a/e ProNet Archives - Page 4 of 11

Document Retention: Rules of Thumb for Design Professionals

By Lynda

In this age of terabyte-sized digital memory banks and the seemingly infinite storage possibilities of “the cloud,” understanding how long a design professional should retain project documents can be tricky. More and longer aren’t always better, but there are legalities to consider before any kind of purge takes place. For architects and engineers, basing a firm-wide retention policy on consideration of the relevant statute of repose is usually a good start. For latent defect claims in California, for example, that’s ten years from the date of substantial completion.

According to attorney Jennifer Suzuki at Long & Levit LLP in California:

There is no statute of repose for personal injury claims arising from alleged construction defects. (Such claims must be brought within two years from date of injury regardless of completion date.) Although it is much less expensive these days to retain records in a digital form rather than in hard copy, most firms do not find it feasible to retain all their records in perpetuity. It’s always a judgment call based on a cost/benefit analysis.

In the absence of notice of a pending or threatened claim, I believe many of our clients retain their records for ten or twelve years. (The additional two years allows extra time for Doe amendments and delayed service of process.) Some clients designate different retention periods based on the type of project record, e.g., correspondence, drawings, etc. In the event of a pending or threatened claim, clients should adopt a litigation hold so that no potentially relevant records are inadvertently destroyed as part of a normal destruction policy.

The following is an excerpt from the Small Businesses & Self-Employed page on the IRS website. Just a few rules of thumb on tax-related documents:

The length of time you should keep a document depends on the action, expense, or event the document records. Generally, you must keep your records that support an item of income or deductions on a tax return until the period of limitations for that return runs out.

The period of limitations is the period of time in which you can amend your tax return to claim a credit or refund, or that the IRS can assess additional tax. The below information contains the periods of limitations that apply to income tax returns. Unless otherwise stated, the years refer to the period after the return was filed. Returns filed before the due date are treated as filed on the due date.

Note: Keep copies of your filed tax returns. They help in preparing future tax returns and making computations if you file an amended return.

1. You owe additional tax and situations (2), (3), and (4), below, do not apply to you; keep records for 3 years.

2. You do not report income that you should report, and it is more than 25% of the gross income shown on your return; keep records for 6 years.

3. You file a fraudulent return; keep records indefinitely.

4. You do not file a return; keep records indefinitely.

5. You file a claim for credit or refund* after you file your return; keep records for 3 years from the date you filed your original return or 2 years from the date you paid the tax, whichever is later.

6. You file a claim for a loss from worthless securities or bad debt deduction; keep records for 7 years.

7. Keep all employment tax records for at least 4 years after the date that the tax becomes due or is paid, whichever is later.

We’ve also published a ProNetwork News issue on this topic, titled Document Retention and Disposition: A Key Element of a Design Professional Quality Control Manual. If you have questions about document retention or other risk management-related issues, don’t hesitate to call on your local a/e ProNet broker!

Disclaimer: As with all posts on The ProNet Blog, this post is not intended to convey legal advice. Readers in all cases should engage competent legal counsel with respect to particular issues, contracts, and disputes.

a/e ProNet Holds Spring Meeting in Trendy Austin

By Lynda

Every spring, our members gather to network with one another, as well as to meet with representatives from the top-tier professional liability insurance providers. While our fall meeting is always held in Chicago, our spring meeting changes locations each year. For 2015, the choice was clear: trendy Austin, Texas!

10167978_10206206928070756_4679841597472695152_n — Above: Our crew enjoys the southern cuisine and atmosphere at Threadgill’s

The three-day meeting wraps up today, and our members will scatter back to their respective states, ready to assist their clients, newly equipped with the latest industry intelligence.

Are you a design professional with an insurance-related question? Get in touch with your local a/e ProNet broker today!

To Report or Not To Report? A Potential Claims Question…

By Lynda

Before a design professional decides whether or not to report a professional liability claim, or circumstance out of which a claim might arise, he or she must understand the definition of a claim, circumstance and what is required of them under their policy. The pros and cons of reporting or not reporting a claim are more fully explored in this Practice Notes.

Why Firms Neglect to Report Claims

From an insurance provider’s point of view, it seems that design firms faced with a claim (or a potential claim) too often come close to jeopardizing their professional liability insurance (PLI) coverage. Many firms resist calling their insurance provider to report the matter or ask for advice. Their reasons tend to fall within one of four categories:

Ignorance. They do not realize what their policy requires of them when they are presented with a claim or possible claim.

Fear. They fear the black mark on their claim history more than they fear the claimant.

Denial. They believe that ignoring the problem will produce the best result.

Resolve. They have read their policies, understand the risks, embraced that the issue exists andafter this careful analysis, choose not to report.

Know Your Terminology

Claims

It is critical that insurance policyholders understand their duties, responsibilities, and benefits under their PLI contract. One of the duties is to report all claims promptly.

