MAY 2005
Construction Law
Pennsylvania Supreme Court Holds That a Contractor
May Assert Claims for Negligent Misrepresentation
Against Architect Despite Lack of Contractual Privity
The Pennsylvania Supreme Court, in a case of first
impression, has held that a contractor may assert a
negligent misrepresentation claim against an architect
for misstatements found in the architect’s plans for a
public construction contract, even though no contract
existed between the contractor and architect, Bilt-Rite
Contractors, Inc. v. The Architectural Studio, 866 A.2d
270 (Pa. 2005) (“Bilt-Rite”). In doing so, the Court, for
the first time, expressly adopted Section 552 of the
Restatement (Second) of Torts (“Section 552”). As a
result of this decision, Pennsylvania has joined the
growing number of jurisdictions which permit
contractors to assert negligent misrepresentation claims
against design professionals where the contractor can
show it reasonably relied upon the misrepresentations,
that the reliance was foreseeable, and that it suffered
economic damages as a result.
was awarded the general construction contract. The
contract specifically referred to, and incorporated by
reference, TAS’s plans, drawings and specifications.
TAS’s plans called for the installation of an aluminum
curtain wall system, sloped glazing system and metal
support systems, all of which TAS represented could be
installed and constructed through the use of “normal
and reasonable” construction means and methods,
using standard construction design tables. After
construction began, however, Bilt-Rite discovered that
this work could not in fact be constructed using normal
and reasonable construction methods. Instead, BiltRite was required to employ special construction
means, methods and design tables, resulting in
substantially increased construction costs.
THE LOWER COURT DECISIONS
Based upon the contention that TAS’s specifications
were false and/or misleading, Bilt-Rite commenced a
East Penn School District (“Owner”) hired The
legal action against TAS asserting claims for negligent
Architectural Studio (“TAS”) to provide architectural
misrepresentation under Section 552. TAS filed
services for the design and construction of a new high
preliminary objections on the grounds that (i) TAS
school in Lehigh County, Pennsylvania. The services
owed no duty to Bilt-Rite due to the lack of a
included the preparation of plans, drawings, and
contractual relationship between them; and (ii) Biltspecifications to be submitted to contractors for the
Rite’s claims were barred by the economic loss
purpose of preparing bids for the construction of the
doctrine. The trial court sustained these objections
new school. The Owner solicited bids from contractors
primarily relying on Linde Enterprises, Inc. v. Hazelton
for all aspects of the project and included TAS’s plans,
City Authority, 602 A.2d 897 (Pa. Super. 1992) and
drawings and specifications in the bid documents
Palco Linings, Inc. v. Pavex, Inc., 755 F. Supp. 1269
supplied to the contractors. Bilt-Rite Contractors, Inc.
(M.D. Pa. 1990).1
(“Bilt-Rite”) was the lowest responsible bidder and
FACTUAL BACKGROUND
The trial court considered itself bound by the Superior
Court’s decision in Linde which held that “a
contractor cannot prevail against an architect for
economic damages suffered as a result of negligence
in drafting specifications, absent privity of contract
between the contractor and the architect.”2 The trial
court found further support in the Palco court’s
discussion of two possible exceptions to the economic
loss doctrine: (1) where there is an intentional
misrepresentation and (2) in the context of negligent
misrepresentations, where the defendant is in the
business of supplying information that is relied upon
by others.3 The trial court noted that Palco held that
neither exception applied to architects.4
The Superior Court, in an unpublished decision,
affirmed the trial court’s decision. In considering the
issues before it, the Superior Court noted that absence
of privity was not an absolute bar to economic
damages in a tort setting.5 Instead, the court stated
that relationships exempt from the privity
requirements must be decided on a case-by-case
basis.6 The court noted that although the
Pennsylvania Supreme Court had cited to Section 552
with approval, it had never been expressly adopted.7
Moreover, Section 552 had never expressly included
or excluded the architect-contractor relationship.8
Citing its decision in Linde for authority, the Superior
Court held that the architect-contractor relationship
was not exempt from the privity requirements.9
Subsequently, Bilt-Rite appealed the Superior Court’s
decision to the Pennsylvania Supreme Court.
distinguished on factual grounds three recent Supreme
Court decisions addressing the tort of negligent
misrepresentation and Section 552.
