A Contractor May Be Able to Escape Liability for Construction Defects but Only if the Defects Solely Resulted from the Deficient Plans or Specifications

From the desk of Mike Staskiews: A contractor may be able to escape liability for a breach of contract due to construction defects, if the contractor proves the defects were caused by the owner’s own defective plans or specifications. This affirmative defense can shield the contractor from all liability. Therefore, the contractor carries the burden to prove that the defects resulted from the deficient plans. But how heavy is this burden?

Case Pointer: In this recent case, the Washington Court of Appeals reaffirms that in order to be absolved of all liability, a contractor must prove that the damages from the construction defects resulted solely from the defective plans or specifications.

Lakehill Invs. LLC v. Rushforth Constr. Co., Inc., 2020 Wash. App. LEXIS 2495 (September 14, 2020).

This case involved a breach of contract claim for construction defects stemming from a contract between Lake Hills Investments, LLC (“Lake Hills”) and AP Rushforth Construction Company (“AP”). The contract outlined the plans for AP to construct multiple buildings and features of a parking structure on an area known as Lake Hills Village. More than a year after the start of the construction, Lake Hills notified AP that the company was in breach of the contract schedule. Additionally, at this time, Lake Hills began identifying areas of the construction work they found defective. AP blamed the construction defects on Lake Hills only providing “a sketch” or “a concept” and not a buildable design. Eventually, the relationship between the companies deteriorated further and Lake Hills filed a breach of contract claim against AP. Subsequently, AP filed its own breach of contract claim for underpayment. After a long trial, the jury returned a mixed verdict, with a net judgment award of more than $9,000,000 in favor of AP. Lake Hills appealed, alleging that multiple jury instructions were erroneous. Particularly, Lake Hills claimed that the jury instruction about AP’s burden to establish the affirmative defense of deficient plans or specifications inaccurately characterized the law.

For the breach of contract suit brought by Lake Hills to be successful, Lake Hills had to prove that AP failed to construct certain areas in compliance with plans and specifications and that the failure to do so damaged Lake Hills. The jury found that Lake Hills successfully proved these elements; thus, AP was liable for the defects. However, when an owner includes in the contract the building plans or specifications, an implied warranty exists that the plans are workable and sufficient. If that is not the case, a contractor can argue breach of warranty. Here, AP alleged breach of warranty regarding the workability of the plans in the form of an affirmative defense. Therefore, the jury was also instructed on AP’s affirmative defense. The explicit language of the jury instruction stated that AP had to prove that AP followed the plans and specifications and “the [construction] defect resulted from defects in the plans or specifications.”

Based on the wording of this jury instruction, the jury could absolve AP from liability regarding a defective area, if there was proof of any deficiency in the plans pertaining to that area. Thus, AP could avoid liability even if AP’s faulty construction work contributed to the defect and damage so long as there was some defect in the plan for that area. Notably, the jury found AP liable for eight work defects and the jury awarded zero damages for two of these defects. For those two defects, there was evidence that the damage was caused by both deficient work on AP’s part and deficient plans. Thus, it is possible that the jury absolved AP of liability for those two defects, even when AP’s own deficient performance contributed to the resulting damages.

The Washington Court of Appeals took this chance to once again make it clear that for complete absolution of liability for construction defects, the contractor needs to prove that the work defects were solely caused by the deficient plans or specifications. The court explained this by reasoning when there is a breach of contract, a party may recover damages for injuries that were proximately caused by the breach. A contractor, like AP, can prove that there was an alternate proximate cause. For a defective plans or specifications affirmative defense, the contractor is in effect arguing that there is another singular cause of the injury, the defective plans or specifications. Thus, in order to prevail, the contractor, in this case AP, needs to prove that the deficient plans or specifications was the sole cause of the damages.

Ultimately, the Washington Court of Appeals held that the jury instructions pertaining to AP’s affirmative defense misstated the law and because the inclusion of the word “solely” would have correctly characterized the law, the court abused its discretion by keeping that word out of the instructions. Thus, the case was reversed and remanded for a new trial.