UPDATE JUNE 11, 2013

In apparent response to Witt, the Florida legislature has enacted Florida Statutes § 558.035, which provides that a professional designated in Florida Statutes § 558.002(7) as a “Design Professional” will not be subject to personal liability for professional negligence when working within his or her scope of employment by a business entity so long as certain specified conditions have been met. Individuals falling within the definition of “Design Professional” set forth in Florida Statutes § 558.002(7) are encouraged to carefully review this new statute and it’s requirements. The statute becomes effective on July 1, 2013.

Among the conditions which must be met in order to avoid personal liability is the requirement that the contract between the client and the business entity include a prominent notice to the client in the specific wording set forth in the statute. This means that is unlikely that contracts pre-existing the statute will be sufficient to protect individual design professionals from liability.

Also noteworthy is the fact that this new statute DOES NOT apply to protect individual professionals who are not “Design Professionals,” such as lawyers and doctors, which means the risks to such other individual professionals in the wake of Witt remain.

ORIGINAL ARTICLE POSTED APRIL 2, 2013

A least since the Florida Supreme Court issued its landmark opinion in Moransais v. Heathman[1], "professionals" such as lawyers, engineers and doctors, have been subject to personal liability for professional negligence independent of any claims an aggrieved client may have against the professional’s employer, and regardless of whether the individual professional is a party to a contract with the claimant. One way individual professionals have attempted to address this independent tort liability has been to insert limitations of liability into their service contracts. Often service contracts contain provisions limiting liability to the amount of the contract or some similar measure. While such limitations remain useful in terms of the liability of a contracting business entity, in the wake of the Third District Court of Appeals’ decision in Witt v. La Gorce Country Club, Inc.[2], they probably offer no protection to individual professionals.

In Witt, La Gorce Country Club entered into a contract with Gerhardt M. Witt & Associates, Inc. (GMWA) to perform hydro-geological consulting services in connection with the design and installation of an irrigation system. The agreement included a limitation of liability which purported to limit GMWA’s liability such that “the total aggregate liability of GMWA and its subconsultants… shall not exceed the total dollar amount of the approved portions of the Scope or GMWA’s total fee for services rendered on this project, whichever is greater.” Mr. Witt, a licensed geologist, performed the services on behalf of GMWA.

When problems with the irrigation system arose, La Gorce sued not only GMWA, but also sued Mr. Witt personally. Witt argued alternatively that the tort action against him was barred by the Economic Loss Rule because it related directly to the performance of duties under the contract, and that at any rate, the limitation of liability in the contract protected him from liability beyond that allowed for in the contract. The trial court found both GMWA and Mr. Witt liable, but applied the limitation of liability in the contract only to GMWA. The court awarded over $4 million in damages against Mr. Witt personally, however, reasoning that the Economic Loss Rule did not bar a cause of action for professional negligence against a professional for his or her own negligence even though the damages are purely economic in nature and even though the aggrieved party has entered into a contract with the professional’s employer, in reliance upon the Florida Supreme Court’s proclamation in Moransais.

The court also held that the limitation of liability in the contract between La Gorce and GMWA protected only GMWA because Mr. Witt was not a party to the contract. And again relying in part upon dicta in Moransais, the court held that “[e]ven assuming, for argument’s sake, that Witt, in his individual capacity, was covered by the limitation of liability provisions, such a limitation would be unenforceable as a matter of law.”[3] In Witt, the court also relied upon a statute specific to geologists which specifically provides that the fact that a licensed geologist practices through a business entity will not relieve the geologist of personal liability. However, the court did not limit its ruling to geologists, but held instead as to professionals in general that “the Florida Supreme Court implicitly acknowledged [in Moransais and the later Indemnity Ins. Co. of N. Am. v. American Aviation, Inc.[4]] that claims of professional negligence operate outside of the contract.”[5]

Following Witt, a professional can take no comfort in contractual limitations of liability, nor in the protections from personal liability ordinarily provided by statutory business entities such as corporations and partnerships. It is accordingly more important than ever for professionals practicing in Florida to carefully review their malpractice insurance coverage and asset protection strategies to be sure they are sufficient to hedge against the potential personal liabilities they may encounter.