Superior Court Further Extends Reach of Negligent Misrepresentation Claims in Pennsylvania

December 15, 2017

Approximately two years ago, I commented on the Superior Court opinion in Gongloff Contracting, L.L.C. v. L. Robert Kimball & Assoc., No. 785 WDA 2014 (Pa. Super. 2015), which expanded the reach of Pennsylvania’s negligent misrepresentation law from applying only to claims by contractors against design professionals to also encompassing claims by subcontractors against design professionals.  Recently, the Superior Court has further expanded this cause of action beyond claims against only design professionals.  In Fulton Bank, N.A. v. Sandquist, No. 2306 EDA 2016 (Pa. Super. 2017), the Superior Court has now recognized a cause of action for potential liability against accountants and their firms under a theory of negligent misrepresentation for providing professional information that is designed to be relied upon by a third party.

In Fulton Bank, N.A. v. Sandquist, the bank filed a complaint with several counts, including negligent misrepresentation, against the accountants of HiFi House (not a party to the action), seeking damages that the bank suffered as a result of making several million dollars in loans to HiFi House based upon financial statements prepared by the accountants. The accountants filed preliminary objections asserting that under the Pennsylvania Supreme Court opinion of Bilt-Rite Contractors, Inc. v. The Architectural Studio, 866 A.2d 270 (Pa. 2005), , which adopted Section 552 of the Restatement (Second) of Torts, claims for negligent misrepresentation were limited to actions against design professionals. The trial court agreed and granted the preliminary objections.

On appeal, after considering various cases from other jurisdictions that the trial court considered, as well a specific comment to Section 522 of the Restatement (Second) of Torts, which all seemed to so limit a claim for negligent misrepresentation, the Superior Court found that the trial court “applied too narrow a reading of Bilt-Rite” and further that it was not bound by opinions for Federal Courts or other jurisdictions. Finally, in a footnote, the Superior Court stated that Bilt-Rite did not adopt the comments to Section 552 of the Restatement.

The language utilized by the Superior Court in Fulton Bank is broad, and in no way limited to only design professionals and accountants. In fact, this holding arguably could extend liability for negligent misrepresentation to any professional service provider in Pennsylvania, where the information is provided and intended to be relied upon by third parties.

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