Lake Hills Investments, LLC v. Rushforth Construction Co., Inc.:

Where the Design is Defective, but the Contractor’s Work is Also Defective, the Contractor Does Not Have a Complete Defense to Defect Claims by Virtue of the Defective Design

Does a contractor in Washington have a complete defense for an alleged construction defect when the defect is related, in part, to a design error and, in part, to a construction defect?  As a contractor, you might argue you are completely absolved of liability when there is a problem with the design, which is completely outside of your control, and where you followed the plans and specifications.  As an owner, you might argue the contractor has an obligation to build in accordance with the plans and specifications and to notify you upon learning of a problem with the design.  Who pays for the damages?  The Washington Supreme Court addressed this question and revisited the state’s interpretation of the Spearin Doctrine[1] in Lake Hills Investments, LLC v. Rushforth Construction Co., Inc., a decision entered September 2, 2021. 

Owner Lake Hills Investments LLC sued contractor AP Rushforth (“Contractor”) for breach of contract arising out of construction work at the Lake Hills Village project in Bellevue.  Among the Owner’s complaints was an allegation that excessive cracking occurred in the concrete garage floor slab.  The Contractor filed a counterclaim, alleging it was underpaid.  One of the Contractor’s affirmative defenses to the Owner’s claim was that the excessive concrete cracking was the result of a problem in the plans and specifications, furnished by the Owner, with respect to the reinforcing steel in the garage slab, and the Contractor had followed those plans and specifications.  The Owner disputed that the Contractor had followed the plans and specifications.  The focus of the court’s opinion was a jury instruction on the Contractor’s burden of proof on its affirmative defense to relieve it of liability.  That instruction given to the jury stated:

[Contractor] has the burden to prove that [Owner] provided the plans and specifications for an area of work at issue, [Contractor] followed the plans and specifications, and the construction defect resulted from defects in the plans or specifications.  If you find that this affirmative defense has been proved for a particular area, then your verdict should be for [Contractor] as to that area.

During the trial, the jury found the Contractor’s work was defective in at least some areas, but the Owner also breached the contract.  The jury awarded a mixed verdict with a net judgment to the Contractor. 

The Court of Appeals reversed, determining that the instruction misstated the Contractor’s burden of proof because in order to avoid liability, the Contractor had to prove a defect resulted “solely” from the defective plans or specifications as a single cause.  The Court of Appeals held that the instruction that was given allowed the jury to find for the Contractor if any part of the construction defect resulted from the Owner’s plans and specifications.  The Washington Supreme Court reviewed this holding on appeal.

The Washington Supreme Court reversed, holding that the jury instruction did not correctly state the law, but the instructions as a whole were sufficient to allow the jury to apportion fault between the Owner and Contractor, and although the jury instruction had the potential to mislead the jury, the Owner did not establish it was prejudiced by the way the jury instruction was stated. 

 The Washington Supreme Court reasoned that a contractor generally has an implied and/or express contractual duty to perform work in a workmanlike manner and free from defects in materials or workmanship.  An owner who furnishes plans and specifications for the work impliedly warrants to the contractor that they will be sufficient for the intended purpose.  “If a contractor establishes that it followed the plans and specifications, then it usually is not responsible for a result unsuited to the owner’s purposes.” The question before the court was “whether the implied warranty of design accuracy can completely shield a contractor from liability for breaching its duty of good workmanship when the jury could find that the defective work resulted, at least in part, from the contractor’s deficient work and failure to follow the plans and specifications.”  The court’s answer was that “[a]n affirmative design defect defense is a complete defense if the damage is solely due to the design.  However, if the defects were caused by a combination of deficient performance and deficient design, then it is not a complete defense.”  Accordingly, the jury instruction was potentially misleading because it described the defense as a complete defense and did not explicitly state that the jury could calculate and attribute proportional liability and determine what percentage of the defect was caused by defective design.

However the Owner did not meet its burden of proof to establish it suffered prejudice as a result of the jury instruction because the instructions as a whole allowed the jury to apportion fault between the parties, and the jury found in favor of the Owner on six claims, and the Contractor on two claims, suggesting that the jury had apportioned liability.  Accordingly, the outcome was that the jury verdict stands, and the court remanded for a determination of attorneys’ fees. 

The takeaway from this case is that in Washington, an error in the plans or specifications may not completely absolve a contractor of liability for construction defects. Where there are deficiencies in a contractor’s work, as well as the design, and where the contractor follows the defective plans and specifications, the finder of fact will apportion liability between the responsible parties.

[1] United States v. Spearin, 248 U.S. 132, 39 S. Ct. 59 (1918) is the seminal case in the U.S. on the implied warranty by an owner who supplies a design that, if the design is followed, the resulting constructed work will be adequate.  This case involved construction of a dry dock for the U.S. government. The contractor followed the plans and specifications in relocating a sewer, however, the site flooded and damaged the sewer.  The U.S. Supreme Court held the contractor was not responsible for defects in the plans and specifications furnished by the owner.