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Presenting a live 90-minute webinar with interactive Q&A
Liability Claims Against Architects, Engineers
and Construction Design Professionals Navigating Evolving Theories of Liability and Defenses, Minimizing Risk
Through Contract Provisions and Project Documentation
Today’s faculty features:
1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific
TUESDAY, MARCH 21, 2017
David M. Adelstein, Partner, Kirwin Norris, Orlando and Ft. Lauderdale, Fla.
John D. Broghammer, Partner, Greve Clifford Wengel & Paras, Sacramento, Calif.
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Liability Claims against
Architects, Engineers,
and Construction Design
Professionals
David Adelstein
Kirwin Norris, P.A.
954-759-0026
What is a project delivery method?
A method to deliver a project to an owner that factors in risks associated w/ project size, complexity, scope, contractor input, budgetary constraints, lean construction principles, risk-allocation such as dispute resolution, sustainability (LEED), emerging technology (BIM), collaboration, owner control…
After considering these factors/ risks, owner selects project delivery method that provides it the best value allocating the responsibility of the design and the construction of the project
David Adelstein
6
I. Design Professional Risks Associated with
Project Delivery Methods
I. Design Professional Risks Associated with
Project Delivery Methods More conventional project delivery methods
Design-Bid-Build
Multi-Prime
Design-Build
CM-Agency
CM-At-Risk
*Evolving delivery methods (that may include more integrated design roles)
Integrated Project Delivery (IPD)
Green – Sustainable Projects (SP)
Public-Private-Partnership (P3)
David Adelstein
7
Collaboration
Lean Construction Principles Emerging Technology (BIM)
Green / Sustainability
Dispute Resolution Complexity, Scope, &
Risk
8
You
are
Here
David Adelstein
IPD
American Institute of Architects
A project delivery approach that integrates people, systems, business structures and
practices into a process that collaboratively harnesses the talents and insights of all
participants to optimize project results, increase value to the owner, reduce waste, and
maximize efficiency through all phases of design, fabrication, and construction.
ConsensusDOCS
The Parties agree that the Project objectives can be best achieved through a relational
contract that promotes and facilitates strategic planning, design, construction and
commissioning of the project, through the principles of collaboration and lean project delivery.
This approach recognizes that each Party's success is tied directly to the success of all other
members of the Collaborative Project Team and encourages and requires the Parties to
organize and integrate their respective roles, responsibilities and expertise, to identify and
align their respective expectations and objectives, to commit to open communications,
transparent decision-making, proactive and non-adversarial interaction, problem-solving, the
sharing of ideas, to continuously seek to improve the Project planning, design, and
construction processes, and to share both the risks and rewards associated with achieving
the Project objectives.
What do these definitions mean?
Collaborate=working and cooperating with others to perform a task to achieve a
common goal by maximizing coordination, efficiencies, waste reduction, and
profitability (all while reducing overall costs)
9
IPD
Considerations:
Shared risk/reward through “transparency”
Waiver of claims among project team
Collaborative relationship between design and construction
Need sophisticated leadership team
Funding requirements
Procurement requirements
Technology (BIM) requirements (for collaborative design)
Sustainability
Lean construction principles
New school thinking regarding risk allocation
Contingency? (unlike GMP contracts)
Insurance considerations (e.g., project specific professional liability
/ manuscript policies with extended reporting period, make sure PL
covers negligent design conveyed in digital data, rectification
coverage…
Note: professional liability coverage centers on conventional notions of
professional liability / E&O
David Adelstein
10
IPD
BIM
Digital 3D (virtual) modeling of project
Promotes sharing of digital information among project team to increase coordination, planning, efficiency and constructability of design—optimize design at all phases (preconstruction, during construction, post-construction)
E.g, BIM would be virtual model of structure (load bearing walls, slabs, windows, etc.) and utilities (duct, piping) and can include real-time scheduling information in the model (manpower, coordination, etc.) and budgetary information (cost)
Transparency-All this data is shared to try to imitate actual construction for the purpose of better coordinated design and construction
