Liability Claims Against Architects, Engineers and...

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Liability Claims Against Architects, Engineersand Construction Design ProfessionalsNavigating Evolving Theories of Liability and Defenses, Minimizing RiskThrough Contract Provisions and Project Documentation

1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific

TUESDAY, MARCH 22, 2016

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Today’s faculty features:

1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific

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 againstArchitects, Engineers,

and Construction DesignProfessionals

Liability Claims againstArchitects, Engineers,

and Construction DesignProfessionals

David AdelsteinKirwin Norris, P.A.

[email protected]

I. Design Professional Risks Associated with ProjectDelivery Methods

What is a project delivery method?

A method to deliver a project to an owner that factors in risksassociated 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 projectdelivery method that provides it the best value allocating theresponsibility of the design and the construction of theproject

What is a project delivery method?

A method to deliver a project to an owner that factors in risksassociated 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 projectdelivery method that provides it the best value allocating theresponsibility of the design and the construction of theproject

David [email protected] 6

I. Design Professional Risks Associated withProject 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 designroles)

Integrated Project Delivery (IPD)

Green – Sustainable Projects (SP)

Public-Private-Partnership (P3)

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 designroles)

Integrated Project Delivery (IPD)

Green – Sustainable Projects (SP)

Public-Private-Partnership (P3)


IPD

Lean Construction Principles Emerging Technology (BIM)

Dispute ResolutionComplexity, Scope, &Risk

Youare

Here

CollaborationGreen / Sustainability

Dispute ResolutionComplexity, Scope, &Risk

8

Youare

Here

David [email protected]

IPDAmerican Institute of Architects

A project delivery approach that integrates people, systems, business structures andpractices into a process that collaboratively harnesses the talents and insights of allparticipants to optimize project results, increase value to the owner, reduce waste, andmaximize efficiency through all phases of design, fabrication, and construction.

ConsensusDOCSThe Parties agree that the Project objectives can be best achieved through a relationalcontract that promotes and facilitates strategic planning, design, construction andcommissioning 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 othermembers of the Collaborative Project Team and encourages and requires the Parties toorganize and integrate their respective roles, responsibilities and expertise, to identify andalign their respective expectations and objectives, to commit to open communications,transparent decision-making, proactive and non-adversarial interaction, problem-solving, thesharing of ideas, to continuously seek to improve the Project planning, design, andconstruction processes, and to share both the risks and rewards associated with achievingthe Project objectives.

What do these definitions mean?

Collaborate=working and cooperating with others to perform a task to achieve acommon goal by maximizing coordination, efficiencies, waste reduction, andprofitability (all while reducing overall costs)

American Institute of ArchitectsA project delivery approach that integrates people, systems, business structures andpractices into a process that collaboratively harnesses the talents and insights of allparticipants to optimize project results, increase value to the owner, reduce waste, andmaximize efficiency through all phases of design, fabrication, and construction.

ConsensusDOCSThe Parties agree that the Project objectives can be best achieved through a relationalcontract that promotes and facilitates strategic planning, design, construction andcommissioning 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 othermembers of the Collaborative Project Team and encourages and requires the Parties toorganize and integrate their respective roles, responsibilities and expertise, to identify andalign their respective expectations and objectives, to commit to open communications,transparent decision-making, proactive and non-adversarial interaction, problem-solving, thesharing of ideas, to continuously seek to improve the Project planning, design, andconstruction processes, and to share both the risks and rewards associated with achievingthe Project objectives.

What do these definitions mean?

Collaborate=working and cooperating with others to perform a task to achieve acommon goal by maximizing coordination, efficiencies, waste reduction, andprofitability (all while reducing overall costs) 9

IPDConsiderations:

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 PLcovers negligent design conveyed in digital data, rectificationcoverage… Note: professional liability coverage centers on conventional notions of

professional liability / E&O

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 PLcovers negligent design conveyed in digital data, rectificationcoverage… Note: professional liability coverage centers on conventional notions of

professional liability / E&ODavid [email protected] 10

IPDBIM

Digital 3D (virtual) modeling of project

Promotes sharing of digital information among project team toincrease coordination, planning, efficiency and constructability ofdesign—optimize design at all phases (preconstruction, duringconstruction, post-construction)

E.g, BIM would be virtual model of structure (load bearing walls,slabs, windows, etc.) and utilities (duct, piping) and can includereal-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 andconstruction

Note: Think also 3-D laser scanning and drone imagery

BIM

Digital 3D (virtual) modeling of project

Promotes sharing of digital information among project team toincrease coordination, planning, efficiency and constructability ofdesign—optimize design at all phases (preconstruction, duringconstruction, post-construction)

E.g, BIM would be virtual model of structure (load bearing walls,slabs, windows, etc.) and utilities (duct, piping) and can includereal-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 andconstruction

Note: Think also 3-D laser scanning and drone imageryDavid [email protected] 11

IPD

BIM

Owner wants Building Information Modeling (BIM) moreso than in conventional project delivery methods

Willingness to invest in a longer, more detailed designphase using BIM to make key design and cost decisionscollaboratively to produce a fully coordinated design withan emphasis on prefabrication and procuring long leaditems

BIM

Owner wants Building Information Modeling (BIM) moreso than in conventional project delivery methods

Willingness to invest in a longer, more detailed designphase using BIM to make key design and cost decisionscollaboratively to produce a fully coordinated design withan emphasis on prefabrication and procuring long leaditems


IPD

BIM & Objectives

Less on site administration effort as conflicts and questions resolved virtually

Fewer RFIs because stakeholders collaboratively involved in design (and longerprecon 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 plannedsequences and durations)

