Property Subrogation

Case Study

Attorney Kevin Price worked to recover losses when braces failed during a windstorm and precast concrete walls collapsed, causing $500,000 in damages. An investigation showed that the firm hired to engineer and provide the braces made last-minute changes, substituting smaller, inferior braces that could not withstand the wind. Mr. Price also discovered that the engineering firm was for sale at the time of the collapse and was striving to maintain value based on large profit margins, providing a motive for its actions.

The engineering firm denied responsibility, but could not produce paperwork to corroborate its claim. On the eve of trial, a former employee was located and admitted that he was asked to destroy the file in order to protect the engineering firm. Faced with this potentially devastating testimony, the defendants settled.

Background

As part of a construction project in Jurupa, Calif., an engineering and equipment rental company provided calculations for braces designed to support precast concrete walls, and rented the braces to the contractor. During a windstorm, 12 walls collapsed, causing a loss of nearly a half of a million dollars.

Legal Strategy

Attorney Kevin Price worked with the construction company’s insurance carrier to identify the cause of the collapse and look at options for recovery. An analysis of the engineering revealed that the bracing was inadequate. Rather than using larger braces called for in the plans, smaller—and weaker—braces were deployed. The construction company blamed the engineers, saying that their staff received a phone call from the engineers instructing them to use the smaller braces. The engineering firm blamed the contractor for unilaterally substituting weaker braces for the stronger ones.

During depositions, no one in the engineering firm admitted to making the phone call. In addition, the design engineer denied any mistakes in the calculations, insisting that the larger braces were specified, and that the contractor should have used the larger braces. Matters were complicated when the engineering files, which might have shown the circumstances of the substitution, disappeared after the incident.

Through discovery, Mr. Price also learned that the engineering company was being sold while the construction project was underway. It did not have enough of the larger braces in stock for the job. Rather than recalculate the job for the smaller braces, or rent braces from a competitor (both of which would have cost more and reduced its profit margin at a critical time when the prospective buyer was valuing the company), the engineering staff substituted the smaller bracing.

Result/Implication

The case was set for a jury trial in Riverside County Superior Court but was resolved at the last minute when a former employee of the engineering firm was located and admitted that he was ordered to destroy the file in order to support the “blame the contractor” defense strategy. Faced with this potential “smoking gun” testimony, the defendants settled on the day the trial was set to begin.

According to Mr. Price, identifying the reason why the engineering firm instructed the contractor to use weaker braces helped him understand how they could prove negligence by the engineers at trial. “The engineers denied calling the contractors and tried to cover their tracks by destroying files,” he said. “When we learned that the prospective buyer was basing the sales price on profit margins, it became clear why the engineering firm risked disaster in order to maximize its balance sheet. The fact that they deliberately destroyed their file was the coup de grace to their defense.”