Note: Think also 3-D laser scanning and drone imagery
David Adelstein
11
IPD
BIM
Owner wants Building Information Modeling (BIM) more
so than in conventional project delivery methods
Willingness to invest in a longer, more detailed design
phase using BIM to make key design and cost decisions
collaboratively to produce a fully coordinated design with
an emphasis on prefabrication and procuring long lead
items
David Adelstein
12
IPD
BIM & Objectives
Less on site administration effort as conflicts and questions resolved virtually
Fewer RFIs because stakeholders collaboratively involved in design (and longer
precon phase) and better communication of design intent
Less shop drawing and submittal approval time
More prefabrication and procurement of long lead items
Less waste and inefficiency
As builts incorporated into the virtual model
Schedule tied to virtual model (allows for visualization of deviation from planned
sequences and durations)
David Adelstein
13
IPD
IPD
Standard Form Contracts
Both the ConsensusDOCS and AIA have standard documents addressing
BIM and IPD (legal and administrative issues and risk allocation):
ConsensusDOCS 300 Multi-Party IPD Agreement
ConsensusDOCs 396 Tri Party Agreement for IPD
ConsensusDOCS 301 BIM Addendum
AIA E203 BIM and Digital Data Exhibit
AIA G202-2008 BIM Protocol Form
AIA B195, A295 and A195 Transitional Documents between O-C and O-A
for IPD
AIA C195-2008 Single Purpose Entity Agreement for IPD
AIA C191-2009 Multiparty Agreement for IPD
AIA C196-2008 Single Purpose Entity and Owner for IPD
David Adelstein
14
Considerations:
LEED certification
Financial incentives and projected cost savings
Claims associated with achieving certification,
incentives, projected cost savings
David Adelstein
15
SP
Identify objectives relating to sustainable design / green
building elements such as LEED certifications, energy
efficiency, product ratings, etc.
AIA A101-2007 SP Agreement between O-C
AIA A201-2007 SP General Conditions
AIA B101-2007 SP Agreement between O-A
*Note: See AIA Document D503-2013 Guide for Sustainable Projects
ConsensusDocs 310 Green Building Addendum
David Adelstein
16
SP
Partnership between public and private entities to
deliver project for public purposes (e.g., infrastructure)
where private entity finances (and perhaps operates
and maintains) project in consideration for revenue (or
% of revenue) completed project will generate for “x”
number of years
David Adelstein
17
P3
Considerations:
Sophisticated leadership teams with understanding of
process
Cost of private financing (cost associated with debt)
Increased private party participation in delivering public
project
Risk transfer to private consortium (e.g., design,
construction, financing, operations and maintenance, etc.)
Insurance considerations (similar to design-build or
potentially IPD)
David Adelstein
18
P3
Contract Forms
EJCDC P3-508 (premised on design-build delivery)
David Adelstein
19
P3
II. Theories of Liability
Design Professional Liability:
1) Common Law (Tort)
2) Statutory / Administrative Obligations
3) Contractual (breach of contract) * Note: Contractual liability becomes VERY important with evolving delivery methods where A/E’s role falls outside of more conventional delivery methods. Reason insurance considerations applicable to design errors & omissions become major criteria
David Adelstein
20
Design professional’s standard of care gaged under
negligence theory (hence, importance of professional
liability coverage…)
Failure to use use reasonable / due care which reasonable,
careful design professional would use under like
circumstances
Failure to use reasonable / due care that conforms to
acceptable standards that is detrimental to client or public
David Adelstein
21
II. Theories of Liability
Common Law
Ex. Lochrane Engineering, Inc. v. Willingham Realgrowth Investment Fund, Ltd., 552 So.2d 228, 232 (Fla. 5th DCA 1989) –”However, the duty imposed by law upon professionals rendering professional services is to perform such services in accordance with the standard of care used by similar professionals in the community under similar circumstances.”
Note: FL- duty of care of supervising design professional not extended to subs. See Spancrete, Inc. v. Ronald E. Frazier & Associates, P.A., 630 So.2d 1197 (Fla. 3d DCA 1994)
Ex. Overland Constructors, Inc. v. Millard School District, School District No. 17, Douglas County, 369 N.W.2d 69, 76 (Neb. 1985) -“the test is whether the architect has exercised that degree of skill and diligence ordinarily exercised under like circumstances by architects in good standing in the same or similar communities.”
Ex. Martin v. Barge, Waggoner, Sumner & Cannon, 894 S.W.2d 750 (Tenn.App. 1994) – “Tennessee courts have adopted the “same or similar community” standard of care with respect to professional negligence.”
