Architect is subject to potential liability for failure of design to comply with fire code requirements regardless of whether the generally accepted standard of care was satisfied. This is because it agreed to contract language stating it would comply with the Standard of Care AND would comply with code requirements. This created two separate duties – making the duty to comply with codes absolute and not dependent on meeting the standard of care.
Consider this situation: You have been awarded a commission to design a building for a new client. You propose using the AIA’s Standard Form of Agreement B101 as your owner-architect contract, but the client insists you sign a version of the B101 “with just a few minor changes.” You notice that one of those changes requires you to “comply with all laws, rules, and regulations," rather than, as the B101 states, to “review laws, codes, and regulations applicable to the Architect’s services.” That changed language should be setting off alarm bells for you.
A recent court decision requiring an engineer to indemnify and defend its client, a project owner, against a routine contractor claim is a wakeup call to further clamp down on indemnification language so that only those damages resulting from tort claims against the indemnitee based on the negligence of the design professional will be indemnified, and that there will be no duty whatsoever to defend such claims.
Most people, and most professionals in particular, know what they should do. It is the stuff of aspirational New Year’s Resolutions and Twelve Step Plans. Yet even those readily acknowledged “right principles” often fall to the wayside of neglect and outright avoidance. The mind and heart acknowledge and are willing, but the follow through falters. Nowhere is this more true for the world of design and construction professionals than in the arena of written/unwritten contracts. It may result from the enthusiasm to jump straight into the work, unresolved contract negotiations, or an attitude that the contract just isn’t that important.
Continued from If You Build It, They Will Sue: Condominium Projects – Part I, an analysis of Beacon Residential Community Association v. Skidmore, Owings & Merrill LLP, et al. and its impact on future court decisions.
Key risk allocation clauses in design professional contracts that routinely require editing to make the risk more manageable or insurable include those presented in this template. The language set forth below is suggested as reasonable compromise language to onerous terms and conditions. This is not legal advice, and before adopting contract language for any specific situation, consultations with legal counsel is recommended. Enforceability of contract language varies from state to state.
In the world of claims-related contract clauses for design professional agreements, the indemnity and defense clauses get all the attention. However, lurking in the shadow of the indemnity clause is a menacing cousin with potentially even greater and more frequent impact and risk: the prevailing party attorneys’ fee clause. Both clauses share the common risk that they are often not covered by professional liability insurance because each represents a contractually-assumed liability which would not exist in the absence of the contract.
Engineering firms often take jobs that knowingly expose the firm to legal risk. But how much risk is too much? That’s a question that more and more engineering and design firms are asking when confronted with contracts that contain controversial “Duty to Defend” language.
The point of this article is to provide design professionals with a simple, three-step evaluation and corresponding “scoring” model to evaluate and improve the indemnity obligations it receives.