.

Defense Digest

Pennsylvania Supreme Court Expands Liability of Contractors for Completed Work – Even If a Defect Is Obvious

Defense Digest, Vol. 29, No. 3, September 2023

September 1, 2023

Key Points:

  • The Supreme Court of Pennsylvania held that a contractor can be liable for a hazardous condition it created, even if the work is accepted, known by the property owner, and is obvious in nature.
  • This opens the door to remote claims brought by third parties against construction contractors.
  • It may serve to undercut the open and obvious defense to claims brought by the public against out-of-possession contractors.
  • This does not serve to relieve premises owners/possessors of potential joint liability with contractors.

In Brown v. City of Oil City, 294 A.3d 413 (Pa. May 16, 2023), the City of Oil City, Pennsylvania, retained two contractors to design and oversee reconstruction of the deteriorated concrete stairs leading to the entrance of the City’s library. The work was performed by another contractor, also through a contract with the City. Installation of the new stairs was completed by the end of 2011. However, in early 2012, the City received reports about imperfections in the concrete surface. The City notified the contractors that it considered the steps to be dangerous and defective. Between 2012 and 2015, the condition became worse, but no remedial work was performed. In 2015, the plaintiff exited the library, tripped on one of the deteriorated steps, and sustained a fatal head trauma. A wrongful death suit was filed against the City and the contractors.

After discovery, the contractors were granted summary judgment, having argued they owed no duty to third persons as they were not in possession of the premises at the time of injury. The trial court cited to Section 385 of the Restatement (Second) of Torts as limiting a contractor’s third-party liability to only those situations where a possessor was unlikely to discover the defect. The court relied on Gresik v. PA Partners, L.P., 989 A.2d 344 (Pa. Super. 2009) (Gresik I), which involved a negligence suit against the prior owner of a steel plant where modifications had been made. The prior owner removed a drawbridge designed as a safety feature for steelworkers. After the plant was sold, a steelworker died when he had no means of escaping a molten steel breach. Suit was brought against the prior owner. The Superior Court held that a precondition for liability under Section 385 is showing that the danger was unlikely to be discovered by the possessor. Since the plant’s current owner was aware of the hazard, summary judgment was entered for the prior owner. Citing to Gresik I, the trial court in Brown held that the contractors could not be liable because the City was aware of the hazardous condition of the steps. 

The Commonwealth Court reversed, citing two Pennsylvania cases that imposed liability on contractors to the public, Prost v. Caldwell Stores, 187 A.2d 273 (Pa. 1963) and Gilbert v. Conrail, 623 A.2d 873 (Pa. Cmwlth. 1963). In Prost, the court held that a contractor could be liable to third parties for faulty tile installation, despite the possessor’s acceptance of the work. In Gilbert, Conrail built a defectively designed track crossing and then turned the property over to SEPTA. Despite the obvious nature of the track crossing, the court in Gilbert held that Conrail could still be liable for a passenger’s death resulting from the hazard and that the the condition did not have to be hidden, or latent, for the contractor to be liable. SEPTA’s awareness of the condition did not negate Conrail’s exposure. 

The contractors in Brown argued on appeal to the Supreme Court that the court should adopt the Superior Court’s approach in Gresik I to limit liability for an out-of-possession contractor to latent defects only. They argued that since the condition of the steps was known by the City, that entity was solely responsible for remediation. In fact, the contractors argued that they could not take action without instructions from the City. The City would be in the best position to remedy defects, instead of a contractor who no longer had contact with the property. They also cited to the Restatement under which possessors are required to inspect for latent defects to protect invitees. Further, they cited to a comment of Section 385, which imposed liability on contractors only to the same extent as manufacturers of a product, that is, for defects which the end user is not able to discover. Brown, to the contrary, argued that Section 385 does not pre-condition a contractor’s liability to third parties on the knowledge of the possessor. Brown further argued that the contractor’s interpretation creates an incentive for possessors to ignore defects and that the possessor’s knowledge should not insulate the contractor. 

The Supreme Court in Brown affirmed the Commonwealth Court’s reversal of summary judgment. The court sided with the reasoning of Gilbert, which permitted liability, even for open and obvious conditions known by the possessor. The court held that under Section 385 of the Restatement, a contractor could face liability whether the condition was latent or apparent. 

