In Opinions issued on June 28 and June 29, 2010, the Court of Appeals of Indiana and Supreme Court of Indiana ruled against the Indianapolis Marion County Public Library in connection with litigation that arose from ongoing problems with the renovation and expansion of the Central Library in Indianapolis.
The Library hired an architect (WMP), which in turn hired an international engineering firm (TTE), to provide structural design work. On TTE’s recommendation, WMP hired a small civil engineering firm in Indianapolis (CCL) to provide inspection services during the construction of a parking garage. Joseph Burns, a managing principal of TTE, affixed his engineering seals to the design plans for the parking garage structure. Problems with concrete beams and columns required significant repair work, including the removal and replacement of materials installed by subcontractors, at an alleged expense to the Library of more than $50 million. The Library sued TTE, alleging negligent performance of engineering services, among other claims. Burns and CCL were joined as parties in an amended complaint. The Library and WMP then agreed to a settlement, under which WMP assigned its claims against TTE and CCL to the Library. As the assignee of WMP, the Library was substituted as the real party in interest regarding pending cross-claims between WMP and TTE.
In response to a motion for summary judgment filed by TTE, for the first time the Library asserted that it was entitled to recover under a theory of contractual indemnity, even though neither WMP nor the Library had pled such a theory. The trial court entered summary judgment for TTE, and the appellate court affirmed in Indianapolis-Marion County Public Library v. Charlier Clark & Linard, PC, 929 N.E. 2d 838 (Ind. Ct. App. .2010). There was no express indemnity provision in the contract between WMP and TTE that ran in favor of TTE, so WMP could not have assigned an express indemnity claim to the Library. The Court was not persuaded that it should adopt the doctrine of implied indemnity in this case, involving sophisticated businesses that chose how to contractually allocate risk between them. The Court agreed with TTE’s argument that adopting the doctrine would “invite havoc into not only contract cases in the construction setting but throughout the spectrum of civil cases.”
Applying the economic loss doctrine, the trial court also granted summary judgment in favor of TTE, Burns, and CCL on negligence claims asserted against them. The Court of Appeals affirmed in a published decision. The Supreme Court of Indiana granted transfer and affirmed. Indianapolis-Marion County Library v. Charlier, Clark & Linard, PC, 929 N.E. 2d 722 (Ind. 2010). The Supreme Court first examined the history and rationale of the economic loss rule, which was expanded to construction projects in Gunkel v. Renovations, Inc., 822 N.E. 2d 150 (Ind. 2005). The rule applied in this case because the Library suffered “pure economic loss,” that is, harm not resulting from an injury to a plaintiff’s person or property. The product or service purchased by the Library was the renovation and expansion of the facility. The owner, engineers, contractors, and subcontractors, though not technically in privity of contract, were connected through a chain of contracts under which their rights, duties, risks, and remedies were allocated. In this situation, the Supreme Court found the reasons for applying the economic loss rule to be “compelling.”