But see ex. In re Parsons, Main, Inc., ASBCA No. 51355, 2002 WL 1307490, (June 10, 2002) – USACOE project near St. Louis; A/E argued that government must apply standard of care of geotechnical engineers in St. Louis; rejected local standard in favor of national standard
David Adelstein
22
II. Theories of Liability
Common Law
Design Professional’s reasonable / due care requirement based onstatutory / administrative licensing requirements:
Ex: Florida Administrative Code 61G1-12.001(4)- An architect, firm, or business holding a certificate of authorization may not be negligent in the practice of architecture. The term negligence is defined as the failure, by an architect, to exercise due care to conform to acceptable standards of architectural practice in such a manner as to be detrimental to a client or to the public at large.
(a) Plans, drawings, specifications and other related documents prepared by an architect shall be of a sufficiently high standard to inform the users thereof of the requirements intended to be illustrated or described by them. Such documents shall clearly and accurately indicate the design of all essential parts of the work to which they refer. An architect shall meet a standard of practice which demonstrates his knowledge and ability to assure the safety and welfare of his clients and the public.
(b) An architect shall be required to coordinate his activities with other professionals involved in those projects wherein the architect is engaged to provide plans, drawings and specifications which result in the production of working documents which are used or intended to be used for the construction of a structure.
David Adelstein
23
II. Theories of Liability
Statutory
Ex. Ohio Administrative Code 4703-3-07 (A) (1)- In practicing architecture, a registered architect shall act with reasonable care and competence and shall apply the knowledge and skill which is ordinarily applied by registered architects of good standing, practicing in the same locality.
Ex. Alabama Administrative Code 100-X-7-.01 (1)- In practicing architecture, an architect’s primary duty is to protect the public’s health, safety, and welfare. In discharging this duty, an architect shall act with reasonable care and competence, and shall apply the knowledge and skill which is ordinarily applied by architects of good standing, practicing in the same locality.
David Adelstein
24
II. Theories of Liability
Statutory
Duties are imposed by contracts such as industry form contracts:
EJCDC E-500 – Standard Form Agreement Between Owner and Engineer for Professional Services
6.01.A. Standard of Care: The standard of care for all professional engineering and related services performed or furnished by Engineer under this Agreement will be the care and skill ordinarily used by members of the subject profession practicing under similar circumstances at the same time and in the same locality. Engineer makes no warranties, express or implied, under this Agreement or otherwise, in connection with Engineer’s services.
David Adelstein
25
II. Theories of Liability
Contractual
AIA B101 – Standard Form Agreement Between
Owner and Architect
2.2 The Architect shall perform its services consistent
with the professional skill and care ordinarily provided by
architects practicing in the same or similar locality under
the same or similar circumstances. The Architect shall
perform its services as expeditiously as is consistent with
such professional skill and care and the orderly progress
of the Project.
David Adelstein
26
II. Theories of Liability
Contractual
Design Professional’s common law duty of care can be extended / broadened by contract…WATCH OUT FOR THIS!
Ex. The School Board of Broward County, FL v. Pierce Goodwin Alexander & Linville, 137 So.3d 1059 (Fla. 4th DCA 2014)
“2.1.3 As to all services provided to this Agreement, the Project Consultant [the architect] shall furnish services by experienced personnel and under the supervision of experienced professionals licensed in Florida and shall exercise a degree of care and diligence in the performance of these services in accordance with the customary professional standards currently practiced by firms in Florida and in compliance with any and all applicable codes, laws, ordinances, etc. . . .
2.1.5 All professional design services and associated products or instruments of those services provided by the Project Consultant shall: .1 Be in accordance with all applicable codes, laws, and regulations of any governmental entity, including, but not limited to, [list of regulatory entities] with the Owner serving as the interpreter of the intent and meaning of . . . any other applicable code.”
In this contract, architect contracted to heightened standard of care and was contractually obligated to perform to more heightened standard of care than common law standard. Here, architect accepted risk of design plans not code-compliant (no matter what!)
David Adelstein
27
II. Theories of Liability
Contractual
Ex. The School Board of Broward County, FL v. Pierce Goodwin Alexander & Linville, 137 So.3d 1059 (Fla. 4th DCA 2014)
- Previously discussed
- First Cost Defense / Added First Cost Benefit Theory
Architect not responsible for costs of items left out of original design since owner would always be responsible for this cost based on cost of item if that item was included in original design
“For example, if the school board would have paid a cost for construction in accordance with the code-compliant final design plans, an award of a COI [change order item] expense against the architect attributable to a change in the initial design plans for the same cost would put the school board in a better position than if the design services had been performed as agreed. Stated another way, if there had been no change between the initial plans drawn for bidding by contractors and the final construction plans, the school board would have been solely responsible for paying all construction expenses incurred for the renovation.”
