue, and accordingly increase liability exposures for professional servicers in the residential construction realm.
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