Iowa Court Of Appeals Saves Builder In A Construction Defect Case That Got A Little Weird

By harley erbe

House

So what do you do if you're a building contractor and the structure you're building collapses?  Why blame the company that supplied the roof trusses of course!  That was the situation before the Iowa Court of Appeals in the November 12, 2015 case of Dinsdale Construction, L.L.C. v. Lumber Specialties, Ltd.

Lumber Specialties supplied various products, including roof trusses, for a new building.  Dinsdale Construction was the builder.  The building collapsed during construction.  The building's collapse was caused by inadequate temporary bracing of the roof trusses.

Now, this sounds like a standard construction defect case.  Dinsdale Construction, the builder, didn't properly brace the roof trusses during construction.  The building thus collapsed.  But things took an unexpected turn when Dinsdale Construction sued Lumber Specialties and blamed it for giving bad advice about the temporary bracing of the roof trusses during construction.

Dinsdale Construction's claim against Lumber Specialties arose because Lumber Specialties provided in-house engineering services, something that's commonly done by third parties, not the product manufacturer.  A Lumber Specialties employee also visited the site during construction to evaluate the temporary bracing of the roof structures.  That employee told Dinsdale Construction that everything looked fine and it should continue what it was doing.

Dinsdale Construction sued Lumber Specialties under a fairly rare legal theory, "negligent misrepresentation."  The jury returned a verdict that found Lumber Specialties mostly at fault for the building's collapse.  Lumber Specialties appealed.

Dinsdale Construction sued Lumber Specialties asserting that Lumber Specialties’s employee, Ryan Callaway, negligently misrepresented the
adequacy of the temporary bracing supporting the roof trusses when he visited the site during construction.  Negligent misrepresentation is defined as “one who, in the course of his business, profession or employment, or in any other transaction in which he has a pecuniary interest, supplies false information for the guidance of others in their business transactions, is subject to liability for pecuniary loss caused to them by their justifiable reliance upon the information, if he fails to exercise reasonable care or competence in obtaining or communicating the information.”  When a negligent misrepresentation doesn't result in personal injuries or property damage, liability is restricted to only those who are in the business of supplying information to others.  Because the building collapse didn't cause personal injuries and property damage (other than to the building itself), the fighting issue was whether Lumber Specialties was in the business of supplying information to others and thus exposed to liability for negligent misrepresentation.

The factors courts consider in determining whether a person is “in the business of supplying information” include: (1) whether the relationship between the parties is at arm’s-length and adversarial or advisory; (2) whether the person providing the information is manifestly aware of the use that information will be put and intends to supply it for that purpose; (3) whether the information is given gratuitously or incidental to a different service; and (4) what role the defendant was playing when the misrepresentation occurred.  Lumber Specialties asserted that it did not owe a duty to Dinsdale Construction under a negligent misrepresentation claim because Lumber Specialties is not in the business of supplying information.  It claimed that the advice Ryan Callaway offered regarding the temporary bracing was incidental to, or gratuitously provided as part of, the sale of its product—roof trusses.  Dinsdale Construction countered that Lumber Specialties owed it a duty in light of the fact that it did not just supply a product—the trusses—but also provided information—engineering services.

The Iowa Court of Appeals decided that, under the "unique" facts of the case, Lumber Specialties could be liable for negligent misrepresentation to Dinsdale Construction.  When Lumber Specialties gave advice to Dinsdale Construction about the installation of its product, it was in the business of supplying information such that it owed a duty to exercise care in giving that advice to Dinsdale Construction.  Through its agent, Ryan Callaway, Lumber Specialties voluntarily offered the advice about the adequacy of the temporary bracing in response to a specific inquiry about the temporary bracing of the roof trusses.  The contract at issue, between Lumber Specialties and Moeller & Walter, involved both the purchase of a product—roof trusses—and also the purchase of information— engineering services. After the purchase, Lumber Specialties employee, Steven Kennedy, provided advice and information regarding the steps involved in applying the permanent bracing for the structure.   In addition, the advice in question was given by someone (Ryan) who was aware of the reason for the request and intended to supply the information for an expressed purpose, and the advice was not given gratuitously.  Moreover, Lumber Specialties was manifestly aware of how the information would be used and intended to supply it for that purpose.  Lumber Specialties was in a unique position as the supplier of both the product and the information of how to install the product.  In sum, when Lumber Specialties agreed to and did provide an opinion to Dinsdale Construction regarding the temporary bracing of the roof trusses, it owed a duty to provide accurate information and could be liable for negligent misrepresentation.

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