BIM & Objectives

Less on site administration effort as conflicts and questions resolved virtually

Fewer RFIs because stakeholders collaboratively involved in design (and longerprecon 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 plannedsequences and durations)


IPDStandard Form Contracts

Both the ConsensusDOCS and AIA have standard documents addressingBIM 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

Standard Form Contracts

Both the ConsensusDOCS and AIA have standard documents addressingBIM 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


14

SP

Considerations:

LEED certification

Financial incentives and projected cost savings

Claims associated with achieving certification,incentives, projected cost savings

Considerations:

LEED certification

Financial incentives and projected cost savings

Claims associated with achieving certification,incentives, projected cost savings


15

SP

Identify objectives relating to sustainable design / greenbuilding elements such as LEED certifications, energyefficiency, 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

Identify objectives relating to sustainable design / greenbuilding elements such as LEED certifications, energyefficiency, 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


16

P3

Partnership between public and private entities todeliver project for public purposes (e.g., infrastructure)where private entity finances (and perhaps operatesand maintains) project in consideration for revenue (or% of revenue) completed project will generate for “x”number of years

Partnership between public and private entities todeliver project for public purposes (e.g., infrastructure)where private entity finances (and perhaps operatesand maintains) project in consideration for revenue (or% of revenue) completed project will generate for “x”number of years


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)

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)


18

P3

Contract Forms

EJCDC P3-508 (premised on design-build delivery)


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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 withevolving delivery methods where A/E’s role fallsoutside of more conventional deliverymethods. Reason insurance considerations applicableto design errors & omissions become major criteria

Design Professional Liability:

1) Common Law (Tort)

2) Statutory / Administrative Obligations

3) Contractual (breach of contract)

* Note: Contractual liability becomes VERY important withevolving delivery methods where A/E’s role fallsoutside of more conventional deliverymethods. Reason insurance considerations applicableto design errors & omissions become major criteria


20

II. Theories of LiabilityCommon law

Design professional’s standard of care gaged undernegligence theory (hence, importance of professionalliability coverage…)

Failure to use use reasonable / due care which reasonable,careful design professional would use under likecircumstances

Failure to use reasonable / due care that conforms toacceptable standards that is detrimental to client or public

Design professional’s standard of care gaged undernegligence theory (hence, importance of professionalliability coverage…)

Failure to use use reasonable / due care which reasonable,careful design professional would use under likecircumstances

Failure to use reasonable / due care that conforms toacceptable standards that is detrimental to client or public


21

II. Theories of LiabilityCommon 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 professionalservices is to perform such services in accordance with the standard of care used by similarprofessionals in the community under similar circumstances.”

Note: FL- duty of care of supervising design professional not extended to subs. SeeSpancrete, Inc. v. Ronald E. Frazier & Associates, P.A., 630 So.2d 1197 (Fla. 3d DCA1994)

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 skilland diligence ordinarily exercised under like circumstances by architects in good standing inthe same or similar communities.”

Ex. Martin v. Barge, Waggoner, Sumner & Cannon, 894 S.W.2d 750 (Tenn.App. 1994) – “Tennesseecourts have adopted the “same or similar community” standard of care with respect toprofessional 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 ofgeotechnical engineers in St. Louis; rejected local standard in favor of national standard

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 professionalservices is to perform such services in accordance with the standard of care used by similarprofessionals in the community under similar circumstances.”

Note: FL- duty of care of supervising design professional not extended to subs. SeeSpancrete, Inc. v. Ronald E. Frazier & Associates, P.A., 630 So.2d 1197 (Fla. 3d DCA1994)

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 skilland diligence ordinarily exercised under like circumstances by architects in good standing inthe same or similar communities.”

Ex. Martin v. Barge, Waggoner, Sumner & Cannon, 894 S.W.2d 750 (Tenn.App. 1994) – “Tennesseecourts have adopted the “same or similar community” standard of care with respect toprofessional 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 ofgeotechnical engineers in St. Louis; rejected local standard in favor of national standard


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II. Theories of LiabilityStatutory

Design Professional’s reasonable / due care requirement based onstatutory / administrativelicensing requirements:

Ex: Florida Administrative Code 61G1-12.001(4)- An architect, firm, or business holding a certificate ofauthorization may not be negligent in the practice of architecture. The term negligence is defined as thefailure, by an architect, to exercise due care to conform to acceptable standards of architectural practice insuch 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 asufficiently high standard to inform the users thereof of the requirements intended to be illustrated ordescribed by them. Such documents shall clearly and accurately indicate the design of all essential parts ofthe work to which they refer. An architect shall meet a standard of practice which demonstrates hisknowledge 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 inthose projects wherein the architect is engaged to provide plans, drawings and specificationswhich result in the production of working documents which are used or intended to be used for theconstruction of a structure.

Design Professional’s reasonable / due care requirement based onstatutory / administrativelicensing requirements:

Ex: Florida Administrative Code 61G1-12.001(4)- An architect, firm, or business holding a certificate ofauthorization may not be negligent in the practice of architecture. The term negligence is defined as thefailure, by an architect, to exercise due care to conform to acceptable standards of architectural practice insuch 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 asufficiently high standard to inform the users thereof of the requirements intended to be illustrated ordescribed by them. Such documents shall clearly and accurately indicate the design of all essential parts ofthe work to which they refer. An architect shall meet a standard of practice which demonstrates hisknowledge 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 inthose projects wherein the architect is engaged to provide plans, drawings and specificationswhich result in the production of working documents which are used or intended to be used for theconstruction of a structure.


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II. Theories of LiabilityStatutory

Ex. Ohio Administrative Code 4703-3-07 (A) (1)- In practicingarchitecture, a registered architect shall act with reasonablecare and competence and shall apply the knowledge and skillwhich is ordinarily applied by registered architects of goodstanding, practicing in the same locality.

