Professional liability insurance for architects and engineers.


Key Clauses of a Consulting Agreement: Design Professional to Design Professional

Posted on October 3, 2017

By Tom Owens A good risk management strategy for design professionals requires proper contracting of all firms engaged in the project. When you are the prime design consultant to the owner (client) you assume responsibility for the performance of the consultants contracted to you. Agreements with your consultants can be just as important as the agreement with your client, as claims often evolve from the performance of your consultants. And, similar to the agreements with your client, it is important that you recognize that your consultant relationships are as important as the contracts between your firms. When you get in a tough spot with the client, a positive relationship with your consultants can mean the difference between a team that is working to resolve an issue collectively and the disaster of “every firm for itself.” Prompt and thorough response to a project circumstance based on a relationship of cooperation and collaboration amongst the design team can turn a potentially significant problem into one that is more manageable, mitigating risk to the client relationship as well the cost of resolution of the issue. The most important clause in a consulting agreement passes through the obligations of your prime agreement to your consultant for the scope of services allocated to that consultant. This clause defines the consultant’s scope and binds the consultant to the provisions of the prime agreement consistent with the terms and conditions to which you are subject. There are several ways to accomplish this and I must clarify that this advice has not been tailored for the particular state in which you work. You should consult with an attorney licensed in your state and experienced in design-construction matters to adjust this clause as appropriate. With that legal disclaimer in place, the following clause should work almost everywhere: • Designer has an agreement with Client dated ______, entitled ____ (“Prime Agreement”), which is attached and incorporated as part of the agreement between Designer and Consultant (“Contract”). If this Contract includes Consultant’s proposal, it is included for adding detail to Consultant’s scope of services but does not modify the scope required by the Prime Agreement for Consultant’s services. All other terms in the Consultant’s proposal are not a part of this Contract. Consultant agrees to be bound to Designer in the same manner and to the same extent as Designer is to the Client under the terms of the Prime Agreement. If Consultant’s obligations, duties, and responsibilities under the Prime Agreement and the obligations, duties, and responsibilities in this Contract differ so that both cannot govern Consultant’s services, then the requirements of the Prime Agreement govern Consultant’s services. In addition to making sure that the scope your consultant is covering will satisfy your obligation for the consultant’s specialty under the Prime Agreement, you also eliminate any term in your consultant’s proposal to you to which you shouldn’t agree. Terms such as “limits of liability” or “waivers of consequential damages” can be very detrimental to you and are eliminated. Certainly, if you are able to negotiate those favorable terms with your client in the Agreement, the entire design team will benefit. Your consultants must accept the shared risk of the project. The suggested language causes the client requirements that you want to, or are required to, pass through to the consultant....

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AIA B101™ – 2017 Owner-Architect Agreement, What Has Changed Since 2007?

Posted on August 1, 2017

© 2017, by J. Kent Holland Introduction The American Institute of Architects (AIA), on April 27, issued the 2017 update to the AIA B101™ “Standard Form of Agreement Between Owner and Architect.”  There are a number of tweaks, refinements, improvements – and even a few significant changes.  Eighteen months from the date AIA published the 2017 document, the license to use the current 2007 edition will terminate.  This is not a major revision.  But from a design professional’s point of view, there are a number of improvements that will make it worthwhile to begin using this new form sooner rather than later. An easy way to quickly see the changes is to download from the AIA website the “2007/2017 Comparative,” which is a redline showing what has been added and what has been deleted. In this article, we highlight and explain some of the key changes, including: Architect represents that it is either licensed in the jurisdiction where the project is located, or in the alternative, “shall cause its services to be performed by appropriately licensed design professionals.”   But see the discussion below as to whether an unlicensed firm can meet state licensing requirements by having licensed individuals perform the professional services (§2.1). The insurance section of the agreement has been beefed up to include a more detailed description of insurance in the B101, and there is a new detailed insurance and bond exhibit that can be attached to the owner/contractor agreements such as A201 (Document A102 – 2017 Exhibit A). And insurance is required to be maintained by the Architect for a minimum of one year following Substantial Completion (§2.5); New sustainable project exhibit (AIA E 204™-2017). Sustainable project services can be added as a Supplemental Service under Section 4.1. This exhibit eliminates the need to have a sustainable project version of each contract document. The requirement that the architect discuss with the owner the feasibility of incorporating environmentally responsible design approaches has been deleted basic Agreement from (§3.2.3), but a requirement that the architect consider sustainable design alternatives is added (§; Reviewing contractor requests for substitutions will be paid for as an additional service (§ and; Additional Services identified at the time of agreement now are called Supplemental Services in contrast to Additional Services that arise during project performance (§4.1.); Changing previously prepared Instruments of Service due to official interpretations of codes that are contrary to the requirements existing will be paid for as additional service (§4.2.1); Owner must include the architect in all communications with the contractor that relate to or affect the architect’s services or professional responsibilities, and must notify the architect of the substance of any communications with the contractor that “relate to the project” (§5.12); Re-design with no compensation is no longer required if bids exceeded the budget due to changes in market conditions that could not have been reasonably anticipated (§6.7); Owner’s license to use the Instruments of Service is no longer created upon execution of the agreement. The license will instead only be granted after the owner complies with all contract requirements, including payment of the architect’s fees (§7.3); Termination expenses will no longer be paid as part of a termination for convenience, but there will instead be a termination fee that is established in advance as part of the...

