2013 - Page 3 of 7 - a/e ProNet

A New A&E Resource: Beazley Pro Inaugural Issue

By Lynda

One of the several excellent insurance companies a/e ProNet works with has a new risk management resource for their professional clients: Beazley Pro.

We think our readers will be most interested in the Claims Corner; three scenarios, three discussions, three lessons learned. An example of a claim outlined in the Summer 2013 issue…

Engineer granted rare summary judgement

Facts: After sustaining serious injuries in a fall in a sports facility parking lot, the plaintiff sued the property owner, who in turn filed a third-party action against our insured, an engineer. This suit against the engineer alleged that deficiencies and code violations in his design of the facility’s parking lot (specifically its handicap access ramp and lighting) were to blame for the fall. A site visit revealed that the lighting and lighting tower location in the parking lot were not as the engineer had specified. During deposition, the paving contractor affirmed that he used the engineer’s plan for pricing only, not for construction. Hence, there was no causal connection between any design deficiencies in the engineer’s plans and the plaintiff’s serious fall and injuries. Counsel moved for summary judgment, which was granted in full. Continue reading “A New A&E Resource: Beazley Pro Inaugural Issue”

a/e ProNet Partners with the Society for Design Administration (SDA)

By Lynda

In May this year, the Society for Design Administration (SDA), the nation’s largest professional organization for architectural and engineering design firm administrators and managers, announced its endorsement of a/e ProNet.

The proper management of professional risk factors such as contract administration, project administration, and document management are known factors in reducing professional risk in a/e firms. Both SDA and a/e ProNet are dedicated to providing a/e firms the necessary tools to better manage risk and improve firm management. ~ Deborah A Gill, CPA, CGMA, CDFA, 2013 SDA President

As announced in the June/July 2013 issue of SDA Today, “a/e ProNet will pay one half of a new SDA member’s dues if that member’s insurance agent belongs to a/e ProNet… Chapters can partner with the local broker and reach out to principals and managers in their network.”

a/e ProNet and the SDA will also collaborate on a number of educational events, including the SDA’s annual EDSymposium conference. Last year, past a/e ProNet President, Leslie Pancoast, made two presentations at EDSymposium12 in Portland, Oregon, and current a/e ProNet President Jeff Todd spoke at EDSymposium13 in Williamsburg, Virginia earlier this year.

We look forward to a long and successful partnership with the SDA.

Need CE Credits? a/e ProNet’s Contract Review Guides Can Help

By Lynda

Looking for a convenient way to fulfilll your AIA Continuing Education credit requirements? a/e ProNet can help.

In the past few years, a/e ProNet has published two risk management guides for the design industry: Risk Management & Contract Guide for Design Professionals and Risk Management for Design Professionals in a World of Change. Both include courses at the back of the book, which have just been renewed with the AIA for credit for an additional 3 years.

Our books and access to the courses are available for purchase on our website, but you can receive a discount for both by requesting copies from your a/e ProNet broker. (And if your broker isn’t an a/e ProNet member, call your local a/e ProNet broker today!)

Read on for details about both contract review guides… Continue reading “Need CE Credits? a/e ProNet’s Contract Review Guides Can Help”

Making the Grade: Testing Design Professional Indemnity Obligations

By Lynda

In•dem•ni•fy Verb.

• Compensate (someone) for harm or loss.
• Secure (someone) against legal responsibility for their actions.

Imagine a case where an engineering firm was found to have had an expensive duty to defend claims asserted against a developer, even after the engineer’s performance was judged not to have violated the professional standard of care. That was the decision three years ago, in the California Court of Appeals in UDC – Universal Development L.P. v. CH2M Hill. In fact, that case extended another one, decided two years earlier in the California State Supreme Court. (Crawford v. Weather Shield Mfg., Inc.). That decision held that the duty to defend was incurred the moment that the indemnitee (the party that the design firm was contractually bound to indemnify) tendered its defense to the design firm.

Candidly, the indemnity provision underlying the UDC v. CH2M Hill decision was long and rambling, repetitive, and ambiguous. That’s what opened the door to the expansive (and expensive) legal interpretation. The clear message to design professionals was: if you do not want to take on the extensive defense and indemnity obligations implied or required by statute and case law, you must be clear. Further, the longer and more confusing an indemnity provision is, the more likely it is to receive an expansive reading.

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. Continue reading “Making the Grade: Testing Design Professional Indemnity Obligations”

California Court Upholds Contractual Statute of Limitations Provision in AIA Standard Form

By Lynda

California architects can breathe a little easier. Filed June 3, 2013, the Court of Appeals decision in Brisbane Lodging, LP v. Webcor Builders, Inc. held that the section 13.7.1.1 of the 1997 AIA Standard Form of Agreement between Owner and Contractor is enforceable.

This is good news for Design Professionals, as section 13.7.1.1 shortens the statute of limitations period to four years and effectively abrogates the delayed discovery rule in California.

Per an announcement email recently received from Jacqueline Pons-Bunney, a partner at law firm Weil & Drage:

The case involves a contract between an owner and a contractor for the construction of a hotel. The clause at issue reads:

“any applicable statute of limitations shall commence to run and any alleged cause of action shall be deemed to have accrued in any and all events not later than such date of Substantial Completion.”

