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In Zirkelbach Construction, Inc. v. DOWL, LLC, 402
P.3d 1244 (Mont. 2017), the Supreme Court of Montana ruled design professionals
can contract to limit liability for a contract claim, even if the limitation is
a nominal percentage of the overall fees paid, as long as the parties do not
disclaim all liability outright. However, the Court held that the limitation
did not apply to the negligence claim in the suit.
Zirkelbach Construction, Inc. (“Zirkelbach”) was retained by
SunCap Billings, LLC (“SunCap”) to build a FedEx Ground facility (the
“Project”) in Billings, Montana. Zirkelbach contracted with DOWL, LLC (“DOWL”)
to provide design services related to the Project.
Zirkelback and DOWL entered into an Agreement for Professional
Services (the “Agreement”), whereby DOWL would receive $122,967.00 for its
design services. The Parties subsequently added an addendum to the Agreement
adding additional services and fees, bringing the total of fees paid to DOWL to
$665,000.00. The Agreement included a limitation of liability in which both
parties limit DOWL’s total liability under the Agreement to $50,000.00.
Following the Project, Zirkelbach claimed it incurred
$1,218,197.93 in repair costs necessary due to DOWL’s defective design. Zirkelbach
filed suit against DOWL and DOWL filed for partial summary judgment, citing the
contractual limitation of liability clause. Summary judgment was granted and
Zirkelbach appealed to the Montana Supreme Court.
Zirkelbach argued Montana law disfavors limitations of
liability clauses because they violate public policy. The Supreme Court held freedom
to contract was a central tenet to modern contract law. As long as the parties
enter into the contract on equal footing and the terms of the contract do not
conflict with public laws, the Court stated the contract should be upheld. The
Court recognized that § 28-2-702 MCA prohibits a party from exempting itself
wholly for its own liability, but noted DOWL did not attempt to contract away
all liability, only to minimize it. The
Court agreed the limit imposed by contract was minimal, but found it was not
the Court’s place to render an agreement void just because Plaintiff failed to
negotiate for a higher limit of liability.
It is important to note that the Court specifically stated
the limit of liability did not apply to the negligence claim, only the breach
of contract claim. The Court did not address why the language addressing “total
liability” did not also limit the damages under the negligence claim.
While the decision is seemingly good for Design
Professionals in Montana, it in reality has very little effect in Montana since
a professional negligence claim is almost always contained in the complaint
with a breach of contract claim.
However, we encourage our clients to continue inserting limitations of
liability in their proposals and contracts to reduce their exposure in contract
or tort to the extent allowed by each state.