The first of these three decisions was in Bortz v. Noon,
729 A.2d 555 (Pa.1999), wherein the Court concluded
that no special relationship existed between a real
estate agent and a buyer, and thus no duty was found
on behalf of the agent.11 Next, the Court considered
Gibbs v. Ernst, 647 A.2d 882 (Pa. 1994), which
discussed negligent misrepresentation in the context
of adoption. Although it cited to Section 552 with
approval, the Court also noted in Gibbs that
Pennsylvania had long recognized the common law
tort of negligent misrepresentation.12 Ultimately, the
Court in Gibbs found that the parents had stated a
viable claim for negligent misrepresentation against
the adoption agency.13 Finally, the Court reviewed its
decision in Rempel v. Nationwide Ins. Co., 370 A.2D
366 (Pa. 1977), which again cited with approval to
Section 552, but did not expressly adopt it.14
After discussing its treatment of Section 552, the
Court went on to review its recent decision in Sharpe
v. St. Luke’s Hospital, 821 A.2d 1215 (Pa. 2003) for a
discussion of general principles of negligence. In
Sharpe, the Court held that a hospital that had
conducted drug testing of a third party’s employee
could be liable to the employee even though there
was no privity of contract.15 The Court cited to five
factors to determine whether a duty in tort existed:
1) the relationship between the parties;
2) the social utility of the actor’s conduct;
PENNSYLVANIA SUPREME COURT PERMITS
NEGLIGENT MISREPRESENTATION CLAIMS
AGAINST ARCHITECT
On appeal, the Pennsylvania Supreme Court reversed
the trial court’s dismissal of the contractor’s negligent
misrepresentation claims. The Court began its
analysis by first recognizing that the question of
whether a contractor may assert negligent
misrepresentation claims against a design professional
under Section 552 was one of first impression under
Pennsylvania law.10 In so stating, the Court
2 MAY 2005
3) the nature of the risk imposed and forseeability of
the harm incurred;
4) the consequences of imposing a duty upon the
actor; and
5) the overall public interest in the proposed
solution.16
Based on these factors, the Court in Sharpe held that a
“tort duty can arise absent privity of contract”
between the employee and the hospital conducting
the testing.17
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With the above-referenced precedent as a guide, the
Court then went on to examine the application of the
Linde and Palco decisions that were relied upon by
the lower courts. The Court noted that the panel in
Linde had rejected the claim largely because
Pennsylvania law had not yet accepted the cause of
action.18 The Court then commented on the Palco
court’s reliance on Illinois case law.19 Further, the
Court noted that as the highest court in Pennsylvania,
it was not bound by the decisions in Linde and
Palco.20 In short, the Court declined to follow those
decisions.
Instead, the Court looked to decisions from other
jurisdictions which have allowed contractors to assert
negligent misrepresentation claims against design
professionals. In particular, the Court discussed at
length decisions from Massachusetts21 and Arizona,22
and also noted concurring opinions from Georgia,23
Montana,24 North Carolina,25 South Carolina26 and
Tennessee.27
Based primarily upon the rationale set forth in the
decisions from other jurisdictions, the Court
concluded as follows:
We are persuaded by these decisions from our sister
jurisdictions that (1) this Court should formally adopt
Section 552 of the Restatement (Second), which we
have cited with approval in the past, as applied by those
jurisdictions in the architect/contractor scenario;
(2) there is no requirement of privity in order to recover
under Section 552; and (3) the economic loss rule does
not bar recovery in such a case. Recognizing such a
cause of action, with such contours, is consistent with
Pennsylvania’s traditional common law formulation of
the tort of negligent misrepresentation.28
Although the Court made clear that Section 552
would be applicable to architects and design
professionals, it clarified that their liability would not
be limitless in that only those “for whose benefit and
guidance the information is supplied” may assert such
claims. 29 Therefore, liability is limited to those
whose use of the information is “reasonably
foreseeable” to the design professional.30 In addition,
the Court noted that by adopting Section 552, it was
not supplanting the common law version of the tort;
3 MAY 2005
instead, Section 552 is intended to clarify the
elements of the tort as it is applied to businesses
engaged in the supply of information.31
In finding that an architect owes a duty in tort, the
Court, relying on the Sharpe factors, noted that (1)
although an architect or design professional may not
have a contractual relationship with the contractor, the
professional is well aware that the design will be