Ex. Alabama Administrative Code 100-X-7-.01 (1)- Inpracticing architecture, an architect’s primary duty is to protectthe 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 ordinarilyapplied by architects of good standing, practicing in the samelocality.

Ex. Ohio Administrative Code 4703-3-07 (A) (1)- In practicingarchitecture, a registered architect shall act with reasonablecare and competence and shall apply the knowledge and skillwhich is ordinarily applied by registered architects of goodstanding, practicing in the same locality.

Ex. Alabama Administrative Code 100-X-7-.01 (1)- Inpracticing architecture, an architect’s primary duty is to protectthe 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 ordinarilyapplied by architects of good standing, practicing in the samelocality.


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II. Theories of LiabilityContractual

Duties are imposed by contracts such as industry form contracts:

EJCDC E-500 – Standard Form Agreement Between Owner and Engineerfor Professional Services

6.01.A. Standard of Care: The standard of care for allprofessional engineering and related services performed orfurnished by Engineer under this Agreement will be the care andskill ordinarily used by members of the subject professionpracticing under similar circumstances at the same time and inthe same locality. Engineer makes no warranties, express orimplied, under this Agreement or otherwise, in connection withEngineer’s services.

Duties are imposed by contracts such as industry form contracts:

EJCDC E-500 – Standard Form Agreement Between Owner and Engineerfor Professional Services

6.01.A. Standard of Care: The standard of care for allprofessional engineering and related services performed orfurnished by Engineer under this Agreement will be the care andskill ordinarily used by members of the subject professionpracticing under similar circumstances at the same time and inthe same locality. Engineer makes no warranties, express orimplied, under this Agreement or otherwise, in connection withEngineer’s services.


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AIA B101 – Standard Form Agreement BetweenOwner and Architect

2.2 The Architect shall perform its services consistentwith the professional skill and care ordinarily provided byarchitects practicing in the same or similar locality underthe same or similar circumstances. The Architect shallperform its services as expeditiously as is consistent withsuch professional skill and care and the orderly progressof the Project.

AIA B101 – Standard Form Agreement BetweenOwner and Architect

2.2 The Architect shall perform its services consistentwith the professional skill and care ordinarily provided byarchitects practicing in the same or similar locality underthe same or similar circumstances. The Architect shallperform its services as expeditiously as is consistent withsuch professional skill and care and the orderly progressof the Project.


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Design Professional’s common law duty of care can be extended / broadened bycontract…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] shallfurnish services by experienced personnel and under the supervision of experiencedprofessionals licensed in Florida and shall exercise a degree of care and diligence in theperformance of these services in accordance with the customary professional standardscurrently practiced by firms in Florida and in compliance with any and all applicablecodes, laws, ordinances, etc. . . .

2.1.5 All professional design services and associated products or instruments of thoseservices provided by the Project Consultant shall: .1 Be in accordance with all applicablecodes, laws, and regulations of any governmental entity, including, but not limited to, [list ofregulatory entities] with the Owner serving as the interpreter of the intent and meaning of . . . anyother applicable code.”

In this contract, architect contracted to heightened standard of care and wascontractually obligated to perform to more heightened standard of care than common lawstandard. Here, architect accepted risk of design plans not code-compliant (no matterwhat!)

Design Professional’s common law duty of care can be extended / broadened bycontract…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] shallfurnish services by experienced personnel and under the supervision of experiencedprofessionals licensed in Florida and shall exercise a degree of care and diligence in theperformance of these services in accordance with the customary professional standardscurrently practiced by firms in Florida and in compliance with any and all applicablecodes, laws, ordinances, etc. . . .

2.1.5 All professional design services and associated products or instruments of thoseservices provided by the Project Consultant shall: .1 Be in accordance with all applicablecodes, laws, and regulations of any governmental entity, including, but not limited to, [list ofregulatory entities] with the Owner serving as the interpreter of the intent and meaning of . . . anyother applicable code.”

In this contract, architect contracted to heightened standard of care and wascontractually obligated to perform to more heightened standard of care than common lawstandard. Here, architect accepted risk of design plans not code-compliant (no matterwhat!)


27

Recent Case ExampleEx. The School Board of Broward County, FL v. Pierce GoodwinAlexander & 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 sinceowner would always be responsible for this cost based on cost of item ifthat item was included in original design

“For example, if the school board would have paid a cost forconstruction in accordance with the code-compliant final designplans, an award of a COI [change order item] expense against thearchitect attributable to a change in the initial design plans for thesame cost would put the school board in a better position than if thedesign services had been performed as agreed. Stated another way,if there had been no change between the initial plans drawn forbidding by contractors and the final construction plans, the schoolboard would have been solely responsible for paying allconstruction expenses incurred for the renovation.”

Ex. The School Board of Broward County, FL v. Pierce GoodwinAlexander & 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 sinceowner would always be responsible for this cost based on cost of item ifthat item was included in original design

“For example, if the school board would have paid a cost forconstruction in accordance with the code-compliant final designplans, an award of a COI [change order item] expense against thearchitect attributable to a change in the initial design plans for thesame cost would put the school board in a better position than if thedesign services had been performed as agreed. Stated another way,if there had been no change between the initial plans drawn forbidding by contractors and the final construction plans, the schoolboard would have been solely responsible for paying allconstruction expenses incurred for the renovation.”


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Recent Case ExampleA&H Properties, v. GPM Engineering, 2015 WL 9435974 (Tex.App.-Austin 2015) –owner hireddesign-builder to install/design energy efficient improvement including geothermal loop.Engineer hired by design-builder. No contract between engineer and owner. Owner suedengineer for negligence for design of geothermal loop that caused it financial damages.Summary judgment granted in favor of engineer under economic loss rule. Affirmed onappeal.

