Are design professionals involved in your Florida project? If so, then you need to be aware of this newly decided case. The U.S. District Court for the Middle District of Florida, in Orlando, issued an Order on July 11, 2025, confirming that in Florida, remediation costs for defective design work do constitute direct damages, regardless of whether third-party contractors performed the remediation work. See Orlando Health, Inc. v. HKS Architects, Inc., Case No. 6:24-cv-00693-JA-LHP (M.D. Fla., Jul. 11, 2025). This ruling occurred despite the use of the parties’ contract – the AIA B101 (2017) - that contained a waiver of consequential damages. Could this outcome affect your Florida project? To make that determination, we need to discuss what happened in Orlando Health.
On December 30, 2019, HKS Architects Inc. (HKS) was hired as the architect of record responsible for planning, architectural and engineering services for the design and construction of a six-story healthcare facility in central Florida. HKS, in turn, hired BBM Structural Engineers Inc. (BBM) to provide structural engineering services and signed structural drawings to HKS. During construction, the healthcare facility owner discovered multiple design errors, such as a badly designed cantilevered overhang, deficiently designed structural beams, incorrect design of concrete beams, and missing reinforcing steel. These structural errors were of such a magnitude that they required immediate repair. Thus, the owner hired a third-party contractor to demolish and rebuild part of the facility. After the owner paid the third-party contractor millions of dollars to perform the remediation, the owner sued to recover remediation cost damages from HKS, who filed a third-party complaint against BBM, contending that BBM made the structural design errors.
Not so fast, argued HKS and BBM, who jointly moved for summary judgment on the owner’s claims, relying upon paragraph 8.1.3 of AIA B101’s waiver of consequential damages provision. HKS and BBM argued that the costs incurred by the Owner to pay a third-party to remediate the design damages were consequential damages, and therefore the Owner could not recover those costs. The Court disagreed. Instead, the Court noted that the parties had not defined the term “consequential damages” in their contract. The Court further reasoned that the owner’s direct costs to remediate the design damages were recoverable, regardless of the fact that third-parties performed the remediation work. This conclusion was based on the Court’s finding that when remediation damages are a direct result of the breach of the design professional’s contractual obligations (i.e. deficiently designed plans), then those damages will be considered “direct” damages, not “consequential” damages; therefore, the AIA B101 waiver of consequential damages did not bar the owner’s claim. The Court was careful to distinguish the facts related to the project at issue from the project at issue in Keystone Airpark Authority v. Pipeline Contractors, Inc., 266 So. 3d 1219 (1st DCA, Jan. 25, 2019), where the damages to the building were the result of the third-party contractor’s performance of the remediation work that could have occurred independently from the design professional’s duty to inspect (not design) the building at issue. Orlando Health, Opin. at 12-15. Thus, in Keystone, the “‘need for repair did not arise within the scope of the immediate transaction between [the engineering firm] and the [a]irpark’ but instead ‘stemmed from loss incurred by the [a]irpark in its dealings with a third party – the contractor.’” Orlando Health, Opin. at 11-12.
Following this decision, design professionals in Florida must be mindful of the limits of the consequential damages provision in the AIA B101. One potential impact of this decision may be a change to insurance limits, and/or deductibles, and/or coverage related to remediation of buildings in Florida where the fact finder determines that the remediation was caused solely by the design professional’s breach of contract. Another impact may be that, when contracting with the owner, design professionals in Florida may seek to limit the payment of remediation damages to a certain price point, even if it is determined that the remediation was caused solely by the design professional’s breach of contract. A third potential impact of this decision may be that the design professionals insist upon contracting with any third-parties to perform remediation, such that the design professionals, not the owner, control the scope and cost of that work. The issue that still may be in limbo, in light of Keystone and Orlando Health, is whether a mix of design professional breach of contract and defective work by a third-party remediation contractor both cause damages to a building.
