Oregon Raises the Bar on “Certificates of Merit” for Design Professionals

Certificates of merit are intended to prevent frivolous lawsuits. Before a claim can be filed against a design professional, another design professional must certify that the alleged conduct failed to meet the professional standard of care.

A new Oregon statute requires that the certifying design professional have “similar credentials” to the design professional who is being sued. Under Oregon law, a “design professional” includes architects, landscape architects, professional engineers, and professional land surveyors. Previously, the statute was silent as to which design professionals could certify claims against other design professionals. Arguably, the new “similar credentials” requirement means that a licensed architect must support a certificate of merit for a claim against an architect, an engineer for an engineer, and so on.

Further, the statute adds to what must be certified, requiring that the certifying design professional be willing to testify that that the defendant design professional “failed to meet the standard of professional skill and care ordinarily provided by other design professionals with similar credentials, experience and expertise and practicing under the same or similar circumstances.” Oregon SB 383 (emphasis added). The “similar credentials, experience and expertise” is new language added by the statute. This amendment may give rise to new arguments about the adequacy of the plaintiff’s expert’s opinions if offered by a design professional who lacks credentials, experience, or expertise similar to the defendant professional. However, Oregon law does not permit expert discovery. So it is unclear how the “similar credentials” will be tested prior to trial.

The new statute will go into effect January, 2016.

Common Law Indemnity Claims May Be Superfluous in Comparative Fault States

A recent Oregon Supreme Court decision in a construction defect case (Eclectic Investments, I LLC v. Patterson, 357 Or. 25 (March 19, 2015)), may signal the end of common law indemnity claims in many cases in Oregon and signal an ongoing trend in comparative fault states.

Common law indemnity is a court-created doctrine that allows a defendant to make another party pay for a plaintiff’s damages that the defendant was found liable for. Under the doctrine (as applied traditionally in Oregon and several other jurisdiction), a defendant with “passive” negligence could shift responsibility to a party whose “active” negligence caused the injury for which they were both being sued.

The court in Eclectic noted that this passive/active indemnity doctrine developed before the Oregon Legislature created the modern comparative fault system. See Oregon Revised Statutes §§ 31.600, 31.605. Under that system, defendants in Oregon are only responsible for their own fault and not their co-defendants’ fault. That is, Oregon law provides for several liability—not joint—among tortfeasors.

The Eclectic court reasoned that under this new scheme, there is be no need for a common law indemnity claim among defendants:

In cases in which the Oregon comparative fault negligence statutes apply and in which jurors allocate fault—and thereby responsibility—for payment of damages between tortfeasors, and each tortfeasor’s liability is several only, a judicially created means of allocating fault and responsibility is not necessary or justified.

Eclectic, 357 Or. at 38. Further, the court noted that this was in line with cases in other jurisdictions that have “held that the statutory adoption of a comparative negligence scheme effectively abrogates the theory of indemnity bases on the active/passive negligence dichotomy.” Eclectic, 357 Or. at 37.

Finally, the court noted that defense costs may still be shifted under limited circumstances, and suggested that they may only be available when a tortfeasor has committed a tort that “required the [passive defendant] to protect its interests by defending a claim brought by plaintiff or that plaintiff’s claim against the [passive defendant] existed only because of the tort of the [active tortfeasor].” Eclectic, 357 Or. at 39.

What does this mean? It may lead to streamlining of pleadings in multi-defendant cases (common in construction defect) by eliminating many of the superfluous indemnity cross-claims. It also clarifies that, under Oregon law, the defendants may be stuck with the allocations made by the jury, and defendants should not hope to re-shift the liability during post-verdict motions by arguing about whether their negligence was “passive” or “active.”

Oregon Appellate Case Limits Duty to Defend in Construction Contracts

In Sunset Presbyterian Church v. Anderson Constr. Co., 268 Or. App. 309 (Dec. 31, 2014), the Oregon Court of Appeals curtailed the damages available from a breach of a duty to defend obligation in an Oregon construction contract. The court affirmed a trial court’s denial of all defense costs sought because there was no attempt to distinguish between costs covered by the duty and those not covered. Prior to the decision, Oregon law appeared to require a party to defend against all claims (both covered and uncovered), similar to an insurance agreement.

Oregon’s Anti-Indemnity Statute for construction contracts (ORS 30.140) voids “any provision in a construction agreement that requires a person … to indemnify another against liability for … damage to property caused in whole or in part by the negligence of the indemnitee.” In other words, a general contractor cannot force a subcontractor to indemnify the general for the general’s own negligence (or vice versa).

The court rejected the argument that the limitation on “indemnity” obligation in construction agreements does not apply, on its face, to “defense” obligations, holding that ORS 30.140 limits defense obligations in the same manner as indemnity obligations. The court also ruled that a duty to defend does not follow the standard “defend-one-defend-all rule,” whereby a duty to defend against any claim in a complaint requires defense of all claims in the complaint. This rule, developed in insurance law, had previously been applied to duties to defend among non-insurance parties (including parties to construction agreements). However, the court held that the rule was inappropriate in construction agreements with a duty to defend. Rather, a duty to defend in a construction agreement cannot require a party to pay for defending against claims caused by the other’s own negligence.

In the end, the petition for defense costs was rejected in its entirety because the petitioner did not distinguish between the costs of defending claims caused by the indemnitor’s own negligence and other claims.