Category: Affiliates

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”

A Reasonable Contract

By Lynda

Risk Allocation is an important part of the contract negotiation process for Architects, Engineers, and other Design Consultants.

“In allocating risks by contract terms and conditions, the goal is to allocate the specific risks to the party with the best ability to manage them. Although a contract can assign ownership of risks to any party, there can be serious adverse consequences if a party assumes risks it can’t manage. A design firm, for example, isn’t in a position to manage site safety responsibilities that most appropriately belong to the construction contractor. Despite the practicalities, however, of who is actually in the best position to manage site safety, if the design firm agrees to such responsibility by contract, the designer may be found liable for site safety by courts and possibly the Department of Labor.

“To be reasonable, a contract must be reasonable for all parties involved. If a contract attempts to shift all the risks to one party or the other, it will create problems on the project. A one-sided contract is likely to cause hard feelings during contract administration. It may also increase the likelihood of claims turning into litigation. As a practical matter, this means parties are better served by negotiators who don’t try to negotiate a contract that unreasonably shifts risk to someone who can’t logically manage it or accept legal responsibility for it. Such risk transfer will cause problems in the long run, and may even create uninsurable losses and claims.

“In evaluating who the various risks should be assigned to, parties can develop a table or list of responsibilities and risks to more easily see which risks most logically belong to each party. For example, site safety typically falls to the construction contractor. Easements and rights-of-way, as well as site data, including geotechnical information, may logically be allocated to the project owner. Responsibility for exercising due care in the planning and designing of a project generally falls to the design professional performing those services.

“Problems begin when any of these risks are allocated to the party that is not technically responsible for the related services. Unless you are in a position to manage a particular risk, it is not appropriate for you to accept contractual liability for that risk.”

This is an excerpt from a/e ProNet’s Risk Management & Contract Review Guide for Design Professionals (© Copyright 2006; a/e ProNet & J. Kent Holland, Jr.), one of the many resources ProNet Member Broker’s provide to their clients. A digital version of the full guide is available for purchase ($19.99). Contact a/e ProNet today to get in touch with your local ProNet broker.

About the Author: J. Kent Holland is a construction lawyer located in Tysons Corner, Virginia,  (formerly with Wickwire Gavin, P.C. and now with Construction Risk Counsel, PLLC) representing design professionals, contractors and project owners. He is founder and president of a consulting firm, ConstructionRisk, LLC. He is also the author of Contract Concerns, a series of articles available on our website here.

a/e ProNet at SDA’s EDSYMPOSIUM12

By Lynda

Longtime design industry advocate, a/e ProNet, announced this week that ProNet President Leslie Pancoast will make a presentation at EDSYMPOSIUM12, the 42nd annual education conference hosted by the Society for Design Administration (SDA), an affiliate of The American Institute of Architects.

For more than 50 years, the SDA has promoted education and best practices for design firm administrative personnel. EDSYMPOSIUM12 will take place from May 2-5 at the Embassy Suites Hotel in Portland, Oregon. a/e ProNet will sponsor Saturday’s luncheon, where Pancoast will make a two-fold presentation: Introduction to a/e ProNet and Professional Liability—Coverages, Nuances and Endorsements. SDA members will learn more about a/e ProNet and its active support for the design industry, as well as receive a brief overview of professional liability coverage and the standard endorsements available from most professional liability insurance providers for architects and engineers.

About Leslie Pancoast

Pancoast has specialized in the insurance needs of architects, engineers and other design consultants for more than 20 years. She is a Managing Partner of Insurance Office of America (IOA), one of the largest privately-held insurance agencies in the country. She is also the Branch Manager of IOA’s San Francisco Bay Area office, operating in California as IOA Insurance Services, which she opened in 2005. Pancoast has earned the designations of Commercial Insurance Counselor (CIC) and Registered Professional Liability Underwriter (RPLU). She has been an active board member of a/e ProNet since 2005, and currently serves as the membership’s President.

About a/e ProNet

Established in 1988, a/e ProNet is a national network of specialist brokers. The group focuses on providing educational resources and risk management services to its members’ clients. Its member brokers represent a combined annual professional liability premium volume exceeding $300 million, giving top-tier insurance companies a major incentive to work closely with a/e ProNet to enhance their various a/e programs.

As well, a/e ProNet makes a wide range of Risk Management resources available to all design professionals via their website, including ProNet Practice Notes, Guest Essays, ProNetwork News, Contract Concerns, Typical Coverages, and Frequently Asked Questions.

a/e ProNet is excited about the opportunity to partner with the SDA in order to provide this value-added educational resource to design firm administrative personnel across the country.

Additional information is available about a/e ProNet by visiting their website, following them on Twitter, and/or Liking their Facebook page.