Agree to use your “professional best” ? You may lose insurance coverage! (law note)

mistakesYesterday, I was part of a panel at the NC Bar Association Construction Law Winter Meeting, discussing insurance issues for design professionals.

One topic we touched on was how to avoid invalidating your insurance.  As most of you know, Errors & Omissions insurance (“E&O” coverage)  is meant to provide coverage for mistakes you may make in performing your professional architecture or engineering services.  E&O coverage is important to protect you in the event of a lawsuit because, as you know, no set of plans is perfect (nor is perfection the standard of care).

Be careful, though.  Do not promise to provide a higher standard of care than the “professional standard“.

If you are asked to sign a contract that states you will use your “professional best,” “best efforts”, “highest care” or similar, you are being asked to sign something that could cost you your E&O coverage.

Examples of such language:

[Architect] [Engineer] shall perform the Services in accordance with the highest standards of professional competence in the industry.

[Architect] [Engineer] shall exercise a high degree of care and diligence in providing the professional services.

Architect’s] [Engineer’s] services shall be of first class quality and free from defects.

E&O policies cover you for failing to meet professional standards, but not in cases where you agree by contract to provide a higher/better/best standard. 

Explain the risks in such language to your owner clients.  No owner will want to put your insurance policy in jeopardy, and they should be willing to strike or modify that language to ensure that your work on the construction project is fully protected and covered by your E&O policy.

Some examples of coverable standards:

All services to be performed shall be performed in a manner consistent with that level of care and skill ordinarily exercised by members of Designer’s profession.

All services shall be performed in a manner consistent with that level of care and skill ordinarily exercised by members of Designer’s profession currently practicing in the location of the project for which the services are rendered, or similar locations.

Remember this, and make sure your future construction contracts contain favorable language that will actually be insurable.  You know– the whole reason you have professional liability insurance in the first place!

Have you ever been asked to agree to provide your best efforts?  How did you handle the situation?  Share in the space below.

They threatened to sue! What do I do? (Law note on construction disputes)

dont panicI just spent some time answering emails from folks worried because they’ve been threatened with a lawsuit over a construction project gone bad.   They want to know:

Can they do that?

What can they get?

But what if I have a good defense?

These are all good questions.  The short answer is that anyone can sue anyone else in America for anything, at almost any time.  HOWEVER, the law is not (generally) a fool.   If someone sues you, but you have a defense or their claim is not well-founded, they almost certainly will not prevail.

Does this mean you can relax?  No, it doesn’t.  You still must take any lawsuit (no matter how ill-conceived) seriously.   Here is what you do:

1. Report any lawsuits, or threats of lawsuits, to your insurance carrier if it involves your errors & omissions professional liability insurance.  Even if you are not sure if it involves E&O claims, report it anyhow.  Early reporting costs nothing but a few minutes of your time. Late reporting could mean you are denied insurance coverage.

2.File an Answer to any lawsuit within the time frame provided.  In North Carolina state court, that is generally 30 days from the date you were “served”, although if you follow certain procedures you can get that extended to day 60.  In North Carolina Federal Court (it will say on the Summons whether it is state or federal, and almost but not all construction disputes are state court), you have 20 days to respond (with extensions allowed if you follow certain other procedures).

Questions?  Leave a comment or shoot me an email.

 

Can You Change the Scope of Work? Not in a bidding situation! (reader comment)

biddingSetting the Right Expectations for Owner Clients is a must, as I recently wrote in my post discussing Scope of Work clauses.

According to construction consultant Tony Frisby,* scope of work issues are more important than general conditions in the management of a project.

Tony notes, however, that it is not always possible to change Scope of Work clauses in every situation:

“For example, if bidding on advertised procurement, any modifications in the bid may very well be a basis of rejection as non-responsive; the subcontractor is bound the same rule as to the scope of work in the general contract.  In negotiated contracts, two step and design build, of course, the contractor can delineate modifications or exclusions.

In subcontract agreements, we recommend that a Scope Letter do exactly what you have indicated, with emphasis on duties by others, such as hoisting and services provided by others.  Obviously, we recommend the deletion of ridiculous clauses such as No Damages for Delay.”

Tony’s point is a valid one– those dealing with a Bidding situation cannot change the Scope of Work.  Most architects & engineers enjoy more flexibility here than contractors, and can work on scope of work as part of an Request for Proposal response.  Tony’s point about subcontractor agreements is equally applicable to agreements with subconsultants as well.

* Tony Frisby specializes in prevention and non-judicial resolution of construction disputes.  He also assists companies in organizational improvements.

Agree? Disagree?  Share your thoughts with Tony and me, below.

Photo credit: Financial Times via Creative Commons license.

Orders of Precedence in Construction Contracts, and the conflict between architects and contractors

duking it outA few years back, we discussed the Orders of Precedence clause in Construction Contracts.  I wrote a post talking about how having such a clause in a contract can help the parties navigate in the grey areas where specifications and drawings may disagree.

My post generated a follow up guest post from Phil Kabza, a MasterSpec specialist, on what he saw as the problems with an order of precedence clause in truly protecting all parties to the contract.

This week, Phil’s guest post generated a new, and thought-provoking (flame-provoking?) comment from “Joe GC”.  Joe writes:

It is another very typical situation of the Architect and Engineer doing a poor job and then trying to seek relief of their error at the contractors expense. Phil’s comments are based on the fact that all contractors are not ethical, which is simply not true. If the subcontractor is the expert, then why are the drawings and specifications prepared by Architect’s and Engineer?

This is exactly why Design Build delivery methods are becoming more popular by the day.   Single source responsibility from someone who really is an expert, not someone who has a lot of education and therefore purports to be an expert.

In otherwords in laymen’s terms “If I have to verify everything you draw and specify Mr. Architect, then why do I need you in the process at all”? If you are not responsible for the review of the submittals then why do I need to send them to you? No more “approved” stamps just “reviewed” stamps; it’s becoming a joke!

When will the Design Community wake up? That is why so many Architects and Engineers are now finding themselves working for contractors.  You are responsible for the Design Mr. Architect, it is cut and dry, simple as that, not rocket science and you do not need to be AIA or P.E. to understand it.

AIA needs to do more training, especially when it comes to spending time in the field. They need to understand what they are designing, just as the contractor needs to understand what he is building.  They have never seen it that way because they think they are above the contractor or smarter than the contractor.

Until they learn they are not better or smarter because of classroom education things will not be improving and the lawyers will continue to be the most successful.

 

Interesting perspective as to why Design Build is becoming more popular.  I think Joe is correct that Design Build is more popular now, but I think it has less to do with concerns about design professionals avoiding liability and more to do with the economic value in having the “buck stopping” at one single entity.

Is there a perception that designers are classroom educated but not field trained?  Is it a fair one?  Share YOUR thoughts with Joe and me, below.

 

Anatomy of a Construction Errors & Omissions Lawsuit (law note)

hard hatsAs regular readers here know, my aim is to keep you out of court.  However, when that is not possible, it is important that you understand the process and procedure for how you will get sued, what happens then, and when there might finally be resolution.

Previously, I explained this process in detail in a series of posts entitled Law & Order: Hard Hat Files.  For newer readers and for reference, here are all sections of the 9 part series (really, 10 parts, with the introduction).

If you’d prefer to download a pdf instead of the above links, go here.

Your turn.  Have you ever been sued for professional errors and omissions?  Wish something else had been explained?  Share, below.

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