Construction Law News Blog

Showing 2 posts in Kentucky.

Kentucky Adopts Economic Loss Doctrine but Specific Application to the Construction Industry Remains Unsettled

On June 16, 2011, Kentucky’s highest court officially adopted the economic loss doctrine, joining a majority of states that have done so.  To be sure, this doctrine is not pertinent only to the construction industry and is frequently thought to have the greatest impact on manufacturing.  The doctrine holds that when a product causes only damage to the product itself, with no personal injury or physical harm to other property, the owner of the product cannot bring tort claims but is limited to the recovery allowed under its contract with another party.  Negligence claims and strict liability claims are prohibited in this circumstance.  See Giddings & Lewis, Inc. v. Industrial Risk Insurers, __ S.W. 3d ___, 2011 WL 2436154 (Ky. 2011). 

In Giddings, an insurer of a diffuser cell system attempted to recover amounts paid to the owner of the product from the manufacturer of the system based on breach of contract, negligent strict liability, negligent misrepresentation and fraud by omission.  The court rejected the tort-based claims and damages, including economic loss for lost profits, costs for repair and replacement of the defective commercial product. Recovery was allowed only under the terms of the parties’ contract, which could include express or implied warranties negating certain types of damages.

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Funding from Commonwealth does not Automatically Invoke Application of Kentucky Model Procurement Code to Local Public Works Projects

The Kentucky Model Procurement Code (“KMPC”) governs the award of construction contracts by the Commonwealth, but does not automatically apply to a local government agency.  Only if the local governmental agency decides to adopt the KMPC does it apply.  But this may cause tension where a local public project can only be financed with assistance from state government.  In a recent Kentucky Court of Appeals case, Laurel Construction Company, Inc. v. Paintsville Utility Commission, 336 S.W.3d 903 (Ky.Ct.App. 2011), the effect of a Commonwealth grant of funds to local government’s procurement procedures, particularly the applicability or non-applicability of the KMPC to the local project, was examined.

In 2007, the Paintsville Utility Commission (“Commission”), a municipal entity providing water, sewer and gas services in Johnson and Lawrence counties, was in need of a new water tank.  In order to help fund the improvement, the Commission sought financial assistance from the State, eventually entering into a grant assistance agreement with the Kentucky Infrastructure Authority (“KIA”).  One provision of that agreement stated that “the [Commission] shall perform and/or cause to be performed all necessary acts (consistent with [the KMPC] and in accordance with applicable law) to plan design and construct the Project…”.      

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Attorney Spotlight

C. Michael Shull, III focuses his practice on construction law and litigation. Michael's client representations range from casinos and ENR Top 400 contractors to design firms and subcontractors.