provided to and utilized by others; (2) with respect to
social utility of the conduct at issue, given the
important reliance placed on professional services,
there is no reason to exempt such professionals from
the tort consequences of a negligent failure to perform
those services in a competent fashion; (3) given the
limitations found in Section 552, the tort adequately
accounts for the nature of the risk the duty imposes
and the forseeability of the prospective harm; (4) the
consequence of imposing a duty upon design
professionals is not unreasonable or unduly
burdensome; and (5) Section 552 will serve the public
interest by discouraging negligence among design
professionals.32
In its second major holding, the Court rejected TAS’s
contention that the economic loss doctrine barred
Bilt-Rite’s claims. In so holding, the Court noted that
“Pennsylvania has long recognized that purely
economic losses are recoverable in a variety of tort
actions including the professional malpractice
actions.”33 The Court went on to note that “to apply
the economic loss doctrine in the context of a Section
552 claim would be nonsensical: it would allow a
party to pursue an action only to hold that, once the
elements of the cause of action are shown, the party is
unable to recover for its losses.” 34 Accordingly, the
Court found that the economic loss doctrine is not a
bar to recovery for claims of negligent
misrepresentation under Section 552.35
The Court then applied its holdings with regard to
Section 552 and the economic loss doctrine to the
facts at hand. After noting that TAS provided plans
and specifications for the school project with full
knowledge that those plans and specifications would
KIRKPATRICK & LOCKHART NICHOLSON GRAHAM LLP
be included in a bid package supplied to prospective
bidders and relied upon by those bidders, the Court
held that the facts came within the framework of
Section 552 such that Bilt-Rite had a cognizable
claim against TAS under Pennsylvania law. 36
CONCLUSION
The Bilt-Rite decision changes the contours of
liability between design professionals and contractors
on public projects in Pennsylvania. Despite the fact
that no written contract may exist between them, a
design professional may now be liable to contractors
for errors in designs, plans and specifications which
the design professional knew would be included in
bid packages supplied to and relied upon by bidders.
Bilt-Rite therefore “raises the stakes” for design
professionals involved with public projects. Because
the rationale employed by the Pennsylvania Supreme
Court is equally applicable in the private contract
setting, design professionals should expect the
holding of Bilt-Rite will be made applicable to private
projects as well. The Court, however, left open the
question of whether a Certificate of Merit under Rule
1042.3 is required when bringing a claim of negligent
misrepresentation against a design professional.
As a result of the Bilt-Rite decision, design
professionals need to be aware of these additional
liabilities in (i) establishing and performing their
scope of work; (ii) pricing their work; and (iii)
procuring insurance products. In particular, design
professionals should examine their existing
professional liability policies and, if necessary,
contact their carriers to make certain that their policies
provide coverage for such liabilities to contractors.
R.J. Chleboski
rchleboski@klng.com
412.355.6372
Michael J. Zukowski
mzukowski@klng.com
412.355.6397
ENDNOTES
19
1
20
Bilt-Rite, 866 A.2d at 273.
2
Id.
3
See id.
4
See id. at 274.
5
See id.
6
See id.
7
See id.
8
See id.
9
See id.
10
See id. The Court also noted that the question had split the
lower federal courts in Pennsylvania and other state courts.
Id. (citing Linde Enterprises, Inc. v. Hazelton City Authority,
602 A.2d 897 (Pa. Super. 1992), appeal denied, 617 A.2d
1275 (Pa. 1992) and Borough of Lansdowne v. Sevenson
Env. Services, 2000 WL 1886578 (E.D. Pa. 2000)).
11
See id. at 278.
12
See id. at 279.
13
See id.
14
See id.
15
See id. at 283.
16
Id. at 281 (citations omitted).
17
Id. at 282.
18
See id. at 283.
4 MAY 2005
See id.
See id. at 284.
21
Nota Construction Corp. v. Keyes Associates, 694 N.E.2d
401 (Mass. App. Ct. 1998).
22
Donnelly Construction Co. v. Oberg/Hunt/Gilleland,
677 P.2d 1292 (Ariz. 1984).
23
Robert & Company Associates v. Rhodes-Haverty
Partnership, 300 S.E.2d 503 (Ga. 1983).
24
Jim’s Excavating Service, Inc. v. HKM Associates,
878 P.2d 248 (Mont. 1994).
25
Davidson and Jones, Inc. v. County of New Hanover,
225 S.E.2d 580 (N.C. Ct. App. 1979).
26
Tommy L. Griffin Plumbing & Heating Co. v. Jordan,
Jones & Goulding, Inc., 463 S.E.2d 85 (S.C. 1995).
27
John Martin Co., Inc. v. Morse/Kiesel, Inc., 819 S.W.2d
428 (Tenn. 1991).
28
Bilt-Rite, 866 A.2d at 285.
29
Id. at 287.
30
Id.
31
See id. at 287.
32
See id.
33
Id. at 288.
34
Id.
35
See id.
36
See id.
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