My 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):
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.
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!
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.
I have previously discussed the ABCs of Lien Laws for those making claims on a project (that is, architects, engineers, contractors, subcontractors, and suppliers) and the 123s of Lien Laws for project owners. Now, time to learn some new tricks: enter, the Lien Agent.
In case you’ve been hiding in your man-cave waiting for warmer weather to arrive and missed all the hoopla, as of April 1, 2013, North Carolina has a new lien law act. Essentially, for *most* construction projects [there are a few limited exceptions for low dollar work or single family, owner occupied residences], owners will need to file a notice of an entity to be their “Lien Agent”, and contractors will file notices within a short window of starting work. If done correctly, it should keep everyone aware of who is on the project, who is doing what work, and who may have a lien.
The most pertinent part that affects architects and engineers? This:
N.C. Gen. Stat. § 44A‑11.2
(h) When a lien agent is not identified in a contract for improvements to real property subject to G.S. 44A‑11.1 entered into between an owner and a design professional, the design professional will be deemed to have met the requirement of notice under subsections (l) and (m) of this section on the date of the lien agent’s receipt of the owner’s designation of the lien agent. The owner shall provide written notice to the lien agent containing the information pertaining to the design professional required in a notice to lien agent pursuant to subdivisions (1) through (3) of subsection (i) of this section, by any method of delivery authorized in subsection (f) of this section. The lien agent shall include the design professional in its response to any persons requesting information relating to persons who have given notice to the lien agent pursuant to this section. For purposes of this subsection, the term “design professional” shall mean any architects, engineers, land surveyors, and landscape architects registered under Chapter 83A, 89A, or 89C of the General Statutes.
In other words, if the owner designates a lien agent up front, you follow the process and note your involvement for the record.
What if the owner does NOT designate a lien agent up front? You are covered by default, once he does so. And he will do so, as before the owner can get a building permit, he will be forced to designate a lien agent. Nice, right? You have built in protections, and you don’t need to worry about filing a lien and damaging a relationship with an owner if they are slow to pay.
The on-line system for selecting Lien Agents (for owners) and notifying Agents of your work (for everyone else) on a project is LiensNC. A helpful tip sheet produced by the Title Insurance industry walks you through the process.
Many other fine folks have weighed in on the nuts & bolts of how the new system works, so I will not repeat it all here. Instead, let me direct you to a few of these resources (apologies in advance for anyone I may have slighted):
Bryan Scott: A good place to start for a broad overview of what you need to know
For the designer’s perspective, from Matthew Bouchard:
I’m a design professional providing services prior to the execution of a contract for construction. What if there’s no lien agent in placing during my pre-construction performance?
That depends on whether your contract is with the owner or with another design professional. If you are in direct contractual privity with the owner and your contract does not include the lien agent information, the owner is responsible for providing your contact information to its lien agent upon the owner’s appointment of same. If you are a design subcontractor, you should make a written request to the owner for the lien agent’s contact information. By statute, you will have no obligation to comply with the preliminary notice requirements until you receive the contact information you have requested.
I believe that the new lien law will help design professionals, as you no longer have to worry about alienating the owner by filing a lien or risk losing your lien priority. Instead, the lien agent will be as common as a building permit. You will be protected from the beginning with little effort, and without even having to depend on the owner. What do you think?
Comments? Questions? Share you thoughts in the comments box, below.
Photo (c) Seattle Municipal Archives.
Mine is better than yours! Battle of the experts in the construction lawsuit (Law & Order: Hard Hat files Part 6)
Eventually, 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
Today, a very important post from guest blogger Silvia Brook. Silvias writes about home and cyber security for homesecurity.org. When she’s not writing, Silvia enjoys biking with her friends or cooking a new recipe from her compendium of cookbooks.
Believe it or not, cyber security is still a big issue in the tech industry. It seems as though every year a new electronic device is released by one of the major hardware developers, and yet every year consumers who buy those same devices fall prey to a host of viruses, glitches, and malware. A tablet released this year may get hit with just as many (if not more) viruses as they model that preceded it the year before.
Part of why that’s the case is because malicious applications are changing and evolving at the same rate as the new devices that they target. Developers on both sides of the equation are fighting to make the better application—those who design security apps and protection software will try to keep your information, while hackers will try just as hard to take it away.
A recent assessment of the Android OS’s newest virus protection software might explain this problem. The new smartphone OS—Android 4.2—has a built-in malware scanner for apps. A computer scientist at North Carolina State University decided to see how this new scanning software stacked up third-party virus protection apps in a test that pits them all against the latest malware targeting smartphones. The study found that the Android OS app scanner caught malware content only about 20% of the time. The third-party security apps fared much better, some of which caught malware nearly every time.
What are we supposed to do with this information? Google seems to have trouble designing a competent virus scanning application for its own line of smartphones, all of which seem at least vulnerable to potential viruses according to the above report. If that’s the case, then how can people expect to put sensitive information (emails, finances, photos, etc.) on their smartphones?
I think the most important takeaway is that cyber security should be taken seriously by people who use mobile devices on a regular basis. There really are malicious apps out there that could do some serious damage to smartphones and tablets. Design professionals such as engineers and architects who rely on their electronics for mobile work are best off defending themselves from such annoyances with third-party apps designed by professionals with a proven track record.
Below are two apps by such developers which have received nothing but glowing reviews from critics.
Avast! is a comprehensive software that addresses many key cyber security concerns. For one thing, the software will help users track their smartphones or tablets should they ever get lost or stolen. Avast! will let users locate their misplaces phones via GPS and send SMS messages to it should they want to address whoever has it. Of course the software also protects mobile devices from malware apps and websites that could be packing a nasty virus by scanning every app before it’s loaded. Avast! also allows users to build a firewall for their mobile devices should they suspect that hackers want to tamper with their data. In other words, Avast! is the whole security package for the Android, and it’s free!
F-Secure Mobile Security
F-Secure is an acclaimed security software company, protecting both home computers and mobile devices all sorts of cyber security threats. F-Secure will ensure that mobile users can browse the web safely without fear of encountering malware; the service will also scan incoming apps and data for any potential viruses that could compromise the safety of the device. Like Avast!, F-Secure also has a feature that will help users track down their mobile device should it be misplaced or stolen (and users can erase their data remotely it they suspect that someone has access to their information). F-Secure has a subscription fee, and it’s only available for Android users.
Melissa here again. What about you? Do you have a favorite cyber security app? Depending on how much you work in the Cloud, you should!
Share your recommendations in the comment section, below. Just remember, I’m a luddite, so talk in plain and simple terms!
Photo (c) Lora Williams