Surveyors Inc. was hired by a real estate development company to provide a survey for a subdivision. Following the completion of the survey, Surveyors Inc. was third partied into a lawsuit between two adjacent property owners concerning a 22 foot encroachment issue. The complaint alleged that Surveyors Inc. failed to properly survey the eastern boundary of the subdivision resulting in one of the lots encroaching 22 feet onto the neighboring property to the east.
A motion was filed by the defense counsel for dismissal based on a case law emphasizing that surveyors owe no duty to parties who are not in contractual privity with them.1 As the defense counsel and the adjustor saw little to no exposure for Surveyors Inc., liability was questionable.
A settlement was reached between the developer and the adjacent property owner in which the developer paid $400,000. Given the loss, the developer looked to Surveyors Inc. and other defendants to recoup the $400,000.
While this was first believed to be a title issue, it was later discovered that the Surveyors Inc. employee who conducted a second survey on the subdivision did notice that some information was missing.2
It was determined that Surveyors Inc. had considerable liability on this claim and if the claim had gone to trial the verdict may have been in favor of the real estate development company, resulting in possible higher indemnity payments for Surveyors Inc.
The total damage payment paid was $500,000, which is the amount the plaintiff was seeking. The insurance company paid $300,000 in indemnity and $140,000 in expenses while Surveyors Inc. contributed the $10,000 deductible.
Risk Factor #1
Contracts can help the parties involved state their goals, expectations, rights, responsibilities and risks that they have of each other and of third parties. Contracts can also prevent disputes and help resolve disputes that do occur.
Risk Factor #2
Records should be prepared and maintained throughout the project. Such records are more useful and credible than ones prepared after something has gone wrong. Records can include written documentation, audio/visual, photographs and computer records. All documented records should be dated and signed by the author for identification.