David Adelstein
28
Recent Case Example
A&H Properties, v. GPM Engineering, 2015 WL 9435974 (Tex.App.-Austin 2015) –owner hired design-builder to install/design energy efficient improvement including geothermal loop. Engineer hired by design-builder. No contract between engineer and owner. Owner sued engineer for negligence for design of geothermal loop that caused it financial damages. Summary judgment granted in favor of engineer under economic loss rule. Affirmed on appeal.
“[T]he Texas Supreme Court recently clarified in a similar factual scenario that the availability of contractual remedies in a vertical chain of contracts on a construction project precludes tort recovery when no personal injury or property damage is alleged. The record before us establishes that GPM [engineer], as subcontractor, was performing services part of of the overall construction project based on its contract with the general contractor, Bell. GPM’s duty to perform work on A&H’s [owner] arose of that construction subcontract, and no other duty or relationship between GPM and A&H is presented in this record.
***
“Application of the economic-loss rule is particularly appropriate here, where permitting A&H to sue GPM for economic loss would disrupt the risk allocations that A&H negotiated with Bell, and that Bell, in turn, negotiated with GPM.”
David Adelstein
29
Recent Case Example
Balfour Beatty Infrastructure, Inc. v. Rummel Klepper & Kahl, LLP, 2016 WL 360875 (Md.Ct.Sp.App. 2016)-City hired engineer to produce construction documents for wastewater treatment plant under design-bid-build. Years later successful bidder (contractor) sued engineering firm for delays associated with defective design and negligent misrepresentations. No contract between contractor and engineer. Trial court dismissed based on economic loss rule. Affirmed on appeal.
“[I]n the absence of privity, death, personal injury, property damage, or the risk of death or serious personal injury, no duty of care in tort runs from an engineer or architect to a contractor for purely economic losses on a public construction project.”
David Adelstein
30
Recent Case Example
But see Gongloff Contracting, L.L.C. v. L. Robert Kimball & Associates, Inc., 119 A.3d 1070 (Penn. 2015)- University hired A/E and GC. GC hired steel sub. Steel sub hired plaintiff (sub-sub) to erect steel. Concerns were raised with A/E roof design. During construction it was determined that roof design not sufficient to bear loads. There were 3 shut-downs of steel erection due to redesigns. Plaintiff submitted 81 change order requests resulting in itbeing unable to pay vendors, laying off its crew, and leaving site. Plaintiff sued A/E for negligent misrepresentation re: the design of the roof. Trial court granted judgment on pleadings based on economic loss rule. Reversed on appeal.
“We conclude that the amended complaint's allegations that Kimball's [A/E] design documents constituted negligently-supplied false information have been pled with the appropriate level of specificity to state a cause of action for negligent misrepresentation…. While Kimball might prove later in the litigation that the allegation that it provided false information concerning the integrity of its roof design was unsubstantiated, it is not entitled to judgment in its favor at this stage of the proceedings.” (relying on case that A/E can be liable for negligent misrepresentation when it negligently supplies information knowing that 3rd parties will rely on such information)
David Adelstein
31
Recent Case Example
- T H E A R T O F WA R -
32
EFFECTIVE PROJECT
DOCUMENTATION
Using Documentation For Risk Allocation and Warfare.
John D. Broghammer
Sun Tzu…Wi th A Tw is t 34
“It is said that if you
know your enemies and
know yourself, you will
not be imperiled in a
hundred battles; if you
do not know your
enemies but do know
yourself, you will win
one and lose one; if you
do not know your
enemies nor yourself,
you will be imperiled in
every single battle.”
Sun Tzu
YOUR ENEMY IS YOU!!
• Per a large A/E insurance carrier, a dispute is ALMOST ALWAYS caused by a documentation error—not a design error.
– 1. No or poorly drafted contracts;
– 2. Failure to manage expectations;
– 3. Failure to document and follow up.
36
Studies have shown the genesis of
most lawsuits, in one way or
another, is a contract problem.
37
“Thus it is that in war the victorious strategist only seeks battle after the
victory has been won; whereas he who is destined to defeat first fights and
afterwards looks for victory.”
