a/e ProNet Archives - Page 2 of 11

If You Build It, They Will Sue: Condominium Projects – Part I

By Lynda

Do architects owe a “duty of care” to the homeowners of a condominium project with whom the architects have no contractual privity? According to the California Supreme Court, they do. What does this mean in practical terms? The answer is that architects are now more than ever exposed to potential future claims and lawsuits brought by homeowners and the homeowners’ associations years after the project has been completed even where the architect’s design decisions are trumped by those of the project developer, and the architect’s role in the construction phase of the project is limited.

The purpose of this paper is to provide background on an architect’s potential liability to its client and third parties on condominium projects as well as guidance on how to prospectively address the concerns highlighted by a recent California Supreme Court decision and many other lawsuits in which architects have been sued by third parties. Specifically, we address the following topics: assessing your owner client, important contract provisions, and insurance issues. The intent is to provide a roadmap for architects in assessing their risks on condominium projects and a practical approach to addressing those risks. While it may not be possible to fully insulate architects from all risks, it is certainly a good practice to have a firm understanding of those risks and to address the risks up front. Benjamin Franklin is attributed with the statement: “In this world nothing can be said to be certain, except death and taxes.” For architects who design condominium projects, unfortunately, lawsuits should be added to that list. Continue reading “If You Build It, They Will Sue: Condominium Projects – Part I”

AIA Names Leddy Maytum Stacy Architects Nation’s Top Architecture Firm

By Lynda

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Leddy Maytum Stacy Architects, an a/e ProNet client hailing from San Francisco, California, has received the coveted AIA Architecture Firm Award for 2017.

“Firm principals William Leddy, FAIA, Marsha Maytum, FAIA, and Richard Stacy, FAIA, began collaborating in 1983 and the belief that architecture is the synthesis of poetics, economics, technologies, and meaning has always been embedded in the firm’s culture. Dedicated to addressing issues of resource depletion, climate change, historic preservation, and social equity, LMSA and its leadership clearly demonstrate that architects can help their communities adapt to a complex and rapidly changing world. To that end, the firm’s proficiency in diverse building types – from affordable housing to the adaptive reuse of historic structures – has been recognized with more than 140 design awards and are only one of three firms to have ever received eight AIA COTE Top Ten awards.”

Founded in 2001 by principals Marsha Maytum, Bill Leddy and Richard Stacy, LMSA is well known in the region for its long list of modern, sustainable projects. This includes the Ed Roberts Campus in Berkeley and North Beach branch library, as well as multiple low-income apartment buildings in the Bay Area. LMSA’s Plaza Apartments and Rene Cazeneve Apartments house “formerly homeless residents who need on-site support services to try to rebuild their lives.”

As noted by SFGate.com, “In announcing the selection, the AIA praised Leddy Maytum Stacy for its ‘highly influential work that advances issues of social consciousness and environmental responsibility.’ Only two other San Francisco-based firms have received the national firm award in the past 45 years: EHDD in 1986 and Gensler in 2000.”

LMSA has consistently ranked among the Top 50 firms each year since 2011. It considers itself “a teaching practice committed to developing complete, well-rounded architects, leaders in the profession and effective global citizens.” Read more in Architect Magazine.

Congratulations to Leddy Maytum Stacy Architects on this honor from the AIA! Your commitment to social consciousness and environmental responsibility is an inspiration.

Shout-out Credit

Leslie Pancoast, CIC, RPLU
Vice President IOA Insurance Services – Pleasanton, CA
Email: Leslie.Pancoast@ioausa.com / Phone: 925-416-7862

Construction Contracts and Bankruptcy: The Ultimate in “Value Engineering”

By Lynda

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You have just learned that the other party to your contract has filed for bankruptcy. That party owes you money for past work and the project is not yet completed. This is a difficult and confusing situation that your firm might encounter.

In this Practice Note, attorney Jeremy W. Katz provides insight into the bankruptcy mechanism and the steps you might take to protect your firm’s interests.

A prime designer or lead contractor on a design/build project files bankruptcy. Can a design professional/consultant working under contract to the entity filing for bankruptcy protection pack up its gear and walk off the job site or stop work? Can the consultant enforce its mechanics’ lien rights against the real property’s owner? Can the consultant look to the bankrupt’s payment bond for payment? A bankruptcy filed by one party to a construction contract creates significant problems that put at risk the other party’s right to payment. When this happens, the non-debtor party to the construction contract should be ready to act.

