Is your design professional construction contract too friendly? (law note)

not friendlyMy husband often travels the back roads between Chapel Hill and Fuquay Varina to visit friends.  En route (a circuitous route that goes past Sharon Harris Nuclear Power Plant, among other places), he passes by the “Friendly Grocery”.  For those who haven’t had the pleasure, here is a photo of the side of the building in all its glory.

In case you cannot read the list of forbidden activities, I’m re-printed them here (complete with spelling error):

not friendly sign

I’m not sure which is the “friendly” part of that sign.  In fact, the sign seems to be the antithesis of friendly.

What does this have to do with your construction contracts?  Sometimes, in an effort to please the client and/or secure the project, architects and engineers have the habit of being too friendly in their contract language.  That is, you make promises or proposals that may promise too much of a good thing for the client.  This can cause big problems.  Bigger than being towed away from a rural grocery store in the middle of nowhere.  You could be putting your insurance coverage at risk.

Have you ever promised to use “best efforts” in your design or plans?  Promised to design to a specific LEED standard?  Guaranteed 100% satisfaction?  You might be putting your errors & omission coverage at issue.  By warrantying or guaranteeing something, you are assuming a level of liability well beyond the standard of care required by law.  By law, you only need to conform to the standard of care, and your insurance will only provide coverage up to that standard of care.  In other words, if you make guarantees or promise “best efforts,” you are contracting to something that will *not* be insured.  If something goes wrong, you will be without the benefit of your professional liability coverage.

Instead, make sure that your contracts, and proposals, are not too friendly to the client.  Sure, agree to work in accordance with the standard of care of professional architects/engineers.   But don’t make guarantees, or promise “best” efforts.  In fact, you might want to educate your client on why you cannot make such guarantees, and why anyone who does (i.e., your competition) is putting their insurance coverage at risk.  Owners want and need you to stay within the bounds of your coverage.  You need to, also.  Maybe the owner of the Friendly Grocery was on to something there.

Your turn.  Have you ever used language that jeopardized your insurance protection?  Uncertain if you have?  Drop me a line and we can talk.

Photo (c) Melissa Brumback  Creative Commons License

New Green Standards; Same Green Warnings for Architects & Engineers (law note)

The newest version of the LEED ratings system, LEED v4, has officially been released.  For a comparison of the major changes between LEED 2009 and LEEDv4, check out this downloadable form from the USGBC.LEED croppee

As the folks at Schinnerer’s pointed out, there is one major change that is fraught with peril for design professionals– the requirement for increased transparency concerning the composition and performance requirements of composition materials.

Notes the insurance carrier:
While design firms always had a level of responsibility for ongoing product research, the lack of standardized, affirmative industry data made it difficult for design firms and project owners to assess the impact of building materials on human health.
As with many aspects of sustainability in design and construction, the danger to design firms is likely to come from self-inflicted perils. When a firm accepts responsibility to “ensure that a project meets its goals by using the best products that align with project requirements,” it is essentially giving the project owner a guarantee that is both beyond the firm’s control and uninsurable by any insurance carried by a firm.

 

What is an architect or engineer to do?  NOT make guarantees.  That’s the easiest way to avoid potential problems and lawsuits down the road.

Inform your client that any green design guarantees may cause an otherwise covered claim to be denied by your errors & omissions insurance carrier.  Show them this post, or the Victor O. Schinnerer (CNA) blog article.  Whatever you do, do not make guarantees related to green design.

Your turn.  What has been your experience educating clients concerning green “guarantees” and the uninsurable nature of any such contract provisions?  Share in the comments section.

Photo adapted from (c) Albert Herring

Ask not for whom the bell tolls: it tolls for thee! The construction trial (Law & Order: Hard Hat files Part 9)

This is the final section of a 9 part series discussing the entire trajectory of a construction lawsuit involving claims of design errors or omissions.  If you missed any of the earlier posts, click on the Law & Order tag to read them all.
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The time has come.  You’ve been sued.  Suffered through discovery.  Talked about the project under oath til your throat turned raw.  And responded to the umpteen million request from your lawyer.  You’ve engaged experts, second-guessed your work, and looked at copies of legal documents that made your head spin.  Now, at long last, you will have your day in court.  Or will you?

church bellsWhen will your case be heard?

Your trial date is a moving target, at least in North Carolina.  Depending upon the county or jurisdiction the lawsuit is filed in, you are probably looking at your case taking from 1 year (for a small homeowner lawsuit) to 2 or 3 years for very complex cases.  This is one reason why court ordered mediation is required in all Superior Court cases in North Carolina.  It is also why most construction lawsuits do settle– at some point– prior to trial.  Some cases settle, literally, on the courthouse steps (or in the courthouse conference room).  Others settle during trial itself.  But if you find yourself settling at the last minute, you will have spent the time and money for trial preparation for naught.  A somewhat bitter pill to swallow.

What is involved in trial preparation?

Expect to review many documents relating to the project all over again with your lawyer(s), even if you’ve previously discussed them.  Expect to spend time with your expert(s) discussing your plans and design intent.  Expect to have some mock testimony sessions with your lawyers and others on their team.  Mostly, expect a lot of aggravation.  Trial preparation takes time.  A lot of time.  While much will be done by your construction lawyer, you will need to be actively involved.

How does the trial work?

The trial itself is probably the closest to a Law & Order scene that you will experience.  But don’t expect Jack McCoy (or Perry Mason) moments.  Very little happens in a trial that is completely unexpected.

If the trial is a jury trial (and most are), your lawyers will question the potential jury pool to try to weed out folks that have predisposed themselves to one side of the case.  The other side will do the same.  The result, ideally, is a group of disinterested, neutral folks that will decide your case.

After jury selection, opening statements are given.  These are speeches given by the lawyers to forecast the evidence that will be given to the jury.

