ILNews

Limitation of liability provision enforceable

Back to TopCommentsE-mailPrintBookmark and Share

DTCI-Temple-DavidOn March 2, 2011, the federal district court in Indianapolis issued a rather innocuous and unassuming opinion in SAMS Hotel Group, LLC v. Environs, Inc. (S.D. Ind. 2011), No. 1:09-CV-00930-TWP-TAB. However, its ramifications may be far-reaching and are surely welcomed by design professionals working on projects in Indiana.

The court granted an architectural firm’s motion for partial summary judgment and denied the owner’s motion for partial summary judgment, finding that (1) the owner’s negligence claim is barred by the economic loss doctrine, based on the reasoning articulated by the Indiana Supreme Court in Indianapolis-Marion County Public Library v. Charles Clark & Linard, P.C., 929 N.E.2d 722 (Ind. 2010), and (2) the architectural firm’s liability is contractually limited to the lump-sum fee paid by the owner. It is the latter finding that is most significant, yet it should not be surprising in light of contract law in Indiana. While the court’s decision does not cite to significant case law on this issue, the court found the contractual language at issue to be unambiguous, stating that “[e]ven a person with limited acumen would interpret this contract to mean that Environs could owe SAMS no more than what it was paid if it did not deliver a sound design as promised.”

SAMS Hotel Group owned a Homewood Suites Hotel under construction in Fort Wayne which the Allen County building commissioner ordered to be demolished because of its structural instability. SAMS sued Environs Inc., the architectural firm hired to design the hotel and perform certain oversight functions during construction, as well as the steel fabricator and the engineering firm that provided engineering services relating to the steel framing. The parties stipulated to the dismissal of the steel fabricator and the engineering firm leaving Environs Inc. as the sole defendant.

The parties’ contract provided: “The Owner agrees that to the fullest extent permitted by law, Environs Architect/Planners Inc.[’s] total liability to the Owner shall not exceed the amount of the total lump sum fee due to negligence, errors, omissions, strict liability, breach of contract or breach of warranty.” SAMS asserted that the provision was unenforceable because it did not unequivocally make clear that Environs’ liability was limited for its own wrongful acts. However, the court rejected SAMS’s argument, finding in part that the provision at issue was a limitation of liability provision, not an exculpatory clause. Moreover, the court found “the limiting language in the contract is unmistakably clear” and that “[t]his is not a situation where an unsuspecting or unknowing party is disadvantaged by a murky provision.”

Under Indiana law, absent an ambiguity, Indiana courts give the terms of a contract their plain and ordinary meaning. Indiana Dept. of Transp. v. Shelley & Sands, Inc., 756 N.E.2d 1063, 1069-1070 (Ind. Ct. App. 2001). Furthermore, a “contract is unconscionable if a great disparity in bargaining power exists between the parties which leads the weaker to sign a contract unwillingly or without being aware of its terms.” White River Conservancy Dist. v. Commonwealth Eng., 575 N.E.2d 1011, 1017 (Ind. Ct. App. 1991). The court made it clear that in this situation, it was faced with neither ambiguous terms nor disparate bargaining power between the parties.

The court ultimately concluded that “[i]f SAMS wanted greater protection from a negligent design, it could have obtained such protection through different contractual terms or a performance bond.” The court appears to have implicitly rejected any invitation to rewrite the parties’ contract based upon the limitation of liability provision somehow violating public policy. From an outsider’s perspective, the court’s decision is one of the purest forms of applying the four corners’ doctrine, and it serves as a reminder to contracting parties that unambiguous contractual provisions – even if they later seem like a “bad deal” for one of the parties – can and will be enforced.•

__________

 David A. Temple
  is a partner at Drewry Simmons Vornehm in Carmel, where he focuses on professional liability, construction, products liability and environmental insurance matters. He is on the board of directors of the Defense Trial Counsel of Indiana and a member and former chair of the Construction Law Section. The opinions expressed in this column are the author’s.

