By Mark Jackson, JCJ Insurance
Under Florida law, individual design professionals can be personally liable for negligence claims even if they did not sign the professional services contract with the client. Nine years ago, the State of Florida passed legislation that allows design firms to limit claims against their individual employees for professional negligence. Unfortunately, many of the contracts we see do not include this important protection.
In 2013, the State of Florida signed a law relating to design professionals known as the Fairness in Liability legislation, allowing design firms the ability to negotiate contracts that protect their professional employees from being sued individually by their clients. The law grants design professional employees immunity from liability for economic damages resulting from negligence occurring during the course and scope of a professional services contract. For the protection of the client, the law does require that the design firm maintain professional liability insurance as required under the contract.
Our agency provides risk management contract review services to help our clients avoid, or at least decrease the severity of claims. Despite the benefits of this legislation, we continue to see agreements that do not include the individual protection, or they have contract language that does not meet the specific requirements of the Statute. Below are the five conditions required for this protection to apply to the individual:
1. The contract is made between the design firm and the client.
2. The contract does not name as a party to the contract the individual employee who will perform the professional services.
3. The design firm must maintain Professional Liability insurance, as required by contract.
4. The contract contains a prominent statement, in uppercase font that is at least five-point sizes larger than the rest of the text, that an individual employee or agent may not be individually liable for negligence. (example below)
5. Any damages are solely economic in nature and the damages do not extend to personal injuries or property not subject to the contract.
When we review contracts for our clients, we routinely add the language above in uppercase five font sizes larger than the rest of the contract. It is not uncommon for the Owner to accept the provision but send back the contract reducing the font size or removing the uppercase font. While the language may look odd (see below for example), we explain that the Statute requires this specific format.
Sample contract language:
PURSUANT TO SECTION 558.0035 FLORIDA STATUTES, THE CONSULTANT’S CORPORATION IS THE RESPONSIBLE PARTY FOR THE PROFESSIONAL SERVICES IT AGREES TO PROVIDE UNDER THIS AGREEMENT. NO INDIVIDUAL PROFESSIONAL EMPLOYEE, AGENT, DIRECTOR, OFFICER OR PRINCIPAL MAY BE INDIVIDUALLY LIABLE FOR NEGLIGENCE ARISING OUT OF THIS CONTRACT.
Your clients should not have an issue with agreeing to this language. This language does not reduce or eliminate any liability against the design firm. In fact, the law requires that the design firm maintain any contractual requirements to carry Professional Liability insurance in order to uphold the individual protection for the licensed design professional.
Just as we are asking your clients to agree to this language, we encourage you to provide this clause in your subconsultant agreements. Again, it is not limiting your ability to recover from the subconsulting firm. You are only agreeing to not sue the individual employee.
There are some additional items to consider with the individual protection provision.
While this protection does not apply to claims made by third parties, it is still important to include it in all your contracts since the majority of negligence claims are made by your clients.
This language is especially important to include if you have negotiated a Limitation of Liability clause. You want to make sure that the individual employees are not a target if the firm’s liability is limited.
Another issue we face when trying to add this language is whether the individual protection applies to public transportation projects. Under the Florida Statutes 558.002(8), the definition of property excludes public transportation projects. Some people have interpreted this language to mean that a licensed employee does not have individual protection for roadway projects. Our opinion is that you still should ask for this language. Including the language means you have done what was required to offer this protection to your employees. Let the courts determine if the individual protection applies or not.
Your contracts are the first line of defense when there is a negligence claim. You want to negotiate a fair contract that provides protection for both the firm and your individual employees. We are available to help your firm navigate the intricacies of contract language whenever the need arises.