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In D.W. Wilburn, Inc. v. K. Norman Berry Associates, Architects, PLLC, No. 2015-CA-1254-MR (Ky. Ct. App. Dec. 22, 2016), the Kentucky Court of Appeals reversed a lower court’s grant of summary judgment in favor of Third-Party Defendant K. Norman Berry Associates, Architects, PLLC, the architect hired by the Oldham County Board of Education to design the North Oldham High School. The Board also contracted with Third-Party Plaintiff D.W. Wilburn, Inc. to serve as the general contractor on the project. Wilburn subcontracted with Link Electric, Inc. to construct the electrical portion of the Project.
During the Project, change orders were executed extending the final completion date. Following completion, Link Electric sued Wilburn claiming damages as a result of the delays. Wilburn filed a third-party complaint against KNBA, alleging KNBA caused the delays by failing to properly prepare plans and specifications. KNBA moved for and was granted summary judgment based on the trial court’s reasoning that because there was no privity of contract between KNBA and Wilburn, Wilburn’s claim for negligent misrepresentation was barred by the economic loss doctrine.
KNBA argued even if the claim for negligent misrepresentation was viable, Wilburn’s claim was premised purely on economic loss and should be barred by the economic loss doctrine. Under Kentucky law, the economic loss doctrine prevents the commercial purchaser of a product from suing in tort to recover for economic losses arising from the malfunction of the product itself. The doctrine was created by the judiciary in order to prevent the commercial purchaser of a product from suing in tort to recover for economic losses which must be recovered, if at all, pursuant to contract law. KNBA noted the Kentucky Court of Appeals, in an unpublished opinion, had extended the economic loss doctrine to the realm of construction litigation.
The Appeals Court disagreed, noting although it was doubtful the Kentucky Supreme Court had in fact extended the economic loss doctrine beyond product liability cases, the issue did not need to be resolved because the economic loss doctrine would not apply to a negligent misrepresentation claim. The Court reasoned the very purpose of a negligent misrepresentation claim was to compensate purely economic losses where there is no contractual remedy available and there is a breach of duty under Section 552 of the Restatement (Second) of Torts.
The Court’s decision in D.W. Wilburn, Inc. v. K. Norman Berry Associates, Architects, PLLC demonstrates the ongoing trend to eliminate privity of contract as a requisite for recovery of economic loss in construction cases where negligent misrepresentation is alleged. A Kentucky design professional should be aware that a claim for negligent misrepresentation may be made against him or her in Kentucky by a general contractor or subcontractor, even where there is no contractual privity.