What defines a claim? Most policies refer to it as a “demand for money or services.” So the telephone call from the angry client asking you to pay for damages they believe they have suffered as a result of your professional services would rise to the definition of “claim” under most policies.

Why is this definition important? Remember, you must report claims promptly. Failure to meet your obligations under the insurance policy may jeopardize your coverage.

Possible claims

It is important to know how your insurance policy defines a “claim” versus a “possible claim.” Possible claims typically do not rise to the definition of “claim” but could become one. Policies generally define possible claims as “a circumstance from which you reasonably expect that a claim could be made.”

Are you required to report these instances to your insurance company? Maybe. Most policies read, “if you report a circumstance,” but some state, “you must give written notice.” The circumstance provision in most policies goes on to say that if you follow the reporting requirements, “then any claim that may subsequently be made against you arising out of such circumstance shall be deemed to have been made on the date the insurance company received written notice of the circumstance.”

With some policy forms, firms have a fair amount of discretion on whether to report a “circumstance,” unlike the requirement that you promptly report all claims. Keep in mind that most PLI policies for design firms are claims-made, which means that insurance cove rage is not retroactive to an unreported occurrence. Continue reading “To Report or Not To Report? A Potential Claims Question…”

California Supreme Court Rules Against California’s Architects in the Beacon v. Skidmore Owings Case

By Lynda

The closely watched California Supreme Court case of Beacon Residential Community Association v. Skidmore Owings and Merrill et. al. has been decided, and the opinion is bad news for California Architects. The Court held that architects owe a duty of care to future homeowners in the design of residential buildings where the architect is a principal architect on the project, meaning that the architect is not a subordinate to other design professionals.

Case background and procedural history

As a refresher, this case involved the design and construction of residential units in the Bay Area of California. Originally held as apartments, the units were converted by one of the developers into condominium units. After completion, the condominium association filed a lawsuit against the original developers, contractors, and designers alleging a long list of construction and design defects. Among the issues was a complaint that the individual units did not include air conditioning and that the quality of the windows used was so deficient that the individual units experienced excessive heat gain, making them unlivable.

Skidmore Owings and Merrill (“SOM”) and HKS, Inc. (“HKS”) were the architects for the project. In reliance on past case law in California, SOM and HKS filed a motion in the trial court arguing that they did not owe any duty of care to the condominium association because neither SOM nor HKS had contracted with that entity. The trial court granted that motion. The intermediate appellate court reversed that ruling, holding that under other California law, SOM and HKS in fact did owe a duty to subsequent owners who were foreseeable even though SOM or HKS did not contract with them. This created an arguable conflict between cases, and thus the California Supreme Court accepted the case for resolution.

Our firm was privileged to file an amicus brief on behalf of the American Institute of Architects and the American Institute of Architects, California Council, arguing that architects should not be held to owe a duty to downstream owners with whom the architect did not contract. Continue reading “California Supreme Court Rules Against California’s Architects in the Beacon v. Skidmore Owings Case”

Construction Phase Services: Considerations for a Successful Outcome

By Lynda

The construction phase is a dynamic time of a project and a design professional’s involvement is significant from a risk management perspective since it allows the design professional the opportunity to provide input during the construction of the project. Since no designs are perfect (and, moreover, are not expected to be perfect to still meet the standard of professional skill and care), all designs require some level of interpretation that is best done by the design professional who created them. During construction, the design professional can visit the jobsite to determine if construction is proceeding in general accordance with the plans and specifications and clarify the design intent when necessary. This article addresses issues design professionals should consider if they provide services during this phase.

Do you have the resources?

The firm must have sufficient staff to devote to this important phase of the project. The services during this phase require experienced professionals who know how to handle themselves on the jobsite and how to successfully complete tasks in the office. If junior professionals perform construction phase services, the firm must ensure senior professionals are available to (and actually do) mentor the junior staff. A successful mentoring program requires regular and meaningful communication between junior and senior staff who need to be proactive to nurture the mentoring relationship. Mentoring is a two-way street: it will not be effective if busy senior professionals do not devote time to advance junior professionals’ development and junior staff must take the initiative to seek out senior staff for guidance.

What does your contract say?

Industry standard documents have relatively balanced language regarding the construction phase. However, design professionals are often faced with a client-

proposed document that may not include appropriate language for the design professional’s involvement in the construction phase. Continue reading “Construction Phase Services: Considerations for a Successful Outcome”

The Design Professional in the Age of BIM: Things that change; things that don’t.

By Lynda

Seen any changes the past thirty years in the delivery of professional design services? Sure, you have—particularly in the area of construction documents. Raised stools and drafting tables, pounce, and lead-darkened calluses on the middle finger of the draftsmen have, for the most part, yielded to CAD. Although CAD’s promise of error-free drawing may have proven elusive, many of its other promises have been fulfilled. Some even appear understated in hindsight—in part because CAD and the Internet seem to have been made for each other. Their combined effect reduces trying to list all the ways CAD has changed project delivery to a futile exercise.

