In ACE American Insurance Co. v. AERCO International, Inc., 2022 WL 814788 (E.D. Mo., March 17, 2022), the United States District Court for the Eastern District of Missouri   held the absence of privity of contract and the economic loss doctrine do not bar a contractor’s contribution claim against an architect and its subconsultant.

Walsh Construction Company II, LLC and Alberici Constructors, Inc. created a joint venture (“Owner”) to construct a medical clinic in St. Louis, Missouri.  Owner purchased two AERCO Model B+II WaterWizard water heaters for the Clinic.  Blackmore & Glunt, Inc. (“B&G”) delivered and installed the water heaters. 

Approximately three (3) months after installation, an electronically controlled release valve on the water heaters discharged hot water, which caused substantial property damage.  The water heaters malfunctioned again in a similar manner a few months later.  Owner’s insurer, ACE American Insurance Co. (“ACE”), paid approximately $4 million for the flood damage.

ACE filed suit against AERCO and B&G, alleging negligence and seeking subrogation for the losses it had paid.  B&G filed a third-party complaint against Christner, Inc. (“Christner”), the architectural design firm retained by the Owner, and IMEG Corp (“IMEG”), the engineering consulting firm hired by Christner to advise on certain mechanical, electrical and plumbing design matters.   B&G sought contribution from Christner and IMEG on the grounds they negligently designed the mechanical room where the water heaters were located.   

Christner and IMEG moved to dismiss, arguing the claims against them were barred by the “no privity-no duty” rule and economic loss doctrine.  While the Parties agreed there was no contract between B&G and Christner or IMEG, the Court denied the motion, holding there is a right to contribution among persons who are liable in tort to the same injured party for the same harm.  The Court noted B&G did not bring independent negligence claims against Christner and IMEG; instead, B&G only sought contribution to the extent it was liable to ACE.  The Court held B&G’s entitlement to contribution did not depend on whether Christner and IMEG owed a duty to B&G, but rather, whether Christner and IMEG acted tortiously towards the Owner. 

The Court ruled expressly that the economic loss doctrine did not necessarily bar B&G’s contribution claims.  The economic loss doctrine “prohibits a party from seeking to recover in tort for economic losses that are contractual in nature.”  However, Missouri law is clear that claims for negligent rendition of professional services are not barred by the economic loss doctrine.  The Court found that while Christner and IMEG’s alleged negligence clearly related to the contracts for services, it was unclear whether this would equate to a professional negligence claim “contractual in nature.”  Accordingly, the Court held the economic loss doctrine did not mandate dismissal of the contribution claims.