Avoiding Individual Liability for Corporate Acts

Incorporating a professional practice can help to avoid individual liability when a professional is acting within the course and scope of his employment.  For instance, certain states provide statutory immunity to design professionals such as architects and engineers who are acting in a corporate capacity.  However, individual immunity from claims may be waived if the professional makes a representation, even inadvertently, in contracts or design plans that could be construed as accepting individual accountability for negligent acts.

A recent case from Louisiana highlights the potential consequences of inadvertent waivers of statutory protection.  The plaintiff hired a contractor to raise the elevation of his home.  Shortly thereafter, the contractor applied for a building permit to perform the elevation work and attached elevation plans stamped by a professional engineer in support of the application.  Two months later, the city department of safety issued the required work permit and the construction proceeded.

The plaintiff, however, was not satisfied with the elevation work and demanded repairs be made.  When the issue was not corrected, the plaintiff filed a lawsuit against the engineer who stamped the building plans in both his individual and corporate capacity, claiming that he breached the standard of care by issuing defective elevation plans and failing to observer properly the construction of the property.

The defendant engineer filed a motion for summary judgment arguing that the claims against him in his individual capacity should be dismissed because he acted as an agent and an officer of the corporation, and thus was statutorily protected from individual liability.  The district court granted the defendant’s motion for summary judgment and dismissed the individual claims.  On appeal, the plaintiff attached a “statement of responsibility” signed by the engineer, which stated that the engineer had prepared and reviewed plans for the specific location and that he “bear[s] the liability that comes with that approval.” Based on this concession, the court of appeals determined that the engineer had created a genuine issue of material fact for a jury as to his personal liability, notwithstanding the Louisiana statute precluding individual liability.  Accordingly, the court reversed the trial court and denied summary judgment.

Professionals must be cautious when drafting statements regarding the scope of their liability on any given project.  Statements that are not clearly limited to the professional corporation could be construed as allowing individual liability when it would otherwise be barred.