Substantial completion at the subject project was July 31, 2000. In early 2005, the owner discovered a break in the sewer line which caused waste to flow under the hotel. It was determined that the plumbing problem was a latent defect. Both the contractor and its plumbing subcontractor investigated the problem and attempted repairs. It was ultimately discovered that the plumbing subcontractor had installed ABS pipe rather than cast iron pipe for the sewer line, in violation of the Uniform Plumbing Code. The owner filed a lawsuit in May 2008. Continue reading “California Court Upholds Contractual Statute of Limitations Provision in AIA Standard Form”

Views From The Expert: Top 3 Liabilities Facing Design Professionals

By Lynda

Using a real-life claims scenario from “a structural engineer and senior partner in a small A/E firm that specialized in multi-family and commercial condominium projects”, William F. Dexter offers his view on the Top 3 Liabilities Facing Design Professionals in today’s increasingly litigious marketplace:

“Long after the construction documents have been published and permits issued, the architect or engineer flies into the Bermuda Triangle of construction phase services, which include review of shop drawings, payment certification and construction observation. Let’s take a look at establishing solid guidelines to reduce the risks of these frequent situations by transferring liability back to the client and others who are always quite eager to let the design professional be responsible.”

Continue reading at the JDI Data website.

Design Professional Contracts – Words to Avoid

By Lynda

At its most basic level, risk management for design firms includes selecting and signing sound contracts. a/e ProNet’s Risk Management & Contract Guide for Design Professionals (2005) can assist with the specifics of this process.

An excerpt from Chapter 7, Some Do’s and Don’ts of Contract Language:

7.2 Words to Avoid

Certain words create the impression that the design firm has a greater duty or responsibility than required by the generally accepted standard of care and scope of services stated elsewhere in the contract. Some words that risk managers often advise the design firm to avoid using in their contracts to the greatest extent possible include the following:

“supervise contractor’s work”
“control contractor’s work”
“direct contractor’s work”
“guarantee or warrant either your services or the contractor’s work”
“certify that contractor’s work meets the plans and specifications”
“inspect contractor’s work to assure it meets the plans and specifications”

This risk management guide was previously out of print, but has since been re-released in electronic format. The book includes three updated optional AIA-approved continuing education courses! Visit the a/e ProNet Web Store to purchase and download your copy today! Also available is our most recent guide, Risk Management for Design Professionals in a World of Change (2009). If you have any questions about these resources, find your local a/e ProNet broker or Contact Us.

How to Get a Design Professional to Work For Free!

By Lynda

Now that we have grabbed your undivided attention, the purpose of this article is to alert Design Professionals to an alarming trend. This trend involves the inclusion of contract provisions in agreements prepared by Owners/Developers and their attorneys that force a Design Professional to work for free in the event that the Owner/Developer unilaterally determines that there is a “dispute.”

Overview

It goes without saying that every contract, especially in the design field, must be read thoroughly before it is signed, or the signer will be stuck with the ramifications. Generally speaking, the clauses in question here state that in the event of any dispute between the Owner/Developer and Design Professional, the Owner/Developer may withhold payment until the dispute is resolved, but the Design Professional must continue to perform services. This upsets the historical balance of power between the Owner/Developer and the Design Professional and creates a situation where the Design Professional may very well end up working for free or else be faced with being sued if they stop work or suspend services. Continue reading “How to Get a Design Professional to Work For Free!”

Project Insurance: Benefits and Cautions – Part 2 of 2

By Lynda

The March 2013 issue of ProNetwork News is the second installment of a two-part article; the author, Tim Corbett of SmartRisk explains the origins and principles of project coverage and introduces the reader to two of the four main types of Project Insurance. For a recap of the first part, including details about types 1 (Project Professional Liability Insurance) and 2 (IPD Project Specific Insurance), download the full March issue, or, better yet, download the February 2013 newsletter here.

Now, let’s examine the remaining three types of project coverage.

3. Project Specific Insurance Limits

Sometimes, contracts demand that design professionals carry a higher limit than they usually do. This can occur on any kind of project, but is more common on larger, higher risk projects, and more recently, on public ones. One of the more common strategies for obtaining increased limits for a project is through a Project Specific Insurance Limit. This is provided by endorsement through your current practice policy insurance carrier.

Benefits and typical features of Project Specific Insurance Limits:

Provides a higher limit for the firm, for a specific project only.
Can be more cost effective than raising the limits on the entire practice policy.
Makes the cost of the project-specific limit a reimbursable expense.

Cautionary Points and Tactics:

Having a project specific increased limit may not always be the best strategy, and it may not even be available from your practice policy carrier. From an insurance company’s perspective, comparing construction costs to policy limits is part of the underwriting process. Construction value and requested limits may not be in line with the insurer’s potential exposure: those higher limits requested could place a target on the design firm’s back. The insurer doesn’t want to provide the higher limits that could be used as a cost recovery strategy.

Ensure that requested limits are in line with exposures and construction costs. For example, is it necessary to require a $5 million limit of professional liability insurance from a firm performing services on a $20 million project?
Contact the contract administrator, and state that your firm normally carries a lower professional liability limit than requested, and that it is consistent with industry practice. Inquire if your current limit will be acceptable.

* Include language similar to the following in your contract:

“The expense of any additional insurance coverage or limits requested by the Owner in excess of that normally carried by the firm shall be a reimbursable expense paid by the Owner.”

To find out more about types 4 (The Wrap-Up Policy) and 5 (Owner Protective Insurance Policy or OPIP), download the full March 2013 issue from our website.

About the Author: Timothy (Tim) Corbett is Founder and President of SmartRisk, a Pasadena, CA based consultancy with over 25 years of experience providing risk management and performance management solutions to Design and Building Professionals. Mr. Corbett holds a BS Degree in Security & Risk Management, MS Degree in Management; a degree in Environmental studies as well as concentrated studies in Architecture Design and is LEED accredited. For more information on this or other topics, visit the SmartRisk website or email Tim at tcorbett@smartrisk.biz.