The Supreme Court interpreted Section 385 as imposing liability on contractors for injuries to third parties arising from all defects, whether latent or obvious. The court noted that comment c to Section 385, which refers to work “unlikely to be discovered by the possessor,” is not applicable to third parties, but only relates to claims brought by possessors. As such, under Brown, a contractor can be found liable to third parties as a result of a dangerous condition it created, regardless of whether the condition is latent, open and obvious, or known by the possessor. If the condition is latent, a possessor may have a viable claim as well. This decision only bars a claim by a possessor against a contractor for an open and obvious condition. The court also notes that a possessor also retains a duty to keep its premises reasonably safe for third parties and could be jointly liable with a contractor. 

This case is problematic as it opens the door to injury claims brought against contractors by third parties long after their work is accepted, even if the condition is open and obvious to the plaintiff and the possessor. Also, the court does not address the established defenses that no duty is owed to warn of open and obvious conditions, or that the plaintiff may be at fault for assuming a risk. Last, it is presumed that this decision does not impact a statute of repose defense, assuming a defendant fits within the protected class. 

*David is an Of Counsel and works in our Philadelphia, Pennsylvania, office. He can be reached at 215.575.3577 or dswolf@mdwcg.com. 


 

Defense Digest, Vol. 29, No. 3, September 2023, is prepared by Marshall Dennehey to provide information on recent legal developments of interest to our readers. This publication is not intended to provide legal advice for a specific situation or to create an attorney-client relationship. ATTORNEY ADVERTISING pursuant to New York RPC 7.1. © 2023 Marshall Dennehey. All Rights Reserved. This article may not be reprinted without the express written permission of our firm. For reprints, contact tamontemuro@mdwcg.com.

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Thought Leadership

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In December 2019, the plaintiffs filed a claim with Universal for damages caused by a water and sewage back up through the plumbing system and existing through multiple fixtures including the washing machine drain, kitchen sink, dishwasher, bathtub and toilet. Universal investigated the claim, issued payment for resulting water damage totaling $7,000.00 in actual cash value ($12,000.00 in replacement cost value). The plaintiffs sought additional benefits for work needed to access the below-slab cast iron plumbing system due to the failure of the system from rust, deterioration, corrosion and breaks in the line. Universal denied any additional benefits for access. In 2021, the plaintiffs filed suit. During litigation, Universal sent a plumber to inspect the home and the plumber concluded the pipes were clogged but could be cleaned. The plaintiffs’ plumber testified that the plumbing system needed to be replaced due to holes and openings in the pipes. The plaintiffs introduced two estimates prepared by Triad Restoration services totaling $79,680.22 in replacement cost value and $50,219.97 in actual cash value and an executed contract with another company for repairs with the amounts of repair redacted. Since the insurance policy did not provide coverage for repair or replacement of the plumbing system, the jury only had to decide whether the plumbing system needed to be replaced, and if it did, Universal would owe for the access costs; the jury verdict form required the jury to determine both the replacement cost value and actual cash value amounts. The jury asked if it had to rely on the Triad estimates for their amounts. The trial court advised the amount awarded had to be based on the evidence presented at trial and the law given by the trial court. The jury awarded $335,000.00 in replacement cost value or $305,000.00 in actual cash value. Universal motioned for a new trial arguing the amount awarded was unsupported by the evidence and then moved for remittitur. The trial court denied both motions and this appeal followed. The court found that while a jury’s verdict should only be disturbed with caution and discretion, the trial court must give the properly challenged award close scrutiny and determine whether it bears a reasonable relation to the damaged provided, is supported by the evidence, and could have been reached in a logical manner by reasonable means §768.74(3), (5)(d)-(e), Fla. Stat. The court found the trial court did consider the statutory requirements at the hearing on Universal’s remittitur motion and was concerned about a reasonable relation to the amount of damages proved and injury suffered and whether the award was supported by the evidence, but ultimately denied the motion, reasoning that the jury had been properly instructed to fairly and adequately compensate the plaintiffs. The court noted the only evidence providing the basis for the jury verdict was Triad’s estimates and those valued the plaintiffs' claimed loss at $79,680.22 in replacement cost value and $50,219.97 in actual cash value; no valuation evidence reasonably supported the jury verdict. The plaintiffs argued that the jury was entitled to consider more than the estimates, but the court conveyed the evidence provided did not give the jury a way to reach the amounts they awarded. The court was also not swayed by the plaintiffs’ argument regarding inflation and later price increases, but the court noted that no evidence via the contract, nor testimony regarding increase in labor, material, fuel or construction costs were entered into the record.  The court concluded the jury may draw reasonable inferences from the evidence, but it may not supply a damages number by speculation. The court did not find any of the plaintiffs’ remaining argument persuasive either. The court reversed the denial of Universal’s remittitur motion and motion for new trial as to damaged and remanded the case. The court ended its opinion with advising the trial court must determine whether replacement cost value or actual cash value is the property measure of damages under the policy and order remittitur in an amount consistent with that determination and the evidence.