“[T]he Texas Supreme Court recently clarified in a similar factual scenario that theavailability of contractual remedies in a vertical chain of contracts on a constructionproject precludes tort recovery when no personal injury or property damage is alleged.The record before us establishes that GPM [engineer], as subcontractor, was performingservices part of of the overall construction project based on its contract with the generalcontractor, Bell. GPM’s duty to perform work on A&H’s [owner] arose of that constructionsubcontract, and no other duty or relationship between GPM and A&H is presented in thisrecord.

***

“Application of the economic-loss rule is particularly appropriate here, where permittingA&H to sue GPM for economic loss would disrupt the risk allocations that A&H negotiatedwith Bell, and that Bell, in turn, negotiated with GPM.”

A&H Properties, v. GPM Engineering, 2015 WL 9435974 (Tex.App.-Austin 2015) –owner hireddesign-builder to install/design energy efficient improvement including geothermal loop.Engineer hired by design-builder. No contract between engineer and owner. Owner suedengineer for negligence for design of geothermal loop that caused it financial damages.Summary judgment granted in favor of engineer under economic loss rule. Affirmed onappeal.

“[T]he Texas Supreme Court recently clarified in a similar factual scenario that theavailability of contractual remedies in a vertical chain of contracts on a constructionproject precludes tort recovery when no personal injury or property damage is alleged.The record before us establishes that GPM [engineer], as subcontractor, was performingservices part of of the overall construction project based on its contract with the generalcontractor, Bell. GPM’s duty to perform work on A&H’s [owner] arose of that constructionsubcontract, and no other duty or relationship between GPM and A&H is presented in thisrecord.

***

“Application of the economic-loss rule is particularly appropriate here, where permittingA&H to sue GPM for economic loss would disrupt the risk allocations that A&H negotiatedwith Bell, and that Bell, in turn, negotiated with GPM.”


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Recent Case Example

Balfour Beatty Infrastructure, Inc. v. Rummel Klepper & Kahl,LLP, 2016 WL 360875 (Md.Ct.Sp.App. 2016)-City hiredengineer to produce construction documents for wastewatertreatment plant under design-bid-build. Years later successfulbidder (contractor) sued engineering firm for delays associatedwith defective design and negligent misrepresentations. Nocontract between contractor and engineer. Trial courtdismissed based on economic loss rule. Affirmed on appeal.

“[I]n the absence of privity, death, personal injury, propertydamage, or the risk of death or serious personal injury, noduty of care in tort runs from an engineer or architect to acontractor for purely economic losses on a publicconstruction project.”

Balfour Beatty Infrastructure, Inc. v. Rummel Klepper & Kahl,LLP, 2016 WL 360875 (Md.Ct.Sp.App. 2016)-City hiredengineer to produce construction documents for wastewatertreatment plant under design-bid-build. Years later successfulbidder (contractor) sued engineering firm for delays associatedwith defective design and negligent misrepresentations. Nocontract between contractor and engineer. Trial courtdismissed based on economic loss rule. Affirmed on appeal.

“[I]n the absence of privity, death, personal injury, propertydamage, or the risk of death or serious personal injury, noduty of care in tort runs from an engineer or architect to acontractor for purely economic losses on a publicconstruction project.”


30

Recent Case ExampleBut see Gongloff Contracting, L.L.C. v. L. Robert Kimball & Associates,Inc., 119 A.3d 1070 (Penn. 2015)- University hired A/E and GC. GChired steel sub. Steel sub hired plaintiff (sub-sub) to erect steel.Concerns were raised with A/E roof design. During construction it wasdetermined that roof design not sufficient to bear loads. There were 3shut-downs of steel erection due to redesigns. Plaintiff submitted 81change order requests resulting in itbeing unable to pay vendors, layingoff its crew, and leaving site. Plaintiff sued A/E for negligentmisrepresentation re: the design of the roof. Trial court grantedjudgment on pleadings based on economic loss rule. Reversed onappeal.

“We conclude that the amended complaint's allegations that Kimball's[A/E] design documents constituted negligently-supplied falseinformation have been pled with the appropriate level of specificity tostate a cause of action for negligent misrepresentation…. While Kimballmight prove later in the litigation that the allegation that it provided falseinformation concerning the integrity of its roof design wasunsubstantiated, it is not entitled to judgment in its favor at this stage ofthe proceedings.” (relying on case that A/E can be liable for negligentmisrepresentation when it negligently supplies information knowing that3rd parties will rely on such information)

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. GChired steel sub. Steel sub hired plaintiff (sub-sub) to erect steel.Concerns were raised with A/E roof design. During construction it wasdetermined that roof design not sufficient to bear loads. There were 3shut-downs of steel erection due to redesigns. Plaintiff submitted 81change order requests resulting in itbeing unable to pay vendors, layingoff its crew, and leaving site. Plaintiff sued A/E for negligentmisrepresentation re: the design of the roof. Trial court grantedjudgment on pleadings based on economic loss rule. Reversed onappeal.

“We conclude that the amended complaint's allegations that Kimball's[A/E] design documents constituted negligently-supplied falseinformation have been pled with the appropriate level of specificity tostate a cause of action for negligent misrepresentation…. While Kimballmight prove later in the litigation that the allegation that it provided falseinformation concerning the integrity of its roof design wasunsubstantiated, it is not entitled to judgment in its favor at this stage ofthe proceedings.” (relying on case that A/E can be liable for negligentmisrepresentation when it negligently supplies information knowing that3rd parties will rely on such information)


31

- T H E A R T O F WA R -

EFFECTIVEPROJECT

DOCUMENTATION

Using Documentation ForRisk Allocation and Warfare.

