Architects' liabilities have been extended by a recent Court of Appeal case, insurance law specialist Davies Arnold Cooper (DAC) has warned.
DAC associate Philip Murrin said that Baxall Securities Ltd v Sheard Walshaw Partnership established that architects may owe a duty of care to subsequent owners and occupiers with whom they had no contract on latent defects.
Sheard Walshaw was contracted by developers to design a light industrial building between 1989 and 1992.
Baxall Securities Ltd moved into the building in 1995.
Baxall's claim against the architect concerned flooding, which resulted from insufficient drainage and lack of overflows.
Sheard Walshaw's insurer, The Royal Institute of British Architects' Insurance Agency, decided to fight the claim, represented by Fishburn Morgan Cole partner Mark Klimt.
The case hinged on whether the defects were patent or latent.
The Court of Appeal confirmed the Technology and Construction Court's original decision that if the defects were patent, that is reasonably discoverable by skilled advisers, the architect was not liable.
If they were latent, namely, not reasonably discoverable, the architect may be liable.
Murrin said, that although Sheard Walshaw escaped liability in the Appeal Court because the lack of overflows was deemed patent, the case extended the previous duty of care, which only went as far as builders, and established in what circumstances architects were liable.
"The new law this creates is that architects owe a duty of care to future tenants and purchasers," he said.
"So if a subsequent buyer or occupier moves into premises, finds a defect then looks for someone to go after, architects are potentially in line."
Murrin said the case could have an effect on architect's professional indemnity premiums.
"They could be covered under usual policy wordings but insurers could increase premiums to take the greater liability into account," he said.
