Client Alert: Florida Legislature Grants Individual Design Professionals Protections of Contractual Limitation of Liability Provisions
The Florida Legislature has stepped in to protect design professionals left exposed by the Florida courts. In Moransais v. Heathman, 744 So. 2d 973 (Fla. 1999), the Florida Supreme Court cracked open the door to unlimited liability to third parties for design professionals who performed work on behalf of corporate firms. There, the Court refused to extend a limitation of liability clause to an individual design professional whose firm had negotiated this important provision with the client.
The door to unlimited liability was fully opened 11 years later by Florida’s Third District Court of Appeal. In La Gorce Country Club v. Witt, 35 So. 3d 1033 (Fla. 3rd DCA 2010), the court held that design professionals could not be protected by contractual limitation of liability clauses negotiated between their firm and third parties. In Witt, the Third District relied upon Moransais in holding that individual design professionals are not “contracting parties” to their firms’ contracts with clients. This meant that the individual design professionals could not rely on those contracts to limit their liability. After Witt, plaintiffs’ lawyers quickly added claims against the individual design professionals to avoid limitations of liability provisions with the firm. Demonstrating the practical absurdity of the Witt court’s analysis, a crafty plaintiffs’ lawyer could often obtain benefits under the firm’s insurance policy by suing the firm’s members – i.e., the individual design professional.
In order to shut the door on Witt claims against individual design professionals, many firms started mentioning the individual design professionals expressly in their limitation of liability provisions. But this approach was unreliable, at best, given the state of Florida law. Fortunately, the Florida Legislature has acted to limit liability for individual design professionals by extending the same protections to individual design professionals as were already available to firms. These changes were implemented by creating Fla. Stat. §558.0035 and modifying the definition of “design professional” under Fla. Stat. §558.002.
Fla. Stat. §558.0035, which goes into effect July 1, 2013, precludes claims against individual design professionals employed by a business entity for damages resulting from negligence occurring within the course and scope of the business entity’s professional services contract if the following five conditions are met:
- The contract is made between the business entity and a claimant or with another entity for the provision of professional services to the claimant;
- The contract does not name as a party to the contract the individual employee or agent who will perform the professional services;
- The contract includes a prominent statement, in uppercase font that is at least five point sizes larger than the rest of the text, that, pursuant to this section, an individual employee or agent may not be held individually liable for negligence;
- The business entity maintains any professional liability insurance required under the contract; and
- Any damages are solely economic in nature and the damages do not extend to personal injuries or property not subject to the contract.
It is important to familiarize yourself with this new law and strictly comply with the five conditions set forth above. Unfortunately, the statute is not retro-active and will only affect liability under contracts entered into after July 1, 2013.
This new legislation is likely to result in arguments regarding the language inserted into contracts to satisfy the third condition set forth above, but we consider this to be a very positive step towards protecting design professionals from claims by owners, who are attempting to avoid the burdens of the contracts they negotiate. Importantly, the limitation of liability may also extend to intended third party beneficiaries of the design professional-owner contract.
This alert provides a general overview of recent legal developments. It is not intended and should not be relied on as legal advice.