John D. Broghammer33

YOUR ENEMY IS YOU!!• Per a large A/E insurance carrier, a

dispute is ALMOST ALWAYScaused 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.

• Per a large A/E insurance carrier, adispute is ALMOST ALWAYScaused 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.

34

GET IT IN WRITING!!!

• Contracts should be in writing and manystates require a written contract withspecific provisions for inclusion.

• Ancient Chinese proverb: “The faintest ofink is worth more than the strongestmemory.”

• Contracts should be in writing and manystates require a written contract withspecific provisions for inclusion.

• Ancient Chinese proverb: “The faintest ofink is worth more than the strongestmemory.”

35

FROM THE “DUH” FILES:

“An oral contract isnot worth the paper

it is written on.”

“An oral contract isnot worth the paper

it is written on.”

36

YOU DON’T WIN UNTIL YOU DRAGTHE SIGNED CONTRACT HOME.

37

READ YOUR DAMNCONTRACT!!

I’ve never been told byany client embroiled in a

lawsuit that he or sheregretted taking the time to read

and understand the contract.

I’ve never been told byany client embroiled in a

lawsuit that he or sheregretted taking the time to read

and understand the contract.

38

MORE “DUH” STUFF:

• Keep a copy of the contract inseparate file.

• Add papers or e-mails that impact thecontract and/or your scope of work.

• Scan your contracts and relateddocuments an electronic file.

• Keep a copy of the contract inseparate file.

• Add papers or e-mails that impact thecontract and/or your scope of work.

• Scan your contracts and relateddocuments an electronic file.

39

NEGOTIATIONS

• It is unsexy, non-paying anddrudgery.

• The other side fights you on issueswhich you think are stupid.

• And as Colin Powell once said: “Nobattle plan survives contact with theenemy.”

• It is unsexy, non-paying anddrudgery.

• The other side fights you on issueswhich you think are stupid.

• And as Colin Powell once said: “Nobattle plan survives contact with theenemy.”

40

SUN TZU

“The general who wins the battlemakes many calculations in histemple before the battle is fought.The general who loses makes butfew calculations beforehand.”

• BE PREPARED….

“The general who wins the battlemakes many calculations in histemple before the battle is fought.The general who loses makes butfew calculations beforehand.”

• BE PREPARED….

41

ParisHilton???

What the…what???What the…what???

42

NEGOTIATIONS• Your contract is your friend…maybe your

only friend on a project.

• It is the single most critical thing on aproject.

• Never give contract negotiation short shrift.

• Your contract is your friend…maybe youronly friend on a project.

• It is the single most critical thing on aproject.

• Never give contract negotiation short shrift.

43

CONTROL THE NARRATIVE

• “Those skilled in war bring theenemy to the field of battle, andare not brought there by him.”Sun Tzu

Draft your own contract!

• “Those skilled in war bring theenemy to the field of battle, andare not brought there by him.”Sun Tzu

Draft your own contract!44

NEGOTIATIONS

• Be specific. Let others review your drafts forcontent and errors.

• Better yet, use stock contracts (e.g., AIA).

• Read the RFP (or similar documents) closely.

• Memorialize in writing additions/subtractions.

• Be specific. Let others review your drafts forcontent and errors.

• Better yet, use stock contracts (e.g., AIA).

• Read the RFP (or similar documents) closely.

• Memorialize in writing additions/subtractions.

45

CompetitiveArousal

Competitive arousal is thevisceral urge in negotiating to “win,”

rather than get the best deal.

CompetitiveArousal

Competitive arousal is thevisceral urge in negotiating to “win,”

rather than get the best deal.

46

ConfirmationBias

Confirmation Bias describes thepsychological process where we seekinformation that confirms our beliefs.

ConfirmationBias

Confirmation Bias describes thepsychological process where we seekinformation that confirms our beliefs.

47

People infer information thatsupports their existing beliefs,

even if the data support anopposing view.

Confirmation bias is a problem toovercome when you need to make

a fact-based decision.

People infer information thatsupports their existing beliefs,

even if the data support anopposing view.

Confirmation bias is a problem toovercome when you need to make

a fact-based decision.

48

ANCHORING

Anchoring is the tendency tobecome fixed from the first

facts/information shared, then jumpto conclusions thereafter.

ANCHORING

Anchoring is the tendency tobecome fixed from the first

facts/information shared, then jumpto conclusions thereafter.

49

THE CURES?1.Get the opinion of others.

2.Then listen to the voices of dissent.

3.Play “devil’s advocate” and view the dealfrom the other side.

4.Work to build empathy and relationshipsthen share WHY you need certain language.

THE CURES?1.Get the opinion of others.

2.Then listen to the voices of dissent.

3.Play “devil’s advocate” and view the dealfrom the other side.

4.Work to build empathy and relationshipsthen share WHY you need certain language.

50

THE PANDA

EATS

SHOOTS AND

LEAVES.

THE PANDA

EATS

SHOOTS AND

LEAVES.

51

CRITICAL CONTRACT CLAUSES

A. Detailed Scope of Work Language.

B. Construction Administration Language.

C. Indemnity Clauses.

D. Standard of Care.

E. Miscellaneous.





E. Miscellaneous.

52

SCOPE OF WORK• From a prominent A/E insurance carrier re:

Scope of Work claims/lawsuits:

“Failure to manage the owner’sexpectations; failure to explain the

scope of work and exclusions thereto.”

• This must be started during negotiations.

• From a prominent A/E insurance carrier re:Scope of Work claims/lawsuits:

“Failure to manage the owner’sexpectations; failure to explain the

scope of work and exclusions thereto.”

