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Kentucky Supreme Court Decision Significantly Impacts Dynamics in the Construction Industry

In what has proven to be a very high profiled decision in the industry, the Kentucky Supreme Court, in a construction law case, has adopted a theory of liability that significantly impacts the relationship of parties to construction projects.

In Presnell Construction Managers, Inc. v. EH Construction, LLC, the Kentucky Supreme Court officially recognized as law in Kentucky the claim of negligent misrepresentation, as set forth in the Restatement (Second) of Torts § 552. The impact of the decision is that construction contractors can now bring claims directly against construction project managers, engineers and architects for negligent misrepresentation and supervision of the project, even where there is no contract between the parties. This decision is significant because, previously, the common view was that contractors could only make claims against the owner of the project.

The Restatement (Second) of Torts Sec. 552 provides that,

“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 by their justifiable reliance upon the information, if he fails to exercise reasonable care or competence in obtaining or communicating the information.”

In the Presnell case, a construction project manager was held responsible to a contractor for false information allegedly supplied on the project, even though the contract between the construction manager and the owner expressly disclaimed any such liability to contractors.

The formal adoption of the Restatement in the Presnell decision essentially was the culmination of a series of opinions over the past decade expanding the doctrine of negligent misrepresentation in Kentucky. The Presnell ruling has had a notable impact on the exposure of construction managers, architects, engineers and other participants in construction projects. The ruling essentially has changed the perceived and actual scope of the duties and relationships between all the parties involved in such construction projects.

  • Partner

    Mark is the Co-Chair of the Litigation Department, and he concentrates his practice in business litigation and dispute resolution. He has broad experience in contract, commercial, estate, real estate, trade secret, employee ...

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