DIU Engineering was retained by a homeowner to survey a property and make recommendations for repairs to a few designated areas. Some time after DIU Engineering rendered services, a clogged drainage pipe was discovered buried underneath the foundation of the home. It was determined that the clogged pipe was responsible for flooding that occurred in the home a few years earlier. The pipe was not indicated on DIU Engineering’s inspection report, however the pipe was detailed on an inspection done for the previous owner, which was not disclosed by the real estate agent prior to the home purchase.1
After learning of the drainage issue and the non-disclosure agreement by the original homeowner, the new homeowner filed a claim against the real estate agent and DIU Engineering for an erroneous engineering report.
While the claim against DIU Engineering was questionable with respect to the gravity of damages alleged by the plaintiffs, poor record keeping and limited documentation resulted in a difficult defense.2
The inability to build a strong defense resulted in a negotiated settlement of $125,000 including $80,000 for indemnity and $45,000 for expenses.
Risk Factor #1
It is important that design professionals clearly define the scope of services they are providing to their client, identifying both the services that are included and the services that are not included.
Risk Factor #2
Firms need to be able to objectively document how they came up with a set of recommendations to their clients so they can demonstrate that the decisions were based on their engineering judgment based on available information at the time the recommendation was made.