• This must be started during negotiations.

53

SCOPE OF WORK

54

SCOPE OF WORKShould always be Exhibit A to your contract.

GOOD!!

UH…NOTGOOD

55

SCOPE OF WORK

56

SCOPE OF WORK

57






E. Miscellaneous.





E. Miscellaneous.

58

CONSTRUCTIONADMINISTRATION

Construction observation is the periodicobservation of completed work to determine

general compliance with the plans,specifications and project documents.

Construction observation is the periodicobservation of completed work to determine

general compliance with the plans,specifications and project documents.

IT IS NEVER AN INSPECTIONOR GUARNATEE

59

CUSTOM AND PRACTICE

• Observation is the visual observation of theengineering system for general conformancewith the approved plans and specifications.

• Inspection is the monitoring of materials andworkmanship that are critical to the integrityof the project to ensure compliance with theapproved plans, specifications and applicablelaws.

• Observation is the visual observation of theengineering system for general conformancewith the approved plans and specifications.

• Inspection is the monitoring of materials andworkmanship that are critical to the integrityof the project to ensure compliance with theapproved plans, specifications and applicablelaws.

60

SAMPLE PROBLEM:Contractor contract language

“best modern practice…highest, best and first classquality.”

62

Same Project…Architect’s Contract…

What does the owner reasonably expect if heexpects the contractor to deliver the “highest,best and first class quality?”

63

SAMPLE PROBLEM• “[Design Professional] shall make…periodic

on-site observations, not less than weekly….Observations shall be conducteddeliberately and thoroughly...”

• “Observations shall be for the purpose ofascertaining…that the …quality and detailof construction…complies with…thecontract documents.”

• “[Design Professional] shall make…periodicon-site observations, not less than weekly….Observations shall be conducteddeliberately and thoroughly...”

• “Observations shall be for the purpose ofascertaining…that the …quality and detailof construction…complies with…thecontract documents.”

64

EXPECTATIONS• 1. Understand what the law in your

state/locale requires.

• 2. Understand the local customs andpractices.

• 3. Define your duties and rein in clientexpectations.

• 1. Understand what the law in yourstate/locale requires.

• 2. Understand the local customs andpractices.

• 3. Define your duties and rein in clientexpectations.

65






E. Miscellaneous.





E. Miscellaneous.

66

INDEMNITYOWNER

DESIGNPROFESSIONAL

INDEMNITY CLAUSE

67

INDEMNITY≈

INSURANCE• "An indemnity contract resembles an insurance

agreement.” (MacDonald & Kruse v. San Jose Steel(1972) 29 Cal.App.3d 413, 420.).

INDEMNITY≈

INSURANCE• "An indemnity contract resembles an insurance

agreement.” (MacDonald & Kruse v. San Jose Steel(1972) 29 Cal.App.3d 413, 420.).

68

INDEMNITY• PURPOSE: Indemnity, like insurance,

seeks to shift all or part of the risk of lossfrom Player A to Player B.

• Usually insurance clauses are strictlyconstrued against insurers….notnecessarily indemnity clauses.

• PURPOSE: Indemnity, like insurance,seeks to shift all or part of the risk of lossfrom Player A to Player B.

• Usually insurance clauses are strictlyconstrued against insurers….notnecessarily indemnity clauses.

69

INDEMNITY

• Insurer’s business model is to collectpremiums and spread risk. Insurance worksby receiving more premiums than thecompany pays out in benefits. You do notwork this way.

• Insurer’s business model is to collectpremiums and spread risk. Insurance worksby receiving more premiums than thecompany pays out in benefits. You do notwork this way.

70

INDEMNITY

What to lookfor….andwhy to lookfor it?

What to lookfor….andwhy to lookfor it?

71

INDEMNITYDEFINITIONS:

• Indemnitee: The beneficiary of the indemnityagreement. Like an owner or winner.

• Indemnitor: The person who agrees to defendor indemnify the other person. Like a designprofessional or loser.

DEFINITIONS:

• Indemnitee: The beneficiary of the indemnityagreement. Like an owner or winner.

• Indemnitor: The person who agrees to defendor indemnify the other person. Like a designprofessional or loser.

72

INDEMNITY

• Passive negligence has been found from the failure todiscover a defective condition created by others, failure toexercise a right to inspect certain work or a failure to exercisea supervisory right.

• Normally an omission. Think construction administration.

Rossmoor Sanitation v. Pylon (1975) 13 Ca1.3d 622, 630 (citations omitted).

• Passive negligence has been found from the failure todiscover a defective condition created by others, failure toexercise a right to inspect certain work or a failure to exercisea supervisory right.

• Normally an omission. Think construction administration.


73

INDEMNITY• Active negligence has been found in actively

doing something which later caused an injury,knowingly supplying a product which did notmeet the requirements, creating a perilouscondition, or failing to install safety items inviolation of a contract.

• Normally a commission, or an omission where aduty exists. Think a flawed design.


• Active negligence has been found in activelydoing something which later caused an injury,knowingly supplying a product which did notmeet the requirements, creating a perilouscondition, or failing to install safety items inviolation of a contract.

• Normally a commission, or an omission where aduty exists. Think a flawed design.


74

“Except to the extent of Contractor’s solenegligence or intentional misconduct, andwithout regard to any negligence or fault onthe part of Consultant, Consultant agrees todefend and indemnify …Contractor from andagainst 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) theperformance or failure in performance of thework, (c) Consultant's contractual obligations,and/or (d) ….

