Is there a doctrine in the house? Part 5

Under the Accepted-Work Doctrine, contractors and designers are relieved of liability to injured third parties after a completed project goes back to the owner.

The Accepted-Work Doctrine – also known as the Acceptance Doctrine, the Completed and Acceptance Rule, or, in Florida, the Slavin Doctrine – deals with the liability of contractors and design professionals for defects after completion of the project.

Under this doctrine, once the owner has accepted the work, a contractor is not liable to third parties who have no contractual relations with it, for damages later suffered by reason of its negligence in the performance of its contract duties. Essentially, a contractor, architect, or engineer is relieved of liability to injured third parties caused by a patent, or obvious, defect after control of the completed premises has been turned over to the owner. Under this doctrine, the work of the contractor must be fully completed and accepted before the owner becomes liable and the contractor is exonerated for injuries to third parties caused by the defective work.

Why adopt such a rule? The rationale for the Accepted-Work Doctrine is that by occupying and resuming possession of the work, the owner theoretically deprives the contractor of the opportunity to rectify its wrongs. Before accepting the work as being in full compliance with the terms of the contract, the project owner is presumed to have made a reasonably careful inspection thereof, and to know of its defects. Therefore, if the owner takes the project in a defective condition, the owner accepts the defects as their own.

The concept is embodied in Par. 12.3 of the AIA A201 General Conditions (2017 ed.), under which the project owner has the right to accept the contractor’s work with defects and to negotiate a reduction in the contract price for that defective condition. Presumably, such an owner would also assume the risk of those known defects. Not only does this doctrine provide an affirmative defense for contractors as to patent construction defects, but it has been applied to design professionals as well for patent defects in their designs.

Tracing the roots of the doctrine. In the U.S., some trace the Accepted-Work Doctrine to a 1919 Connecticut construction case in which the building contractor was not liable to a passerby who was killed when struck by a faulty cornice built by the contractor. The court stated that the plaintiff’s injury, which occurred after the contractor had completed the work, was proximately caused solely by the owner’s failure to inspect and guard against the cornice’s deterioration. The court noted that although the contractor remained liable to the owner after completion and acceptance of the work, the contractor’s liability did not extend to third parties. Nearly 100 years later, that logic still prevails in states that adhere to the Accepted-Work Doctrine. However, not all states still subscribe to the doctrine, due to the harsh results it can produce for innocent third parties clonked on the head by a falling cornice!

The majority rule (foreseeability doctrine). As late as the 1950s, the majority of jurisdictions adhered to the Accepted-Work Doctrine but, since then, the rule has been severely criticized and is now deemed the minority rule. Today, a majority of states have instead adopted the so-called “Foreseeability Doctrine,” which provides that a construction contractor is liable for injury or damage to a third party as a result of defective work – even after completion of the work and acceptance by the owner – where it was reasonably foreseeable that a third person would be injured by such work due to the contractor’s negligence, or its failure to disclose a dangerous condition that was known to the contractor. The Foreseeability Doctrine, or Rule of Foreseeability, is expressed in Restatement (Second) of Torts § 385, which states: “One who on behalf of the possessor of land erects a structure or creates any other condition thereon is subject to liability to others upon or outside of the land for physical harm caused to them by the dangerous character of the structure or condition after his work has been accepted by the possessor, under the same rules as those determining the liability of one who as manufacturer or independent contractor makes a chattel for the use of others.”

Exceptions to the rule. One court refused to apply the Accepted-Work Doctrine, pointing out that the “rule of non-liability with its many exceptions is more cumbersome than traditional negligence analysis,” as the exceptions to the rule nearly swallow up the rule. One primary exception is known as the “imminently dangerous exception,” which imposes liability on the contractor after acceptance where:

  1. The defect is imminently dangerous to others.
  2. The defect is so hidden that a reasonably careful inspection would not reveal it.
  3. The contractor knows of the defect, but the owner does not.

Essentially, under this exception, a hidden, or “latent” defect, is not covered by the doctrine. Under another limitation, a 1991 Arizona case held that the doctrine applies only when the contractor has no discretion and merely follows the plans and specifications provided by the owner. The court noted that, “If the contractor is hired to exercise its discretion, special skills, and knowledge to prepare a design, and the owner does not control the design details, the contractor cannot invoke the rule.” This would appear to create an exception in Arizona for design-build or EPC contractors who furnish their own designs and plans.

Doctrine abolished in many states. More than 30 states have abolished the Accepted-Work Doctrine, including Connecticut. Texas abandoned the doctrine in 1962, noting that the exceptions “have largely emasculated the rule.” Arkansas adopted the Accepted-Work Doctrine in 1910, but repudiated it in 1999, stating: “[T]he accepted-work rule has been thoroughly criticized as anachronistic and has provided unwarranted exceptions to general negligence principles. It has been said to have provided harsh results and many exceptions have been adopted to ameliorate such harshness. …We believe it would be a mistake to continue to apply a doctrine based upon privity of contract when the third party’s injury is foreseeable.”

How about design professionals? In a 2012 California case, a theater patron sued an architect for personal injury for failure to require contrast marking stripes on stairs. The appellate court held that under the Accepted-Work Doctrine, “When the owner has accepted a structure from the contractor, the owner’s failure to attempt to remedy an obviously dangerous defect is an intervening cause for which the contractor is not liable.” Here, it was undisputed that the architect’s design called for contrasting stripes to be placed on the stairs and that, “The absence of stripes on the stairs is obvious and apparent to any reasonably observant person.” At the time the project was completed and accepted, there were no stripes on the stairs.

Likewise, in a 1997 Oklahoma case, a plaintiff sued the architect of a homeless shelter for injuries sustained when he fell off a retaining wall where he was sleeping. The state supreme court held that the dangerous condition was open and obvious as matter of law and the architect could not be liable for negligent design, as any hazard associated with the wall was open and easily discernible. Evidence showed that the architect had pointed out the condition, and recommended guardrails, but the building’s owner declined to install them.

However, in a 1995 Montana case, the court rejected this defense when a store employee was injured after a remodeling project, when he fell through a suspended ceiling. The court held that the architect violated the building code and that the Accepted-Work Doctrine was no longer available as a defense, asking the question: “How then can we logically conclude that simply because the professional has completed his or her services and the contractee has paid for those services, liability for the contractor’s negligence should shift to the innocent and uninformed contractee?” The court said: “We cannot.”

Takeaways? The law varies from state to state, and changes over time. It is important to the defense of third-party claims to retain all documentation showing that the owner accepted the work, such as a sign-off on final plans, or a certificate of substantial and final completion. This may be the key to asserting the Accepted-Work Doctrine as a defense.

William Quatman, FAIA, Esq., is general counsel and senior vice president at Burns & McDonnell Engineering Co. He can be reached at bquatman@burnsmcd.com.

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Posted in Articles | December 10th, 2018 by