The construction business is a volatile one, and it makes little difference if times are good or bad. Prime contractors, consultants, subcontractors, and property owners are constantly filing for bankruptcy protection. They can be huge companies, such as Washington Group, International, Enron, and PG&E, or they can be small mom-and-pop operations. But no matter how large or small the bankruptcy, creditors are likely to suffer, because rarely are they paid in full. All bankruptcies have a ripple effect; the goal is to keep the waves as small as possible. In order to best protect its interests, the creditor should have some knowledge of creditors’ rights and remedies. This knowledge allows the creditor to recognize, anticipate, and act upon issues that arise in a bankruptcy.

This article identifies some of the issues that arise when a bankruptcy is filed, as well as steps a design professional/consultant or subconsultant can take to protect its interests in the project contract. First, this article describes the bankruptcy process from a general standpoint. Second, it discusses specific issues related to the bankruptcy of owners and primes, whether they are design firms or contractors on a design build project. This article is not intended to be a comprehensive study of the topic, nor is it a substitute for a good bankruptcy lawyer. Its purpose is to allow a consultant to identify problems that may affect a construction contract when a bankruptcy is filed. This knowledge makes it more likely that the contractor will fare better than other creditors in the fight to be paid.

Download the full article–Construction Contracts and Bankruptcy: The Ultimate in “Value Engineering”–to continue reading the following sections:

How Bankruptcy Works – An Overview
Pending or Executory Contracts
Perfect Your Mechanics’ Lien Rights!
The Automatic Stay
Unauthorized or Preferential Transfers, or Having to Give Money Back to the Debtor

If you have further questions on construction contracts and bankruptcy, contact your local a/e ProNet broker. We’re here to help!

Indemnification Clause Templates for Architects & Engineers

By Lynda

We’ve posted several times about the confusion surrounding so-called “standard contracts,” as well as the most commonly misunderstood clauses in design professional contracts. When reviewing a new contract for the first time, it can be helpful to know what sound contract language looks like. In February, we published an issue of ProNetwork News titled Template of Reasonable Contract Clauses for Design Professionals. In it, author Kent Holland of ConstructionRisk, LLC lays out 16 templates to help architects and engineers deal with contract review and negotiation.

The following is an excerpt of the Indemnification clause portion of the newsletter, including six different templates for this deceptively complex contractual requirement:

In the examples provided below, some include an obligation to indemnify a client for reasonable attorneys fees and defense costs. To the extent the a/e is required to pay attorneys fees for its client only because it obligated itself do so by the indemnification clause (i.e., attorneys fees would not be imposed on the a/e by a court under common or law or statute), then these costs will not be covered by insurance. The contractual liability exclusion will bar their recovery.

Sample 1:

Consultant shall indemnify and hold harmless the Client, its officers, directors, employees, from and against those liabilities, damages and costs that Client is legally obligated to pay as a result of the death or bodily injury to any person or the destruction or damage to any property, to the extent caused by the willful misconduct, negligent act, error or omission of the Consultant or anyone for whom the Consultant is legally responsible, subject to any limitations of liability contained in this Agreement. Consultant will reimburse Client for reasonable defense costs for claims arising out of Consultant’s professional negligence based on the percentage of Consultant’s liability.

Sample 2: For California contracts must add that there is no duty to defend:

Consultant shall indemnify and hold harmless (but not defend) the Client, its officers, directors, employees, from and against those liabilities, damages and costs that Client is legally obligated to pay as a result of the death or bodily injury to any person or the destruction or damage to any property, to the extent caused by the willful misconduct, negligent act, error or omission of the Consultant or anyone for whom the Consultant is legally responsible, subject to any limitations of liability contained in this Agreement. Consultant will reimburse Client for reasonable defense costs for claims arising out of Consultant’s professional negligence based on the percentage of Consultant’s liability.

Continue reading “Indemnification Clause Templates for Architects & Engineers”

a/e ProNet’s Fall Meeting to Commence in Chicago

By Lynda

Chicago - a/e ProNet Fall Meeting Location — a/e ProNet meets in Chicago each autumn

This week, a/e ProNet’s membership will gather in Chicago for the annual fall meeting (September 28-30, 2016). It’s an opportunity for the members to exchange insights about the climate of the design industry, broadening each broker’s individual knowledge base.

Established in 1988, a/e ProNet represents a combined annual professional liability premium volume exceeding $300 million. For this reason, representatives from the top tier professional liability insurance providers are eager to present to the group.

What Happens at the Meeting?