ADVERTISEMENT

Post a comment to this story

COMMENTS POLICY
We reserve the right to remove any post that we feel is obscene, profane, vulgar, racist, sexually explicit, abusive, or hateful.
 
You are legally responsible for what you post and your anonymity is not guaranteed.
 
Posts that insult, defame, threaten, harass or abuse other readers or people mentioned in Indiana Lawyer editorial content are also subject to removal. Please respect the privacy of individuals and refrain from posting personal information.
 
No solicitations, spamming or advertisements are allowed. Readers may post links to other informational websites that are relevant to the topic at hand, but please do not link to objectionable material.
 
We may remove messages that are unrelated to the topic, encourage illegal activity, use all capital letters or are unreadable.
 

Messages that are flagged by readers as objectionable will be reviewed and may or may not be removed. Please do not flag a post simply because you disagree with it.

Sponsored by
ADVERTISEMENT
Subscribe to Indiana Lawyer
  1. Whether you support "gay marriage" or not is not the issue. The issue is whether the SCOTUS can extract from an unmentionable somewhere the notion that the Constitution forbids government "interference" in the "right" to marry. Just imagine time-traveling to Philadelphia in 1787. Ask James Madison if the document he and his fellows just wrote allowed him- or forbade government to "interfere" with- his "right" to marry George Washington? He would have immediately- and justly- summoned the Sergeant-at-Arms to throw your sorry self out into the street. Far from being a day of liberation, this is a day of capitulation by the Rule of Law to the Rule of What's Happening Now.

  2. With today's ruling, AG Zoeller's arguments in the cases of Obamacare and Same-sex Marriage can be relegated to the ash heap of history. 0-fer

  3. She must be a great lawyer

  4. Ind. Courts - "Illinois ranks 49th for how court system serves disadvantaged" What about Indiana? A story today from Dave Collins of the AP, here published in the Benton Illinois Evening News, begins: Illinois' court system had the third-worst score in the nation among state judiciaries in serving poor, disabled and other disadvantaged members of the public, according to new rankings. Illinois' "Justice Index" score of 34.5 out of 100, determined by the nonprofit National Center for Access to Justice, is based on how states serve people with disabilities and limited English proficiency, how much free legal help is available and how states help increasing numbers of people representing themselves in court, among other issues. Connecticut led all states with a score of 73.4 and was followed by Hawaii, Minnesota, New York and Delaware, respectively. Local courts in Washington, D.C., had the highest overall score at 80.9. At the bottom was Oklahoma at 23.7, followed by Kentucky, Illinois, South Dakota and Indiana. ILB: That puts Indiana at 46th worse. More from the story: Connecticut, Hawaii, Minnesota, Colorado, Tennessee and Maine had perfect 100 scores in serving people with disabilities, while Indiana, Georgia, Wyoming, Missouri and Idaho had the lowest scores. Those rankings were based on issues such as whether interpretation services are offered free to the deaf and hearing-impaired and whether there are laws or rules allowing service animals in courthouses. The index also reviewed how many civil legal aid lawyers were available to provide free legal help. Washington, D.C., had nearly nine civil legal aid lawyers per 10,000 people in poverty, the highest rate in the country. Texas had the lowest rate, 0.43 legal aid lawyers per 10,000 people in poverty. http://indianalawblog.com/archives/2014/11/ind_courts_illi_1.html

  5. A very thorough opinion by the federal court. The Rooker-Feldman analysis, in particular, helps clear up muddy water as to the entanglement issue. Looks like the Seventh Circuit is willing to let its district courts cruise much closer to the Indiana Supreme Court's shorelines than most thought likely, at least when the ADA on the docket. Some could argue that this case and Praekel, taken together, paint a rather unflattering picture of how the lower courts are being advised as to their duties under the ADA. A read of the DOJ amicus in Praekel seems to demonstrate a less-than-congenial view toward the higher echelons in the bureaucracy.

ADVERTISEMENT