--Sun Tzu 38
39
Your Contract is Your Castle’s Defense
39
Preparations for
War
CLAUSES, WORDS AND EXHIBITS ARE
LIKE RAMPARTS, MOATS, AND GATES.
Each word is like brick and mortar.
Your client wants you to have fewer defenses.
John Broghammer [email protected]
40
GET IT IN WRITING!!!
• Contracts should be in writing and many states require a written contract with specific provisions for inclusion.
• Ancient Chinese proverb: “The faintest of ink is worth more than the strongest memory.”
41
FROM THE “DUH” FILES:
“An oral contract is
not worth the paper
it is written on.”
42
YOU DON’T WIN UNTIL YOU DRAG THE SIGNED CONTRACT HOME.
43
READ YOUR CONTRACT…..PLEASE!!
I’ve never been told by
any client embroiled in a
lawsuit that he or she
regretted taking the time to read and understand the contract.
44
MORE “DUH” STUFF:
• Keep a copy of the contract in separate file.
• Add papers or e-mails that impact the contract and/or your scope of work.
• Scan your contracts and related documents an electronic file.
45
NEGOTIATIONS
• It is unsexy, non-paying and drudgery.
• The other side fights you on issues which you think are stupid.
• And as Colin Powell once said: “No battle plan survives contact with the enemy.”
46
SUN TZU
“The general who wins the battle makes many calculations in his temple before the battle is fought. The general who loses makes but few calculations beforehand.”
• BE PREPARED….
47
Sun Tzu Chinese Military
Strategist, Commander
and Philosopher
NEGOTIATIONS
• Your contract is your friend…maybe your only friend on a project.
• It is the single most critical thing on a project.
• Never give contract negotiation short shrift.
50
CONTROL THE NARRATIVE
• “Those skilled in war bring the enemy to the field of battle, and are not brought there by him.” Sun Tzu
Draft your own contract!
51
NEGOTIATIONS
• Be specific. Let others review your drafts for content and errors.
• Better yet, use stock contracts (e.g., AIA).
• Read the RFP (or similar documents) closely.
• Memorialize in writing additions/subtractions.
52
Competitive
Arousal
Competitive arousal is the
visceral urge in negotiating to “win,”
rather than get the best deal.
53
Confirmation
Bias
Confirmation Bias describes the
psychological process where we seek
information that confirms our beliefs.
54
Bartlett’s “THE war of the
ghosts”
55
FREDERIC BARTLETT AND
MEMORY RECONSTRUCTION—
THE WAR OF THE GHOSTS
PROCESS OF DISTORTION
ASSIMILATION—facts CHANGED TO FIT
BRITISH NORMS
LEVELING—”UNIMPORTANT” DETAILS
OMITTED
SHARPENING—EDIT/ADD DETAILS TO FIT
BRITISH NORMS
56
People infer information that
supports their existing beliefs,
even if the data support an
opposing view.
Confirmation bias is a problem to
overcome when you need to make
a fact-based decision.
57
THE CURES?
1.Get the opinion of others.
2.Then listen to the voices of dissent.
3.Play “devil’s advocate” and view the deal
from the other side.
4.Work to build empathy and relationships
then share WHY you need certain language.
58
“If asked how to cope
with a great host of the
enemy in orderly array
and on the point of
marching to the attack, I
should say: “Begin by
seizing something
which your opponent
holds dear; then they
will be amenable to
your will.”
Sun Tzu
59
Negotiations
First, understand that
negotiations are an exchange of what each side “holds dear.”
The owner/client has money and you have your
time/services. 60
Negotiations
Second, negotiations are about personal relationships….established
before negotiating, not during the process.
The owner then holds the relationship “dear.”
61
CRITICAL CONTRACT CLAUSES
A. Detailed Scope of Work Language.
B. Construction Administration Language.
C. Indemnity Clauses.
D. Standard of Care.
E. Miscellaneous.
62
SCOPE OF WORK
• From a prominent A/E insurance carrier re: Scope of Work claims/lawsuits:
“Failure to manage the owner’s
expectations; failure to explain the
scope of work and exclusions thereto.”
• This must be started during negotiations.
63
SCOPE OF WORK Should always be Exhibit A to your contract.
GOOD!!