A dozen insurance companies are scheduled to present this fall, including: Beazley, Victor O. Schinnerer, Liberty, Travelers and Arch. These presentations update the membership on regional and national insurance trends. Hearing about real life claims scenarios, legal precedents and new policy/endorsement offerings equips our members to do their jobs well. The underwriters are eager for feedback on their programs and changes. a/e ProNet’s members actively advocate for their own clients during this portion of the meeting.

Members will also attend a reception one evening at the Driehaus Museum, just off Chicago’s Miracle Mile. This exquisitely restored 19th century mansion is a must-visit for lovers of Gilded Age architecture and art. Representatives from major design industry organizations, like the AIA and NSPE, are also invited to attend.

To close the conference, Douglas J. Palandech, Esq. of Chicago law firm Foran Glennon will present on the Fiduciary Liability Exposure of Design Professionals. These presentations often turn into articles for one of ProNet’s publications. Don’t miss out! Follow us on Twitter and/or LinkedIn for updates.

Certificates of Insurance: Why You Can’t Always Have It Your Way

By Lynda

Design professionals are often asked by their clients to sign contracts that include comprehensive—sometimes unreasonable—insurance requirements and indemnification terms. These are usually drafted with the goal of protecting owners, clients, contractors, or other project participants. But how does this work when the required coverages aren’t found in the commercial insurance marketplace?

Certificates of insurance (COIs)—which are also often requested in those professional service contracts—provide summaries or verification of current coverage, including policy effective dates, insurers, and certain policy limits. A certificate gives a snapshot to the requestor (usually known as the certificate holder) for informational purposes. It’s important to understand that in no way does a certificate endorse, amend, alter, or extend coverage; nor does it act as a contract. Certificates are often provided using a set of industry standard forms produced by ACORD (formally known as the Association for Cooperative Operations Research and Development), which indicate:

THIS CERTIFICATE IS ISSUED AS A MATTER OF INFORMATION ONLY AND CONFERS NO RIGHTS ON THE CERTIFICATE HOLDER. THIS CERTIFICATE DOES NOT AMEND, EXTEND OR ALTER THE COVERAGE REPORTED BY THE POLICIES DESCRIBED BELOW.

Issuers of COIs generally strive to accurately reflect the insurance policies that are in effect, but those who are relying on the forms need to keep in mind that it’s virtually impossible to summarize an insurance policy of over a hundred pages in a form that contains a few boxes. Adding to this, those who are issuing insurance certificates often struggle as they try to confirm in a COI that specific and detailed contractual requirements are—or aren’t—being met.

One common challenge is meeting a request that an insurer provide notice of a policy’s cancellation to the insured’s clients. To do so, the insurer would need to track all such requirements for all insureds for the duration of each contractual requirement—which may even be unspecified. With this in mind, ACORD made changes in 2010 to clarify that insurers’ notification duties are as defined in the insurance policy, not in the professional services contract.

Generally, courts agree that a certificate of insurance is not a contract. One fundamental reason is that no consideration—or payment—is given by the certificate holder to the issuer. However, there is a duty to make accurate representations within the confines of the overall system. To consider this, we’ll review a few recent cases interpreting the obligations for COIs and their issuers. Continue reading “Certificates of Insurance: Why You Can’t Always Have It Your Way”

ACEC Announces First a/e ProNet Engineering Scholarship Winner

By Lynda

The ACEC has announced the winners of its five national student awards, and among them is Lauren Grimley, winner of a/e ProNet’s first annual engineering scholarship.

Grimley will graduate from Calvin College in Grand Rapids, Michigan this year and enter the University of Iowa’s master’s program in water resources and environmental engineering in the fall. Grimley’s credentials as a student, her experience, and her enthusiasm for her selected field set her application apart. We’re excited to be a part of her journey toward professionalism and wish her the very best going forward.

Visit our scholarships page to read more about the two annual awards we sponsor every year.

Winners of 2016 a/e ProNet AIA Scholarships Announced

By Lynda

We partner with the AIA to give two scholarships to architecture students each year, and, as usual, we’re excited to announce the winners.

Laura Colagrande completed her Bachelor of Fine Arts at Virginia Commonwealth University in 2013 and is enrolled in the M.Arch program at the University of Pennsylvania. With a background in design, she has worked as a designer for Middle of Broad in Richmond, VA, Wolcott AI, and Wirt Design, both located in Los Angeles. A constant desire to learn pushed Colagrande to add business skills, completing a business program at UCLA Extension and studying global marketing, branding, and risk and crisis management. She has learned the value of limiting risk and containing the negative consequences of a crisis, and is now implementing these lessons in the context of her studies in architecture.

