5 Questions About Professional Liability for Design Firms
5 Questions About Professional Liability for Design Firms
Question 1: We strive for clear and simple contract language. Could you explain "indemnity" in simple terms.
Answer:
Simply defined, indemnification is agreement to accept responsibility for someone else's loss
Common law If a person's negligent act damages another person, the damaged party deserves compensation from the damaging party
Uninsurable language "Consultant shall indemnify, defend, and hold harmless Client from any and all damages, alleged or actual, including consequential or collateral damages, occasioned by any actions of the design professional during the performance of the services."
Insurable language "Consultant agrees to hold harmless and indemnify Client from and against liability to the extent caused by Consultant's negligent performance of the services."
Question 2: What are the most common reasons for liability claims?
Answer:
1. Design errors found during construction. This usually occurs as a result of the following:
Inadequate quality control during design
Failure to perform a constructability review during the design
The propensity of contractors to obtain additional compensation through change orders that the Owner accepts and then attempts to pass the costs through to the Consultant.
2. Inconsistency between the plans and specifications
3. Inconsistency in the construction contract documents between the roles of the Consultant, Owner, and Contractor
4. Construction errors that produce unsatisfactory results for which the Contractor attempts to shift the responsibility to the Consultant.
5. Inadequate description of what the Owner may expect from the Consultant or construction observer.
Question 3: What recommendations do you have for protecting one's intellectual property when some clients ask for documents in electronic form (be it in their native form or pdf, etc.)? Or other consultants are involved that can compete for your services using your work material.
Answer: There needs to be a section in the Boilerplate that describes in detail the limitation placed on the Client when reusing any of the contract documents for which they become the owner. This should also include the Client accepting full responsibility for the results of any revisions made to the contract documents without the Consultant's approval. All documents in either electronic or hard copy format should have all consultant's indicia removed prior to turning over the documents to the Client. Your professional liability insurance broker should be able to provide standard contract
language that addresses this matter. Whatever language is used should be reviewed by your attorney that is familiar with the laws of the state in which you practice.
Question 4: When you are doing limited construction observations, what language should be used to provide a certificate of substantial and/or final completion?
Answer: That would vary depending on the nature of the construction but it could look something like this:
Consultant may employ certain observation or sampling/testing procedures in performing the services indicated herein. Client understands that such procedures indicate actual conditions only at the precise locations and times where and when these procedures were performed. Client recognizes that, despite proper application and implementation of observation and/or sampling/testing procedures and despite proper interpretation of the findings, Consultant will not be in a position to ensure the existence of conditions that Consultant can only infer to exist. Because the professional certification that certain conditions exist may be regarded by others as an assurance of such conditions' existence, client understands and agrees that it would not be proper for Consultant to certify the existence of such conditions. Accordingly, Client shall not require Consultant to sign any certification, no matter by whom requested, that would cause Consultant to certify the existence of conditions whose existence Consultant cannot ensure. In additions, Client shall not make resolution of any dispute with Consultant or payment of any amount due to Consultant contingent upon Consultant's willingness to so certify. Your professional liability insurance broker should be able to provide standard contract language that addresses this matter.
Question 5: Please elaborate on the issue of a contractor terminating their work and the impact to the architect.
Answer: If the Consultant's scope of services includes visiting the project to observe work in place prior to the Owner making a progress payment to the Contractor, and the Contractor subsequently defaults on the contract, leaving the job partially completed and takes previously installed material, equipment, and materials stored on site for which the
Contractor has been paid, the Owner and/or Lender will say that they relied on the Consultant's observation as the basis of making the progress payment and will ask that the Consultant pay for the previously paid for now missing material and equipment that must be replaced by the take-over Contractor.
Remember to always consult a professional before making any decisions regarding architect professional liability (architect e&o), engineer professional liability (engineer e&o), or any other form of pli for design firms.
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