“Except to the extent of Contractor’s solenegligence or intentional misconduct, andwithout regard to any negligence or fault onthe part of Consultant, Consultant agrees todefend and indemnify …Contractor from andagainst 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) theperformance or failure in performance of thework, (c) Consultant's contractual obligations,and/or (d) ….

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“Except to the extent of Contractor’s solenegligence or intentional misconduct....”

This is red flag language in any indemnityclause.

It is a sure sign of trouble.

“Except to the extent of Contractor’s solenegligence or intentional misconduct....”

This is red flag language in any indemnityclause.

It is a sure sign of trouble.

76

“and without regard to any negligenceor fault on the part of Consultant”

“Consultant agrees to indemnify …,arising out of, resulting from, or occurring inconnection with…”

This is not normally insurable. You do nothave to be negligent to trigger the indemnityobligations.

“and without regard to any negligenceor fault on the part of Consultant”

“Consultant agrees to indemnify …,arising out of, resulting from, or occurring inconnection with…”

This is not normally insurable. You do nothave to be negligent to trigger the indemnityobligations.

77

“Consultant agrees to defend andindemnify …Contractor from and against anyand all claims, demands, losses, damages, …and/or liabilities….”

Normally, the duty to defend is very broad andalso not insurable. In some states the duty todefend is automatically triggered by anindemnity obligation.

“Consultant agrees to defend andindemnify …Contractor from and against anyand all claims, demands, losses, damages, …and/or liabilities….”

Normally, the duty to defend is very broad andalso not insurable. In some states the duty todefend is automatically triggered by anindemnity obligation.

78

INDEMNITY• The Consultant will indemnify the Client for actual

damages for which the Client becomes liable if thedamage upon which the liability is based wascaused by the proven active negligence of theConsultant.

• If the Client is determined to be liable for damagecaused by the proven active negligence of theConsultant, the Consultant will reimburse theClient for the reasonable value of the defense costsinsured to defend against the damages caused bythe Consultant’s proven negligence.

• The Consultant will indemnify the Client for actualdamages for which the Client becomes liable if thedamage upon which the liability is based wascaused by the proven active negligence of theConsultant.

• If the Client is determined to be liable for damagecaused by the proven active negligence of theConsultant, the Consultant will reimburse theClient for the reasonable value of the defense costsinsured to defend against the damages caused bythe Consultant’s proven negligence.

79

INDEMNITYSuppose your Client insists that you defend it if

it is sued. Then, use:

Consultant has no obligation to pay for Client’sdefense costs until there is a final determination ofliability. Consultant’s obligation to reimburse Client’sdefense cost shall be limited to the Consultant’spercentage of liability based upon Consultant’scomparative fault.

Suppose your Client insists that you defend it ifit is sued. Then, use:

Consultant has no obligation to pay for Client’sdefense costs until there is a final determination ofliability. Consultant’s obligation to reimburse Client’sdefense cost shall be limited to the Consultant’spercentage of liability based upon Consultant’scomparative fault.

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Endowment Effector Overconfidence

BiasThis bias is the tendency to place toomuch emphasis on your knowledge,

abilities and negotiation skills.

Endowment Effector Overconfidence

BiasThis bias is the tendency to place toomuch emphasis on your knowledge,

abilities and negotiation skills.81

Know Your Limitations

82






E. Miscellaneous.





E. Miscellaneous.

83

STANDARD OF CARE

• As a general rule, NEVER, ever, agree tocontract language that alters the standardof care.

• As a general rule, NEVER, ever, agree tocontract language that alters the standardof care.

84

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 similarcircumstances. This level of skill, knowledge,and care is sometimes referred to as “thestandard of care.””

Cal. Jury Instruction 600

“A [professional] is negligent if he/she fails to usethe skill and care that a reasonably careful[professional] would have used in similarcircumstances. This level of skill, knowledge,and care is sometimes referred to as “thestandard of care.””

Cal. Jury Instruction 600

85

STANDARD OF CAREGOOD!

UH…NOT…GOOD!

Best means betterthan everyone else.

86

STANDARD OF CARE• Perfection is not required.

• HOWEVER, you are generally held to ahigher standard when performinginspections.

• Explain in your contract that perfectionis not the standard.

• Perfection is not required.

• HOWEVER, you are generally held to ahigher standard when performinginspections.

• Explain in your contract that perfectionis not the standard.

87

STANDARD OF CARE

Any blanket promise to correct defectsmay alter the standard of care. Are youinsured for this?

88

STANDARD OF CARE• Beware of warranties, guarantees, and

certifications which effectively turn theStandard of Care into a promise ofperfection.

• You normally do not have insurancecoverage for such warranties, guarantees,and certifications.

• Beware of warranties, guarantees, andcertifications which effectively turn theStandard of Care into a promise ofperfection.

• You normally do not have insurancecoverage for such warranties, guarantees,and certifications.

89






E. Miscellaneous.





E. Miscellaneous.

90

THIRD PARTY BENEFICIARY

• The Architect’s services under this Agreementare being performed solely for the Client'sbenefit, and no other party or entity shall haveany rights or a claim against the Architect ….

• This provision may be waived only by expresswritten consent of the Architect.

• The Architect’s services under this Agreementare being performed solely for the Client'sbenefit, and no other party or entity shall haveany rights or a claim against the Architect ….

• This provision may be waived only by expresswritten consent of the Architect.

91

NON-ASSIGNMENT

• Neither the Client nor the Architect shallassign this Agreement without the expresswritten consent of the other.

• Neither the Client nor the Architect shallassign this Agreement without the expresswritten consent of the other.

92

MISCELLANEOUS1. Billing and Payment Provisions: Payment terms, interest,

attorney fees and collection cost provisions. Terms forsuspension or termination for non-payment.