Jonathan Teng graduated from the University of Washington with a Bachelor of Arts in Architectural Studies with Distinction in 2010, receiving a Faculty Award for Scholarship and Design and is enrolled in the M.Arch program at Washington University in St. Louis. He has held internships at Heliotrope Architects and Mahlum Architects, both of Seattle, WA. Teng has developed his ability to represent the LGBT community in architecture, and has set his focus on practicing design that provides inclusive and diverse spaces for everyone. As part of this process, he has learned to incorporate communication across the levels of the project, not just between the architect and the client, but also including the end-user when possible.

“The scholarship applicants this year demonstrated strengths in diversified areas within the submission requirements that made it challenging to select our winners,” said juror, Lira Luis, AIA. “The scholarship winners however, stood out among the rest because not only did their essays address the practice management topic in an articulate to-the- point manner, but also the suggested solutions demonstrated clear understanding of best practices such as peer reviews and the value of accountability, where risk is reasonably managed and future potential liabilities mitigated and the value of communication that includes in person interactions.”

Our scholarship was renamed in 1999 for David W. Lakamp, a founder of a/e ProNet and a trusted advisor to the profession. He left behind a legacy of professionalism and integrity that set new standards in the field of insurance services. The jury for the 2016 David W. Lakamp a/e ProNet Scholarship includes: Thomas G. Coghlan, Integro Insurance Brokers; David B. Richards, FAIA, LEED, AP, PMP, Rossetti and A. Lira Luis, AIA, RIBA, LEED AP BD+C.

Learn more about he a/e ProNet scholarships for both architecture and engineering students on our Scholarships page. And don’t forget to follow us on Twitter! We tweet application openings and deadline reminders each year.

Congratulations, Laura & Jonathan!

Read the full AIA press release here.

The Down-Low on Broker-Verification Questionnaires

By Lynda

In what attorney Brian Stewart calls a “disturbing trend,” more and more project owners design professionals to procure separate questionnaires from their insurance brokers. These “broker-verification questionnaires” are meant to re-state or re-affirm the limits, exclusions, etc. of the relevant insurance policies to the project. If you’re an architect or engineer who has met push-back from your broker on this issue, our November 2015 issue of ProNetwork News explains why:

I: The Problem with Broker Verifications

The use of broker-verification questionnaires has been a growing trend seen most commonly in the context of construction insurance… Historically, a broker has satisfied this requirement through the production of a certificate of insurance or, if necessary, a copy of the policies themselves which demonstrate that the insured had the applicable coverage. However, a number of project owners have recently been refusing to accept certificates alone and are requiring brokers to complete a questionnaire and verification, with the understanding that a failure to complete the questionnaire will cost the broker’s client the job.

The increasingly frequent use of such broker-verification questionnaires raises a number of legal issues for the broker. The first issue deals with the broker’s authority to interpret the underlying policy between the insurer and the insured and whether a broker has the authority to confirm in writing whether a specific policy meets the requirements, not of the contract between the Owner and the insured but rather the requirements contained in the broker-verification questionnaires. The second legal issue deals with the effect of a conflict between the underlying policy and the language of the questionnaire. Specifically, what is the legal consequence when a broker completes a questionnaire that potentially contains conflicting language from the actual policy? Finally, this opinion will analyze what risks and liabilities a broker is exposed to when completing a questionnaire that contains language that is in conflict with or amends, modifies, expands, etc. the underlying policy.

II: Principles of Contract

Insurance is a matter of contract governed by the rules of contract. Unlike the ordinary commercial contract where the parties seek to ensure a commercial advantage for themselves, an insurance contract seeks to obtain some measure of financial security and protection against calamity for the insured.

Being a voluntary contract, as long as the terms and conditions made therefor are not unreasonable or in violation of legal rules and requirements, the parties may make it on such terms, and incorporate such provisions and conditions as they would see fit to adopt. The rights and obligations of parties to an insurance contract are determined by the language of the contact and the insurance policy is the law between the parties unless the contractual provisions are contrary to public opinion or law.

III: Role of the Broker

An insurance broker provides a professional service for the insured, its client and goes to the insurance market to determine what policy or policies best fit the needs of its clients.

Relevant distinctions exist between an insurance agent and an insurance broker. Whereas an agent generally represents a particular insurance company, an insurance broker generally represents only the insured. Consequently, an insurance broker owes a duty to the insured and not the insurer. Continue reading “The Down-Low on Broker-Verification Questionnaires”