Project Managers Not Subject to Claims for Professional Malpractice

On October 7, 2022, Justice Borrok of the New York County Commercial Division issued a decision in CBH Med., PC v. Merit Sys., LLC, 2022 NY Slip Op. 33365(U), holding that project managers are not subject to claims for professional malpractice, explaining:

The Defendants contend that project managers are not the kind of professional who are subject to malpractice claims because professional malpractice claims are restricted to learned professionals such as physicians, architects, engineers, attorneys, and accountants. In their opposition papers, CBH argues that project managers are subject to malpractice claims because they can be certified, have code of conduct and are subject to discipline. New York courts do not appear to have addressed whether project managers can be subject to malpractice claims. However, Leather v. US Trust Co. of New York, 279 AD2d 311 (1st Dept 2001), Chase Scientific Research, Inc. v. NIA Grp., Inc., 96 NY2d 20 (2001), and Castle Oil Corp. v Thompson Pension Empl. Plans, Inc., 299 AD2d 513 (2d Dept 2002) are instructive.

In Leather, the plaintiff sued a financial planning company for, among other things, professional malpractice and alleged he was ill-advised such that his pension plan had become fully funded and needed to be rolled over into an IRA in order to avoid excise taxes. The trial court dismissed (and the Appellate Division affirmed) the plaintiffs claim for professional malpractice because (i) it was duplicative of the breach of contract claim and (ii) financial planners were not engaged in a profession associated with long-term educational requirements leading to an advanced degree, licensure evidencing qualifications met before engaging in the occupation, and control of the occupation by adherence to standards of conduct and ethics.

In Chase Scientific Research, the plaintiff engaged insurance brokers to procure property insurance (Chase Scientific Research, 96 NY2d at 24). Subsequently, a storm damaged the plaintiff’s property and the plaintiff filed a claim with the insurance carrier for the policy limit of $550,000 on claimed losses exceeding $1 million. The insurance carrier offered to cover only $50,000 worth of loss. The plaintiff sued the defendant insurance broker for, among other things, professional malpractice, alleging that the broker had not secured sufficient coverage for the property damage. The defendants moved to dismiss the complaint as time-barred pursuant to CPLR 214 (6)’s three-year statute of limitations for professional malpractice. The Supreme Court granted the defendant’s motion to dismiss the professional malpractice complaint as time barred and the Appellate Division affirmed. The Court of Appeals reversed, holding that the defendants were not professionals subject to the three-year professional malpractice statute of limitations because insurance brokers were unlike physicians, architects, engineers, lawyers, and accountants in that there were no similar pre-requisites to working as a professional project manager such as extensive formal learning and training, licensure and regulation indicating a qualification to practice, a code of conduct imposing standards beyond those accepted in the marketplace and a system of discipline for violation of those standards. In addition, the Court expressed concern over the difficulty in separating the groups of skilled professionals covered by the three-year malpractice statute of limitations from the groups of semi-professions that are not.

Subsequently, in Castle Oil Corp., the Appellate Division held that actuaries are also not subject to malpractice claims. In that case, the plaintiff hired the defendant actuarial company to write a report calculating the projected costs of increasing its benefits plan. The defendant delivered the report and the plaintiff paid the defendant in full. It was determined that the defendant’s report was not correct – i.e., the actual cost of increasing pension plan benefits was far higher than the costs anticipated in the actuarial report. The plaintiff sued and the defendant moved to dismiss the complaint as untimely because it was barred by the statute of limitations for malpractice claims.

The Court disagreed:

Unlike architects, engineers, lawyers, and accountants, who are required to be licensed to practice in their fields, actuaries are not required to be licensed in New York. Moreover, actuaries are not regulated by the State, or subject to a State created disciplinary system. In addition, although the record indicates that actuaries must usually pass a series of examinations administered by the Casualty Actuarial Society or the Society of Actuaries, there is no formal educational criteria for entry
into this field. Furthermore, while individuals are alternatively permitted to become actuaries through work experience, the required duration of this experience is not specified. Considering these factors, we conclude that actuaries are not professionals within the meaning of CPLR 214 (6).

Project managers are also not like architects, engineers or accountants. They are not required to be licensed to practice, they are not regulated by the State and they are not subject to a State created disciplinary system. Thus, project managers are not the type of professionals that are subject to malpractice claims and this cause of action must be dismissed.

(Internal quotations and citations omitted).

Stay informed!
Sign up for email alerts and notifications here.
Read more about our Complex Commercial Litigation practice.