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Moonlighting: What’s the Harm?

Posted on June 1, 2017

Diane Mika, Vice President, Director of Risk Management Education, Berkley Design Professional Consider this scenario: An architect in your firm wants to design a home addition plan for a family member. Or this one: an engineer wants to take on a parking-lot project for a local non-profit organization she volunteers for. They may want the additional experience, income and/or recognition such moonlighting projects may bring. You may think, As long as they do it on their own time, it’s no big deal, right? Not necessarily. It’s not just the designer’s time that’s at issue. There’s a very real potential that your firm could be held liable in the event of a claim related to the moonlighting work. Professional Liability Insurance Your next question may be, But wouldn’t my firm’s professional liability insurance policy cover it anyway? Again, not necessarily. Typically, such policies specify that employees are covered—but only for those services performed on behalf of the firm. Even if your PL insurance policy responds to such a claim, keep in mind that your firm would be responsible for any deductible. In either event, you need to ask yourself this: Do I want to be on the line for paying the cost of a claim on a project for which my firm received no income? What Puts Your Firm at Risk If a claim arises out of a moonlighting project, anything that implicates your firm’s involvement can result in imputed liability against your firm. Any of the following situations might imply that your firm was knowledgeable about and/or sanctioned such work: Employee’s performance of moonlighting services during the firm’s normal work day or on the firm’s premises Moonlighting employee’s use of your firm’s: – Equipment (computers, printers, scanners, plotters) – Software (design technology, other) – Email account domain – Telephone system or company-issued mobile device – Letterhead, logo or other standard documentation What’s more, those who engage in moonlighting tend to be less seasoned employees. This lack of experience, when coupled with the lack of your firm’s normal QA/QC process, creates an environment that is ripe for a claim. Protecting Your Firm Many A/E firms affirmatively prohibit moonlighting activities by addressing it in the firm’s employee handbook and requiring employees to sign a form to indicate that they have read and understood its contents. You may also want to include a disclaimer of liability and, perhaps, an indemnity in the event an employee violates the policy. Be sure to enforce the moonlighting restriction, however, as inconsistency can lead to exposure. In addition to putting your policy in writing and getting it formally acknowledged by your staff, include an actual dialogue about moonlighting during the onboarding and training of new employees. Also consider discussing the topic at an all-employee meeting. Such interactive conversations can help your staff more fully understand the risks of moonlighting—to themselves and to the firm—and help you dispel the myth that there’s no harm in moonlighting. Final Words of Advice A design professional cannot be an effective firm leader and, at the same time, engage in moonlighting activities. Leaders, in particular, need to devote 100% of their professional energy to the firm. Lastly, if you choose to allow non-leadership staff to moonlight, you should place key restrictions on such activities: Cannot be performed on the firm’s premises...

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Using Personal Vehicles While at Work – What are the Risks?

Posted on April 4, 2017

By Mark Jackson and Erin Kelley Whether your company owns vehicles or not, chances are you have employees who use their personal vehicles for business purposes. Most design firms are aware that they need proper coverage for automobiles they own, but are less clear about potential liabilities for vehicles they do not own. When your partners, employees or interns use their personal vehicles to run errands or conduct company business, your firm faces “non-owned” auto exposure. In the event of an accident, your firm could be subject to a costly claim. Generally, your employee’s personal auto policy provides the primary insurance, even if the vehicle is used for business. However, if the damages and liability claims exceed the employee’s policy limits, then the injured party will look to your firm’s “deep pockets”. Furthermore, if your employee has a poor driving history, does not properly maintain their vehicle, or does not carry adequate insurance your company could be held liable. There are several steps you can take to protect your business and reduce significant risks to your company’s assets. 1. Purchase Hired and Non-owned Auto Coverage Any company that allows partners or employees to use their personal vehicles while acting in the scope of their employment and in the conduct of their business should have Hired and Non-owned automobile coverage. If your company owns vehicles, there should be a commercial automobile policy in place. We recommend adding Hired and Non-owned coverage if it is not already included. If your company does not own any vehicles, Hired and Non-owned coverage can also be purchased in conjunction with your General Liability. Hired coverage is for situations in which autos are not owned by the company or the driver. It is important to note that Hired and Non-owned coverage generally protects the company only, not the car or the driver. 2. Implement a Company Policy Regarding Automobile Use An effective company policy identifies who can drive on behalf of the business, defines authorized travel and the company’s position on transporting others. All employees who have permission to drive either company-owned or personal vehicles should be required to provide: • Valid Driver’s License. • Evidence of Personal Automobile Liability Insurance proving liability coverage at or above an established company limit including personal injury and medical limits. • Motor Vehicle Record (MVR) records from the Florida Department of Motor Vehicles. Unacceptable drivers should be prohibited from driving on behalf of your company. Your insurance agent should be able to provide guidance on what criteria constitutes an unacceptable record. Further, you should reserve the right to check employee’s personal auto policy and motor vehicle records annually. 3. Corporate Driving Safety Guidelines Your company policy should include general safety guidelines such as the requirement that drivers obey all driving laws, always use seatbelts, and restrict the use of mobile devices. Formal procedures for handling an accident should be provided to all employees who drive for business. If you do not already have these insurance coverages and guidelines in place, we recommend discussing your needs with an insurance professional who has experience working with design firms. Auto liability claims can be very expensive, especially if injuries are involved. Any type of exposure for your firm, no matter how small, is too big to...

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