Pennsylvania Supreme Court’s Ruling On Certificates Of Merit And “Gist Of Action” May Make It More Difficult For An Architect Or Engineer To Seek An Early Dismissal
In Bruno v. Erie Ins. Co., the Pennsylvania Supreme Court clarified the gist of the action doctrine that distinguishes between tort and contract claims. In doing this, the Court also ruled that a Certificate of Merit in a professional liability claim is necessary only if the plaintiff is in a direct client relationship with the licensed professional. This clarification of the Certificate of Merit requirement may limit the ability of architects and engineers to obtain an early dismissal in lawsuits.
Bruno v. Erie Ins. Co. involves a common scenario. The Brunos filed a claim with their homeowners’ insurer after discovering mold in their home during remodeling. The policy included an endorsement providing coverage for mold. As part of the claim adjustment, Erie hired an engineer to inspect the mold and to provide an opinion on its severity to determine the extent of remediation required. The engineer hired by Erie reported to Mr. Bruno that the mold was harmless, that concern over health problems due to mold was merely a “media frenzy,” and that the Brunos should continue with their renovations.
The Brunos followed this advice, but shortly thereafter the family began experiencing a myriad of medical problems that they attributed to the mold after having it tested at their own expense. The Brunos’ consultant concluded that the mold was toxic and a health hazard. As a result, the Brunos filed a complaint against both Erie and the engineer it hired, alleging negligence for failing to recognize the nature and severity of the mold problem, misleading them about the nature of the mold problem, minimizing the danger of the mold problem, and creating and/or exacerbating a dangerous condition.
The engineer Erie hired filed Preliminary Objections to the Complaint because a Certificate of Merit was not provided. The Pennsylvania Rules of Civil Procedure generally require that a Certificate of Merit be filed in any action based upon an allegation that a licensed professional deviated from an acceptable professional standard. The court agreed with the Brunos’ argument that the language of that rule expressly limits the application of the Certificate of Merit requirement to those plaintiffs who are clients or patients of the defendant. Therefore, because the engineer was hired by Erie, not the Brunos, they were not a patient or client and were not required to file a Certificate of Merit. The Supreme Court held that under the plain meaning of the relevant Pennsylvania Rules of Civil Procedure, a plaintiff is only required to file a Certificate of Merit in a professional liability claim if that plaintiff was in privity with the professional defendant as a patient or client. It is now clear that only patients and clients are required to obtain Certificates of Merit. Therefore, licensed professionals should be aware that they will only be able to seek early dismissal from a case due to a failure to file a Certificate of Merit when the party asserting a professional liability/malpractice claim is a direct client or patient.
The Supreme Court noted that the Superior Court has been inconsistent in its application of the gist of the action doctrine, sometimes focusing on the nature of the duty alleged to have been breached and sometimes adding an additional consideration of whether contract and tort claims brought in the same action are “inextricably intertwined.” At the same time, the Commonwealth Court has applied yet another analysis, focusing on whether the alleged wrong was one of “misfeasance” or “nonfeasance” and finding that nonfeasance generally constituted a breach of contract while misfeasance was a tort.
In settling the conflicting analyses about the gist of the action doctrine, the Supreme Court took an extensive look at the approach Pennsylvania appellate courts have taken to claim classification over the past 150 years. Ultimately, it determined that the general principle underlying the approaches is that the source of the duty alleged to have been breached is the determinative factor. Where the facts alleged establish that the duty said to be breached is one created by the parties by contract and is something that a party would not have been obligated to do but for the existence of the contract, the claim is viewed as one for breach of contract. On the other hand, if the facts alleged show that the claim involves the defendant’s breach of a broader social duty, which is imposed by law and exists regardless of the contract, then the claim is one sounding in tort. This is true even if a simultaneous contractual duty exists between the parties, so long as the duty said to be breached is one that would exists regardless of the contract.
Applying that analysis to the Brunos’ claim against Erie, the Supreme Court held that it should be viewed as a tort, not a breach of contract. The insurance policy imposed three duties upon Erie with respect to mold: to cover costs of mold removal/remediation, cover costs of testing for mold, and cover the cost of increased living expenses caused by mold. The Brunos’ claim did not allege that Erie violated any of those contractual obligations by, e.g. failing to pay the claim under the policy. Instead, the Brunos’ claim alleges that Erie was negligent because its agents rendered unfounded advice and denied the potential for negative health consequences. This constitutes a breach of a general social duty that exists separate from the policy. The mere fact that a contractual relationship existed between the parties at the time that Erie committed its tort does not transform the tort into a breach of contract. In conclusion, the Supreme Court held that the claim was one sounding in tort and overturned the lower courts’ rulings to the contrary.
The court’s clarification of the analysis with regard to the gist of the action doctrine purports to be just that—a clarification, rather than a change. Nevertheless, defendants should take note that a plaintiff’s tort and contract claims may be considered separately even if the alleged tortious conduct took place in the context of performance of a contract. The factual scenario of Bruno makes clear the impact this may have on insurance carriers. The court’s holding suggests that an insurer may be held liable for negligent/tortious conduct that occurs during adjustment of an insurance claim through mechanisms outside of the breach of contract and statutory bad faith remedies traditionally available to insureds. This is an important development for insurers to consider as they evaluate their claims adjustment processes as well as their selection and management of independent experts and other third parties who may interact with insureds and others.
For more information about professional liability claims and construction matters involving architects and engineers, please contact Jerrold P. Anders, (215.864.7003 | firstname.lastname@example.org) Co-Chair of the Construction Practices Group.