The, the plaintiff (that is, the party suing you) will be told to call its first witness.  The plaintiff will proceed to call witnesses to the stand to testify.  The order that they are called in is up to their lawyers, and different lawyers have different strategies for deciding which witnesses they call first, middle, and last.

With each witness, the plaintiff’s counsel will ask open ended, non-leading direct examination questions.  After that, your counsel will ask leading questions on cross examination aimed at poking holes in the other side’s case, and establishing your own case theory.

After the plaintiff has presented its case and rests (and following some procedural motions at that point), the roles are reversed, and your lawyer will conduct direct examination, while the plaintiff will cross examine witnesses.

There are often legal sidebars during a trial, where the lawyers approach the judge and whisper about legal matters.  If extended debate on something is needed, the jury will be excused.  While you will not be invited to the bar to talk during sidebars, your lawyer can tell you what was discussed and how it effects your case.

At the conclusion of all evidence, the jury is given a set of legal jury instructions, and the lawyers present their closing arguments as to why their position should prevail.  Then, you wait.  And wait.  And wait, until the jury reaches a verdict.  The jury foreperson will read the verdict into the record.

What happens after trial?gavel

Depending on the trial results, one side may ask the judge to set aside the verdict (called a j.n.o.v.), which is rarely granted.  Whoever has lost may decide to notice an appeal of the verdict.  Appeals must be based on legal errors that the judge made during trial.  An appeal can take years, and the end result can be the same (that is, the verdict is upheld), overturned (set aside), or remanded for a new trial.  Yes, that’s right: you can be forced to re-try your case.

Is all lost, then, if you lose the jury verdict?  No; definitely not.  No one likes to spend time and money on appellate briefs.  So, even though the case is over, the parties may *still* negotiate a settlement.  Be aware, however, that you will have a judgment “on the books” against you if the jury found that way, and that can affect your credit ratings.  However, the judgment will also be rendered “satisfied” if you settle (or pay it off), which generally helps re-establish your good credit rating.

That’s it!  You now know just enough about the construction trial process to be dangerous!   I’ve obviously had to condense many details in this series, so if you have any questions or want me to expand on any area, drop me a note or comment in the comment section of the blog.

Adding an “Additional Insured” in the Professional Services Agreement: an exercise in futility! (law note)

As an architect or engineer,  you may be asked to sign a contract that has a requirement of adding the Owner (or Contractor, in a design-build project) to your own insurance as an “additional insured”.  This is usually a fall out of the fact that the Owner is treating you like a contractor and using “stock” contract language.  It is not appropriate, nor sometimes even possible, to add the Owner to your professional liability policy.

This is beacuse professional liability insurance only provides coverage for “professional services”.  That is, if it is even possible to buy such coverage, it won’t work to avoid any risks the Owner is seeking to avoid, because the Owner is not providing licensed architectural or engineering services on the Project.

In fact, because of the way professional liability policies are generally written, naming the project Owner as an additional insured essentially voids any coverage for the owner for your Firm’s design errors & omissions.

What should you do with a stubborn Owner who insists he wants to be an additional insured under your E&O policy?  Explain the facts to him, and point out he is risking voiding coverage all together.  Tell him to call me, or point out this post to him.  Also, several insurance brokers, agents, and companies have simple one or two page information sheets that you can provide to the Owner to help with his education.

Remember, having an “Additional Insured” in an Errors & Omissions policy is a true exercise in futility.  It may not be what the Owner wants to hear, but such is life!not want to hear

 

Question time:  have you ever been asked to add an Owner to your E&O insurance?  How did you handle it?  Share in the comments section, below. 

And if you haven’t already, be sure to download your free white paper on the 7 Critical Mistakes that Architects & Engineers make– it’s in the box on the top right hand side of the blog.

 

Photo credit.

Mine is better than yours! Battle of the experts in the construction lawsuit (Law & Order: Hard Hat files Part 6)

battling deerEventually, most construction lawsuits of any size involve hiring experts to review the project.  These experts then usually issue an opinion as to whether or not you, as the design professional, violated the professional standard of care for architects or engineers working on a similar project in a similar community.

If the case proceeds to trial, all sides will have their own expert(s), with rare exceptions.  Thus, the “battle of the experts” begins.  That is, a jury will have to listen to your expert, their expert, and the juror’s own common sense, and try to make out who is correct.  As with most things, there are probably valid points made by all of the hired experts (that is, of all the reputable ones, at any rate).  If a case gets to trial, you can be sure of it.

Hiring an expert to support your position can be a scary prospect.  You will essentially be paying (or having your insurance carrier pay) to have a competitor look over all of your work with a fine-tooth comb and 20/20 hindsight, to see if he can concur that your design met the standard of care.  Your attorney should work with you to get a good, solid professional peer retained as your expert; however, if you have any suggestions of who to use (or, who you do *not* wish to use), make those opinions known.  It is important to hire someone who is impartial about the outcome of the case, but you will not be required to hire your worst enemy/competitor.

Another protection that is built into litigation, is whether or not the expert’s opinion will ever see the light of day.  If the expert cannot support your position, he will be designated a “consulting expert” and his opinions will remain only between you, your lawyer, and the expert.  Assuming the expert does support your position, he will be designated as a “testifying expert,” at which point the other side can look at his records and notes, read any written reports he generates, and take his deposition.

Hiring an expert doesn’t have to be an arduous process, but work with your lawyer to get someone you respect on your side of courtroom.

Questions? Comments?  Share your experience with experts, or being an expert, in the comments section below.  And don’t forget to sign up for the Construction Professional newsletter and my free white paper on 7 Critical Mistakes, on the right hand side of the homepage.

Photo (c) Sias van Schalkwyk

 

 

 

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