Lawsuits Put a Crimp in Firms’ Style
In an era when high-powered attorneys are hired to file lawsuits concerning just about any profession imaginable, it’s no surprise that even architects are finding themselves the targets of big-ticket litigation.
As legal actions against architects--many of them involving condominium projects--spiraled upward in the early 1980s, the cost of liability insurance for architects kept pace. Insurance is so costly that many architects today “go naked”--they carry no liability coverage. Many who have insurance do so because their clients, especially public agencies, require it. The cost is high--about 5% of a firm’s annual gross. For a company bringing in $1 million a year, that’s $50,000.
“The litigation has gone out of sight,” said Jeff Cavignac, vice president of Robson Cavignac & Associates, the largest insurance agency serving design professionals in San Diego. “I see my clients being involved in lawsuits they shouldn’t even be close to. It’s extremely frustrating for them, us and the insurance companies.”
According to architects and attorneys, a typical condominium case begins when an 8- or 10-year-old project begins to show expected wear and tear, or even more severe damage if maintenance has been poor. With the help of attorneys, homeowners associations often decide to take legal action in an attempt to pay for the repair of things such as leaky roofs, poor drainage and soil problems.
Most often they sue a developer, who in turn sues architects and other subcontractors. Suits are seldom brought against architects who don’t have insurance; it’s far more lucrative to pursue an architect with a liability policy of $500,000 or $1 million.
Some architects simply avoid condominium projects.
“Get the addresses of all the condominiums in San Diego County, and you’ll find about two-thirds involved in lawsuits,” said Ed Grochowiak, a principal at SGPA Planning & Architecture and former president of the local chapter of the American Institute of Architects. “Architects who do condominiums have the greatest exposure.”
La Jolla architect Dale Naegle, head of a medium-size firm best known for its tract housing work, said his company has designed thousands of condominiums over the years, and has been sued at least 10 times over such projects. In some cases, his insurance company has had to pay damages, but usually it has settled out of court for far less than what a plaintiff demanded.
A 1987 case brought against Naegle involved the design of several hundred apartments near University Towne Centre for a company called Lucky Development (the apartments are now housing for UC San Diego students and known as La Jolla Del Sol). It was atypical of cases brought against architects, according to Naegle, who said the developer was inexperienced and did not manage the construction well. As a result, work was done poorly and behind schedule, and the developers tried to blame their architect, he said.
“They decided that, since we had insurance, they would sue us because their job was delayed, even though they were the ones who delayed it,” Naegle said. “They accused us of our plans not being in compliance with the building codes.”
The developers withheld Naegle’s fees and made a $5-million construction delay claim against his company. In arbitration, a panel found in favor of the architects, and the developers paid their $250,000 fee. The architects spent $70,000 or so on attorney fees.
Many other local architects have been involved in litigation. Leonard Veitzer didn’t care to discuss a $2-million case brought against him by the homeowners association at the Villa De Fanta condominiums on University Avenue in La Mesa.
Hired for His Opinion
“There were allegations of insufficient structure, roof leaks, leaks in balcony decks, improper ventilation of crawl spaces and various framing problems, all related to improper design,” said architect John Landry, who testified on Veitzer’s behalf in this case and is often hired to provide his opinion in construction cases.
(Naegle and other architects confessed to a strong aversion to architects who testify against their peers; his company has a policy of representing only architects, not plaintiffs. If a case looks bad for an architect, Naegle said, he won’t get involved.)
Veitzer’s case was defended successfully by attorney Chuck Maurer of Maurer, Higginbotham & Harris, which specializes in construction cases. Veitzer’s insurance company didn’t pay a dime.
Sometimes, cases against architects last for years and end up in jury trials. Deems Lewis McKinley & Associates, one of San Diego’s oldest and largest firms, was recently defended by Edwards White & Sooy in a case involving design work the company did for the owners of the old Walker Scott department store building at 5th Avenue and Broadway in downtown San Diego.
According to architect John McKinley, a principal in Deems Lewis, building owner Chuck Del Valle never gave the architects a definitive budget when he commissioned them to design a conversion from a department store into raw office spaces.
Withheld $50,000
Del Valle had paid his architects $75,000 for design services, but construction estimates came in higher than he expected. He blamed the architects, withholding an additional $50,000 he owed and asking for the earlier payments back.
Two weeks ago, a jury returned a verdict in favor of the architects, who were not held liable for any damages.
“I got the feeling they felt this was one of those cases that never should have been there,” McKinley said. “It’s the first time we’ve ever been to court.”
When it comes to condominium projects, Naegle is working on an idea he believes will reduce the number of lawsuits: a maintenance manual for homeowners associations.
As an additional safeguard, he said, more developers now retain their architects to supervise construction to make sure it conforms to plans.
Adverse Effects on Design
Insurance rates have leveled, according to Cavignac, after increases of more than 100% in the mid-1980s. But litigation continues, having adverse effects on what ought to be the primary role of architects: designing good buildings.
According to Naegle, fear of litigation is causing builders to use costly construction methods that cut the risk of legal problems but pass costs on to home buyers.
“The terrible thing is that it’s limiting innovation,” he said, describing a time only a few years ago when architects and builders were revered for innovative designs that cut costs.
“Instead of architects designing, they’re extending themselves against irrelevant legal matters,” said San Diego architect Rob Quigley. “Every principal spends time on them now. Ten years ago, you wouldn’t have been involved. Once you’re named, you have to defend yourself, no matter how ridiculous the claim is.”