2. Certifications, Guarantees & Warranties: Delete wheneverpossible. Delete an agreement for code compliance or thatconstruction will be pursuant to “all laws, regulations andcodes.” Some state laws define “certify” for architects andengineers to mean only an expression of opinion, not awarranty or guarantee.

3. Arbitration and Dispute Resolution: Generally avoidmandatory arbitration provisions. Other forms of disputeresolution are acceptable.

1. Billing and Payment Provisions: Payment terms, interest,attorney fees and collection cost provisions. Terms forsuspension or termination for non-payment.

2. Certifications, Guarantees & Warranties: Delete wheneverpossible. Delete an agreement for code compliance or thatconstruction will be pursuant to “all laws, regulations andcodes.” Some state laws define “certify” for architects andengineers to mean only an expression of opinion, not awarranty or guarantee.

3. Arbitration and Dispute Resolution: Generally avoidmandatory arbitration provisions. Other forms of disputeresolution are acceptable.

94

MISCELLANEOUS4. Job Site Safety: You should not be responsible (directly or

indirectly) for job site safety. You should not be responsiblefor construction means and methods. Ensure language thatkeeps these responsibilities with contractor or owner.

5. Liquidated Damages: Liquidated damages provisionsshould not be included in your contract. There are too manyvariables not in your control as the designer.

6. Limitation of Liability: Where possible insert limitation ofliability clause or some type of cap on damages. Be willing toreceive a lower fee to obtain this protection. Try to limitdamages to “available insurance limits” or similar insurancelimitations.

4. Job Site Safety: You should not be responsible (directly orindirectly) for job site safety. You should not be responsiblefor construction means and methods. Ensure language thatkeeps these responsibilities with contractor or owner.

5. Liquidated Damages: Liquidated damages provisionsshould not be included in your contract. There are too manyvariables not in your control as the designer.

6. Limitation of Liability: Where possible insert limitation ofliability clause or some type of cap on damages. Be willing toreceive a lower fee to obtain this protection. Try to limitdamages to “available insurance limits” or similar insurancelimitations.

95

MISCELLANEOUS7. 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 owneragrees to what insurance is needed for a project (and makesure you AND subs comply). Many policies do not covercertain contractual risk assumptions.

9. Shop Drawing Review: Define shop drawing reviewresponsibilities. Ensure non-responsibility shop drawingsand that review is only for general plan conformance. Makesure owner and contractor know the scope of your review.

7. Attorney Fees & Costs: Generally delete all such clauseswhere possible. Or, limit the clause to very specific disputes,such as fee disputes.

8. Insurance Requirements: Assure yourself that the owneragrees to what insurance is needed for a project (and makesure you AND subs comply). Many policies do not covercertain contractual risk assumptions.

9. Shop Drawing Review: Define shop drawing reviewresponsibilities. Ensure non-responsibility shop drawingsand that review is only for general plan conformance. Makesure owner and contractor know the scope of your review.

96

INSURANCEErrors & Omissions Insurance is always “claims

made,” meaning coverage is triggered by the dateof a claim or suit—not the project date.

Claims made policies almost always have decliningpolicy limits. Attorney fees and litigation costsreduce the policy limits.

Consider “project insurance” which covers a specificproject rather than specific insureds.

Errors & Omissions Insurance is always “claimsmade,” meaning coverage is triggered by the dateof a claim or suit—not the project date.

Claims made policies almost always have decliningpolicy limits. Attorney fees and litigation costsreduce the policy limits.

Consider “project insurance” which covers a specificproject rather than specific insureds.

97

INSURANCE

• Be aware: High deductibles = fool’s gold.Deductibles must be paid by you first before theinsurer will participate.

• Some carriers offer programs to spread out yourdeductible over time, such as a 20%/80% split or“first dollar defense” with the payment of thedeductible later.

• Be aware: High deductibles = fool’s gold.Deductibles must be paid by you first before theinsurer will participate.

• Some carriers offer programs to spread out yourdeductible over time, such as a 20%/80% split or“first dollar defense” with the payment of thedeductible later.

98

INSURANCE

• Make sure your subconsulting contracts complywith insurance provisions of the prime contract.

• Someone in your office must be responsible forobtaining Certificates of Insurance from subs. Getrenewal certificates.

• Have your insurance company review yourcontracts for coverage issues.

• Make sure your subconsulting contracts complywith insurance provisions of the prime contract.

• Someone in your office must be responsible forobtaining Certificates of Insurance from subs. Getrenewal certificates.

• Have your insurance company review yourcontracts for coverage issues.

99

Sun Tzu“The natural formation of the country is thesoldier’s best ally.”

The law (statutes, regulations, codes, etc.) are“formations of the country” to be used duringnegotiations.

“We shall be unable to turn natural advantage toour account unless we make use of local guides.”

Local “guides”…..hmmm…..like perhaps a skilledattorney? Just sayin.

Sun Tzu“The natural formation of the country is thesoldier’s best ally.”

The law (statutes, regulations, codes, etc.) are“formations of the country” to be used duringnegotiations.

“We shall be unable to turn natural advantage toour account unless we make use of local guides.”

Local “guides”…..hmmm…..like perhaps a skilledattorney? Just sayin. 100

PROJECT DOCUMENTATIONPresenter:John D. BroghammerGreve, Clifford, Wengel & Paras, LLP2870 Gateway Oaks Drive, Suite 210Sacramento, CA 95833Telephone: (916) [email protected]: http://www.greveclifford.com

Presenter:John D. BroghammerGreve, Clifford, Wengel & Paras, LLP2870 Gateway Oaks Drive, Suite 210Sacramento, CA 95833Telephone: (916) [email protected]: http://www.greveclifford.com

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Liability Claims Against Architects, Engineers and...

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