Category Archives: Law Notes

Contract Change # 10:   Differing Site Conditions (law note)

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mud slide site conditionsAs promised in my note yesterday, today begins the first in a 10 part series on the most significant changes to the AIA A201, General Conditions to the Contract.

I’ll take the changes in reverse order, a la David Letterman…..

Change #10:  Differing Site Conditions

Previously, the A201 required a Contractor to provide notice to the Owner and Architect within 21 days after discovery of unforeseen site conditions.  This notification is required prior to the conditions being disturbed, so as to allow the Design Team the ability to evaluate the site and determine the compensability of any such differing conditions.

The requirement has been shortened to 14 days — that is, under the 2017 version, a Contractor must give the notification within 14 days of discovery.   See Section 3.7.4.

This is a small contract adjustment, but could prove substantially deprive a contractor of potential additional sums if caught unawares.  As the Architect or Engineer of Record, you should also be aware of this new 14 day requirement, which is a week shorter than most AIA deadlines.

Stay tuned for Change # 9, dealing with the Owner’s Right to Carry Out the Work, in the next post.

 

Photo courtesy NPS.

 

Like Death and Taxes, AIA Contract Changes are a Sure Thing! (law note)

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AIA Contract ChangesLike death & taxes, you can count on the American Institute of Architects (AIA) to regularly update their standard form construction contracts.  Most such forms are updated every 10 years, and 2017 was no exception.

In the 2017 version, the changes are “evolutionary, not revolutionary”, according to AIA Managing Director and Counsel, Kenneth W. Cobleigh.  Ken and I both recently spoke at the North Carolina Bar Association’s Construction Law Forum on various AIA changes.

Over the course of the next two weeks, I’ll be presenting a 10 Part Series on the Top 10 Changes that you need to know about the AIA A201 General Conditions.

Stay tuned for Part 1, on Differing Site Conditions, which will be posted tomorrow morning.

 

Picture adapted from Investment Zen, with thanks.

Do I really need my own lawyer if the insurer is giving me one? (law note; tip)

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Several readers have reached out to me about my post on getting a Reservation of Rights letter with comments and questions.  The most common refrain has been something along the lines of: “Do I really have to hire my own lawyer after paying insurance premiums just because I got one of those pesky ROR letters?”

not break bankThe short answer is that you do not *have* to hire your own lawyer.  But, it can be very useful.  And, it can be done economically so you don’t have to break the piggy bank.  You see, if you hire your own lawyer, they can be “back up” and simply monitor the lawsuit, while the insurance-retained lawyer does the yeoman’s work.  That way, if the insurance carrier begins to make noise about filing a declaratory judgment to deny the claim, you have your own lawyer already in place, knowledgeable about what’s happened in the case from the get-go.  But if the insurance company never “pulls the trigger” on denying the claim, then your private lawyer’s involvement (and bill) will be minimal.

Is there still a cost associated with having your own private lawyer involved?  Of course.  But the costs can be small, while still giving you protection should you need it down the road.  Think of it as just one more safety mechanism for your Firm.

I’ve been on both sides of the lawyer role– I’ve served as the private lawyer, and I’ve served as the insurance-retained lawyer.  Either way, it is a very workable solution with some very real benefits for the design community.

Have you retained your own lawyer in a “ROR” situation?  Share in the comment section below, or drop me an email.

Photo (c) TaxRebate via Creative Commons, with alterations

 

Dear Engineer: Has your insurer issued a “Reservation of Rights” letter? (law note)

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In my previous post, I made reference to getting a  “Reservation of Rights” letter.   I noted that the carrier may decide to defend you under a Reservation of Rights (i.e., hire your lawyer) but may not, necessarily, accept the responsibility for paying the claim.  Does this mean that the insurance company has denied your claim, or will never pay?  No.

Reservation of Rights (ROR) letters are sent for a variety of reasons- most notably, when some portion of the construction lawsuit against you is not covered under your E&O policy.  The letter must state the reason(s) that the ROR is being issued.

With the ROR, the insurance company is telling you that it reserves the right to withdraw from your defense and/or deny payment of damages at a later date, depending upon how facts in the case develop.  The notice is intended to let you know that there *may* be issues later, and to put you notice that  you have the right to hire your own lawyer (at your own expense) to protect yourself from that future potential risk.

How should you react to getting a ROR letter?  You should review it with your own lawyer, and consider retaining your lawyer to work with the lawyer the insurance carrier retains to protect your rights.

Is this required?  No.  Your insurance-retained lawyer still owes you the duty to protect your interests.  If the insurance company decides to later withdraw from defense, or seek a court ruling that they do not owe you a defense, your insurance-provided lawyer cannot represent the insurance company against you.  The insurance company would need to hire a different lawyer/law firm to make that argument.

It is never pleasant to get a ROR letter, but it is not unusual, depending on the particular facts in your case.  And it doesn’t mean that you won’t have a vigorous defense, or that the insurance-retained lawyer is not working for you.  They are, and they will.  However, it is never bad advise to have your own personal lawyer weigh in on the ROR letter and its ramifications for your Firm.

Have you ever gotten a ROR letter from your insurance carrier?  If so, share in the comment section, below.  And, be sure to get your White Paper on 7 Critical Mistakes that Architects & Engineers make, by filling out the form on the right hand side of the blog page. 

“Professional Best Efforts” part 2– Reservation of Rights for Engineers who agree to “best” efforts? (law note)

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reservedRecently, a reader reached out to me to ask about case examples of an engineer losing his insurance coverage because he agreed to a “heightened” or “best” standard of care. The reader stated that he was an insurance adviser who handled various construction professional coverages, and that in his experience it was very unusual to deny or limit damages because of a heightened standard of care.

This comment led me to an informal survey of several insurance brokers that I deal with, and the general consensus is that instead of outright denying a claim, most E&O insurers will issue a “reservation of rights” letter. What that means is that the insurance company will defend the claim (i.e., pay for your lawyer to defend you and your Firm), but with the understanding that they are (potentially) denying any liability for any adverse money judgment against you.

Inevitably, most such cases settle, but if they do not, the question then is whether the heightened duty created part of the damages. The insurer may ask to intervene in the lawsuit to ask the jury that question, in an effort to limit its share of the damages.

The reader commented that he could see two related insurance limitations: (1) where the professional agreed to be liable, and (2) where the professional refused to consent to settle a claim. In such cases, many policies contain a “hammer clause” which limits the insurer’s liability and defense costs to that which would have resulted had the insured accepted the settlement.

While these are interesting fact situations to the insurance and/or law geeks among us, for those of you who would rather spend your days designing and engineering instead of in court,  the best practice still remains the same:  avoid agreeing to the highest professional standards. Being the “test case” for a novel legal issue is not in your best interest.

Thoughts? Comments? Experiences in such situations? Share in the comment section or drop me an email.