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March 1st, 2018
architects and engineers
SUPREME COURT OF MONTANA RULES LIMITATION OF LIABILITY IS ENFORCEABLE IN A CONTRACT ACTION AS LONG AS IT DOES NOT CONTRACT AWAY ALL LIABILITY, BUT NOT IN A PROFESSIONAL NEGLIGENCE ACTION

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.

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