UH…NOT
GOOD
64
SCOPE OF WORK
65
CRITICAL CONTRACT CLAUSES
A. Detailed Scope of Work Language.
B. Construction Administration Language.
C. Indemnity Clauses.
D. Standard of Care.
E. Miscellaneous.
66
You do not inspect…
you only observe !!!
67
CONSTRUCTION
ADMINISTRATION
Construction observation is the periodic
observation of completed work to determine
general compliance with the plans,
specifications and project documents.
IT IS NEVER AN INSPECTION OR GUARNATEE
68
CUSTOM AND PRACTICE
• Observation is the visual observation of the engineering system for general conformance with the approved plans and specifications.
• Inspection is the monitoring of materials and workmanship that are critical to the integrity of the project to ensure compliance with the approved plans, specifications and applicable laws.
69
70
SAMPLE PROBLEM
• “[Design Professional] shall make…periodic on-site observations, not less than weekly…. Observations shall be conducted deliberately and thoroughly...”
• “Observations shall be for the purpose of ascertaining…that the …quality and detail of construction…complies with…the contract documents.”
71
Report limitation language
“Limited observation services pursuant to
the contract for this Project were
performed in substantial accordance with
the standard of care and generally
accepted field observation practices for
[structural engineering entities] under
similar circumstances.”
72
BAD GOOD!!!
AWFUL!!!! 73
OMG
!!!
74
EXPECTATIONS
• 1. Understand what the law in your state/locale requires.
• 2. Understand the local customs and practices.
• 3. Define your duties and rein in client expectations.
75
THE PANDA
EATS
SHOOTS
AND
LEAVES.
CRITICAL CONTRACT CLAUSES
A. Detailed Scope of Work Language.
B. Construction Administration Language.
C. Indemnity Clauses.
D. Standard of Care.
E. Miscellaneous.
77
INDEMNITY OWNER
DESIGN PROFESSIONAL
INDEMNITY CLAUSE
78
INDEMNITY
≈
INSURANCE
• "An indemnity contract resembles an insurance agreement.” (MacDonald & Kruse v. San Jose Steel
(1972) 29 Cal.App.3d 413, 420.).
79
INDEMNITY
• PURPOSE: Indemnity, like insurance, seeks to shift all or part of the risk of loss from Player A to Player B.
• Usually insurance clauses are strictly construed against insurers….not necessarily indemnity clauses.
80
INDEMNITY
• Insurer’s business model is to collect premiums and spread risk. Insurance works by receiving more premiums than the company pays out in benefits. You do not work this way.
81
INDEMNITY
What to look for….and why to look for it?
82
“Except to the extent of Contractor’s sole negligence or intentional misconduct, and without regard to any negligence or fault on the part of Consultant, Consultant agrees to defend and indemnify …Contractor from and against any and all claims, demands, losses, damages, … and/or liabilities …, arising out of, resulting from, or occurring in connection with (a) the materials and services provided, (b) the performance or failure in performance of the work, (c) Consultant's contractual obligations, and/or (d) ….
83
“Except to the extent of Contractor’s sole negligence or intentional misconduct....” This is red flag language in any indemnity clause. It is a sure sign of trouble.
84
“and without regard to any negligence or fault on the part of Consultant” “Consultant agrees to indemnify …, arising out of, resulting from, or occurring in connection with…” This is not normally insurable. You do not have to be negligent to trigger the indemnity obligations. 85
“Consultant agrees to defend and indemnify …Contractor from and against any and all claims, demands, losses, damages, … and/or liabilities….” Normally, the duty to defend is very broad and also not insurable. In some states the duty to defend is automatically triggered by an indemnity obligation.
86
INDEMNITY
• The Consultant will indemnify the Client for actual damages for which the Client becomes liable if the damage upon which the liability is based was caused by the proven active negligence of the Consultant.
• If the Client is determined to be liable for damage caused by the proven active negligence of the Consultant, the Consultant will reimburse the Client for the reasonable value of the defense costs insured to defend against the damages caused by the Consultant’s proven negligence.
87
INDEMNITY
Suppose your Client insists that you defend it if it is sued. Then, use:
Consultant has no obligation to pay for Client’s defense costs until there is a final determination of liability. Consultant’s obligation to reimburse Client’s defense cost shall be limited to the Consultant’s percentage of liability based upon Consultant’s comparative fault.