Like CAD in the ‘80’s, BIM seems to hold similar promise today—a fact not lost on contractors, A/E’s, and project owners alike. Digital models are more-and-more often offered or requested as “deliverables.” And multiple models for the same project are not uncommon—as building team participants explore their usefulness at various stages of design and construction. Some models are used much like enhanced CAD construction documents, provided and controlled largely by the A/E. But many incorporate data contributed by sources other than licensed design professionals, including suppliers, fabricators, contractors, and subs. Not surprisingly, many contractors and construction managers view BIM as a means for carving out an increased share of the project delivery pie—and are taking full advantage of it as both a marketing and performance tool. Some of them have even become the primary creators and custodians of digital models. Of course, that is not altogether unnatural. After all, it’s hard to ignore a tool that can show what will be built—and also to be useful in actually building it. Continue reading “The Design Professional in the Age of BIM: Things that change; things that don’t.”

Construction Contacts, Design Professionals & The Standard of Care

By Lynda

Does utilizing construction contracts for design services impact my common law Standard of Care?

Using a construction contract for design services may well alter a design firm’s Standard of Care, particularly if the construction contract contains warranties or guarantees. Warranties and guarantees may be found in numerous forms. They may include (but are not limited to) construction costs not exceeding original estimates, project completion by a specific date, time of the essence clauses, the design meeting the project objectives, penalties for project delays, construction safety responsibilities and other obligations normally the contractor’s responsibility. The common law standards for a design professional do not require the design professional to “warrant or guarantee” their design services, only that the design professional meet a standard that a prudent professional would perform with comparable education, training and experience in the same area of expertise and locale where the services are being rendered. HOWEVER, if a design firm AGREES to the increased obligations of a construction contract or any owner drafted agreement, in all likelihood, the design professional will be bound by the contract terms, regardless if the contract provisions impose responsibility beyond the common law standard. Signing a contract with an elevated standard of care is not necessarily binding on the designer’s insurance company. Agreeing to warranties and guarantees as well as other “excluded” activities will mean the design firm will be “uninsured” in these areas and claims for allegations excluded by the policy form will have to be defended and paid, if found negligent, by the design firm.

For more, related Frequently Asked Questions and Answers, visit our FAQ page.

a/e ProNet’s Fall Meeting Kicks Off in Chicago

By Lynda

Dozens of a/e ProNet members from across the country are gathering in Chicago this week for the annual fall meeting. They will be joined by representatives from several top tier professional liability insurance companies and a few major design industry organizations, including the AIA, NSPE, and ACEC.

Over the course of three days, members will receive presentations from the following insurance carriers: Beazley, Ironshore, HCC, Victor O. Schinnerer, Axis, Catlin, Hanover, RLI, All Risks, Liberty, Travelers, Navigators and Arch. These presentations will help inform the specialist brokers of a/e ProNet about industry trends, policy language changes, new coverage opportunities, and the like. It will also give our members a chance to ask questions and make suggestions pertinent to their own clients.

Along with insurer presentations, there will also be ample opportunity for the brokers to network with one another, alerting the group to trends around the country and problem solving in the collective.

To open the week, the Board of Directors will meet, and to close, Kent Holland of Construction Risk will present to the membership on the second edition of a/e ProNet’s Risk Management and Contract Guide for Design Professionals.

Construction Observation: Important Risk Management Service

By Lynda

Construction observation is a powerful weapon for architects and engineers (A/E) in their risk management arsenal. Certain clients understand the benefits when A/E firms offer construction phase services. However, driven by slow economic conditions, many clients are asking firms to do more, with less, including reducing or eliminating construction phase services. Other clients decide they will administer the construction contract themselves or decide to use a third party instead of the A/E firm. Clients have also held the A/E to a higher standard of care when providing construction observation services. How do these actions affect A/E firms?… It significantly increases the A/E’s risk and liability exposures.

Construction Phase Risks

Details in design documents cannot anticipate every contingency that may occur during the construction phase. If the A/E firm of record is not retained to provide clarification of the plans and specifications the risk of misinterpretation of the contract documents increases. Bad decisions can lead to project confusion, delays, increased costs, disputes and claims between the owner and the A/E.

The exposure of the A/E is increased due to certain owners and contractors asserting that the designer has a similar responsibility of the contractor for discovering all defects on the project. Based on this distortion and unrealistic expectation of construction observation services, owners and contractors have stated the A/E should be a guarantor of the contractor’s work. These expectations dramatically increase the A/E’s standard of care and risks associated with construction phase services. Court decisions have ruled in Owners’ favor holding that the A/E has a duty to guard the owner against all non-conforming work on the project, although much of that work was completed when the firm was not present on-site. Members of the plaintiff’s bar continue efforts to hold the A/E accountable for this higher standard of care for construction phase services. Continue reading “Construction Observation: Important Risk Management Service”