Thought Leadership

Appeals Court Reverses Trial Court Order Awarding Attorney’s Fees Due to Lack of Evidence to Support Fee Awarded

The Fourth District Court of Appeal reversed the trial court’s order awarding appellate fees to People’s Trust Insurance Company based upon a lack of evidence to support the attorney’s fee award in RM & Assocs. Consulting, Inc. v. People's Trust Ins. Co., 2026 Fla. App. LEXIS 4654 (Fla. 4th DCA 2026). People’s Trust was the insurer of a residential property that had sustained water damage. RM & Associates Consulting was hired by the homeowner to perform mitigation services at the property. The homeowner assigned post-loss benefits to RM and RM subsequently filed suit against People’s Trust alleging that it had not been paid the money it was owed for the mitigation services. People’s Trust defended the lawsuit on the ground that the policy required the insured to notify the insurer before authorizing repairs so People's Trust could elect to use its preferred contractor. Because the owner did not comply with that provision, People's Trust asserted its liability was limited to the amount that its preferred contractor would have charged for the work, which People's Trust contended was $2,000. People's Trust paid that amount to RM before RM filed suit. People’s Trust filed a motion for summary judgment which was granted. RM appealed the summary judgment ruling and the ruling was upheld by the Fourth District Court of Appeal. The appellate court also granted People’s Trust’s entitlement to appellate attorney’s fees, subject to the trial court’s determination of the amount of fees, based upon an offer of judgment made by People's Trust. On remand, the trial court held an evidentiary hearing to determine the amount of attorney’s fees People’s Trust was entitled to. At the hearing, People’s Trust presented testimony from it’s fee expert, supervising trial counsel and appellate counsel. People’s Trust sought recovery of $24,866.17 for work performed by appellate counsel. The request primarily consisted of work performed in preparation of the answer brief. The fee expert testified that more than ninety hours spent preparing the answer brief was reasonable given the complexity and significance of the underlying issue. The appellate court found that the fee expert’s testimony fell short of meeting the necessary standard of demonstrating that the hours expended were necessary. The appellate court found that the billing records did not serve to cure the deficient testimony, as the billing records did not contain adequate details regarding the specific tasks performed. Rather the records contained entries such as “answer brief” which the appellate court found to be insufficient. The appellate court noted that neither the fee expert or counsel addressed how the prior research and briefing in the parallel litigation informed the work in the instant matter. The appellate court noted this was significant in that a court's attorney's fees award must exclude excessive, redundant, or otherwise unnecessary hours, citing Florida Patient's Compensation Fund v. Rowe, 472 So. 2d 1145 (Fla. 1985). Based upon the record failing to support the finding of the trial court, the 4th DCA remanded the case to the trial court for a reconsideration and redetermination of reasonable appellate attorney’s fees supported by competent substantial evidence. The 4th DCA reiterated that the fee expert’s focus on the quality of the work and the importance of the work to People’s Trust did not make up for the perceived deficiencies in the position that spending over ninety hours on a single answer brief was reasonable. Whether moving for attorney’s fees or challenging the amount of fees being sought by an opposing party, practitioners should be mindful of the evidence being used to support the claims being made. Parties should pay close attention to whether the hours being sought may be impacted by prior litigation either party may have engaged in. A party must be prepared to address how prior litigation efforts did or did not impact the amount of hours being claimed in current litigation. Lastly, billing records must be sufficiently detailed so as to support any potential future fee claim.

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