The New Jersey Supreme Court recently dismissed an engineering malpractice subrogation action filed against an engineering firm on a motion for summary judgment. The claim was based upon the fact that the firm’s Standard Baseline Conditions Assessment had not disclosed that the commercial property at issue lacked a curb stop shut-off valve. Despite the fact that the claim sounded in negligence, the court relied, in part, on the engineering firm’s contract with another non-party entity which limited the use of the firm’s assessment and refused to extend the engineering firm’s duty to a subsequent purchaser of the property.
The plaintiff insurance company, as subrogee of the owner of the commercial property, claimed over $1 million in damages as a result of a flood at the property. At the time of the assessment, the property was going to be purchased by a different entity, and plaintiff’s subrogor was the subsequent owner that purchased the property less than one year following the engineering firm’s assessment. The plaintiff claimed that its subrogor had been given a copy of the assessment from the seller of the property, that the assessment improperly failed to disclose that the property lacked a curb stop shut-off valve, and that it had relied upon the assessment when it purchased the property. The plaintiff asserted that the engineering firm owed plaintiff’s subrogor a duty because the defendant knew that the prior owner of the property was going to resell the property shortly after its purchase.
Prior to the completion of discovery, the engineering firm moved for summary judgment, arguing that it owed no duty to plaintiff’s subrogor, an entity with which it had absolutely relationship, contractual or otherwise. Focusing on the contract pursuant to which the engineering firm had been retained, which included a provision that any reuse of the assessment required its written verification, the engineering firm asserted that, regardless of whether it knew that the property would be resold within a short period of time, the subrogor property owner was not a foreseeable plaintiff since the engineering firm had never authorized the owner’s use of the assessment. The engineering firm further argued that even if the subrogor was a foreseeable plaintiff, it would not be fair to impose a duty upon the engineering firm under the circumstances, where there was no relationship between the parties and the subrogor property owner had the ability to avoid the alleged harm by conducting its own inspection of the property.
Ultimately, the New Jersey Superior Court rejected the plaintiff’s contention that the engineering firm owed plaintiff’s subrogor a duty of care. The court agreed with the engineering firm and found that the imposition of a duty was not warranted since the engineering firm’s contract specifically stated that its authorization was needed for reuse of its assessment by another. The court further determined that it would be unreasonable to impose a duty upon the engineering firm when the firm had never authorized reuse of its assessment by the subrogor owner, and the owner had the opportunity to conduct a full inspection prior to purchasing the property but instead chose to rely upon the engineering firm’s assessment, which had been prepared for another entity. The court granted the motion for summary judgment and dismissed the complaint against the engineering firm in its entirety.