88
Endowment Effect
or Overconfidence
Bias
This bias is the tendency to place too
much emphasis on your knowledge,
abilities and negotiation skills. 89
Know Your Limitations
90
HIRE a lawyer!!!! 91
CRITICAL CONTRACT CLAUSES
A. Detailed Scope of Work Language.
B. Construction Administration Language.
C. Indemnity Clauses.
D. Standard of Care.
E. Miscellaneous.
92
STANDARD OF CARE
• As a general rule, NEVER, ever, agree to contract language that alters the standard of care.
93
STANDARD OF CARE
“A [professional] is negligent if he/she fails to use the skill and care that a reasonably careful [professional] would have used in similar circumstances. This level of skill, knowledge, and care is sometimes referred to as “the standard of care.””
Cal. Jury Instruction 600
94
STANDARD OF CARE GOOD!
UH…NOT…GOOD!
Best means better
than everyone else. 95
STANDARD OF CARE
Any blanket promise to correct defects may alter the standard of care. Are you insured for this?
96
STANDARD OF CARE
• Beware of warranties, guarantees, and certifications which effectively turn the Standard of Care into a promise of perfection.
• You normally do not have insurance coverage for such warranties, guarantees, and certifications.
97
CRITICAL CONTRACT CLAUSES
A. Detailed Scope of Work Language.
B. Construction Administration Language.
C. Indemnity Clauses.
D. Standard of Care.
E. Miscellaneous.
98
THIRD PARTY BENEFICIARY
• The Architect’s services under this Agreement are being performed solely for the Client's benefit, and no other party or entity shall have any rights or a claim against the Architect ….
• This provision may be waived only by express written consent of the Architect.
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NON-ASSIGNMENT
• Neither the Client nor the Architect shall assign this Agreement without the express written consent of the other.
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MISCELLANEOUS
1. Billing and Payment Provisions: Payment terms, interest, attorney fees and collection cost provisions. Terms for suspension or termination for non-payment.
2. Certifications, Guarantees & Warranties: Delete whenever possible. Delete an agreement for code compliance or that construction will be pursuant to “all laws, regulations and codes.” Some state laws define “certify” for architects and engineers to mean only an expression of opinion, not a warranty or guarantee.
3. Arbitration and Dispute Resolution: Generally avoid mandatory arbitration provisions. Other forms of dispute resolution are acceptable.
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MISCELLANEOUS
4. Job Site Safety: You should not be responsible (directly or indirectly) for job site safety. You should not be responsible for construction means and methods. Ensure language that keeps these responsibilities with contractor or owner.
5. Liquidated Damages: Liquidated damages provisions should not be included in your contract. There are too many variables not in your control as the designer.
6. Limitation of Liability: Where possible insert limitation of liability clause or some type of cap on damages. Be willing to receive a lower fee to obtain this protection. Try to limit damages to “available insurance limits” or similar insurance limitations.
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MISCELLANEOUS
7. Attorney Fees & Costs: Generally delete all such clauses where possible. Or, limit the clause to very specific disputes, such as fee disputes.
8. Insurance Requirements: Assure yourself that the owner agrees to what insurance is needed for a project (and make sure you AND subs comply). Many policies do not cover certain contractual risk assumptions.
9. Shop Drawing Review: Define shop drawing review responsibilities. Ensure non-responsibility shop drawings and that review is only for general plan conformance. Make sure owner and contractor know the scope of your review.
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INSURANCE
Errors & Omissions Insurance is always “claims made,” meaning coverage is triggered by the date of a claim or suit—not the project date.
Claims made policies almost always have declining policy limits. Attorney fees and litigation costs reduce the policy limits.
Consider “project insurance” which covers a specific project rather than specific insureds.
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INSURANCE
• Be aware: High deductibles = fool’s gold. Deductibles must be paid by you first before the insurer will participate.
• Some carriers offer programs to spread out your deductible over time, such as a 20%/80% split or “first dollar defense” with the payment of the deductible later.
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INSURANCE
• Make sure your subconsulting contracts comply with insurance provisions of the prime contract.
• Someone in your office must be responsible for obtaining Certificates of Insurance from subs. Get renewal certificates.
• Have your insurance company review your contracts for coverage issues.
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PROJECT DOCUMENTATION
Presenter:
John D. Broghammer
Greve, Clifford, Wengel & Paras, LLP
2870 Gateway Oaks Drive, Suite 210
Sacramento, CA 95833
Telephone: (916) 669-3905
Website: http://www.greveclifford.com
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