Blog Archives - Page 6 of 29

Design Professionals and the Give-and-Take of “Standard Contracts”

By Lynda

The word standard implies many things. A bar to be cleared; a rubric to be followed. But for design professionals, the word becomes tricky when applied to contracts. Project owners often want to keep things simple by requiring so-called Standard Contracts for all parties. This is a problem for architects and engineers, especially from an insurance perspective.

Construction contracts cause problems for design professionals.

The following are a few Frequently Asked Questions we see from architects and engineers on this issue:

My project Owner insists on using their own contract for hiring my professional services. They are adamant this is a Standard Contract. How should I respond?

There is no such thing as a Standard Contract. Be sure to read each contract submitted by your clients carefully. You need to understand both the client’s expectations and your firm’s rights and responsibilities. It is a good idea to have all owner-drafted agreements reviewed by your attorney and/or insurance broker. This will help to determine whether you are accepting responsibility beyond what common law would hold you to in the absence of the agreement. If, for example, you agree to accountability beyond the protection afforded by your professional liability insurance, that’s a problem.

When I perform professional services for a Contractor in lieu of an Owner, should I be concerned?

Yes. Construction contracts are not meant to be used in this arrangement; they are not designed to meet the needs of the design professional.

What are some of the problems with using “construction contracts” for design services?

Construction contracts are problematic for design professionals. A General Contractor’s contract with a project Owner includes certain requirements (e.g. means, methods, procedures, sequences, safety, etc.). These requirements trickle down to construction subcontractors the verbiage of construction contracts. Beyond that, none of these requirements meet the test of what a design professional should required to do on the same job.

Contract document libraries available via the AIA and EJCDC can be a good place for design professionals to begin. These are standard in the sense that they are templates. However, it’s still important to seek individualized guidance from your attorney and/or insurance broker.

What are some of the other problems with utilizing “construction contracts” for design services?

Most construction contracts contain warranties/guarantees, and some have performance standards. To our knowledge, all professional liability insurance policies for design professionals exclude coverage for warranties/guarantees and (likely) performance standards. Remember: if you commit your design firm to more responsibility than the law expects of you, your insurance policy cannot protect you the way that it should.

We hope you’ve found this helpful. As always, be sure to contact your local a/e ProNet broker if you have further questions.

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.

Demanding General Contractors and How to Meet Them Halfway

By Lynda

Some of the most frequently asked questions we hear are triggered by the disparities between the insurance coverage available to design professionals and the demands made for coverage by general contractors and their standard contracts.

This is a nuanced area, and you should call your local a/e ProNet broker if you have specific questions. In the meantime, here are a few quick answers to the biggest FAQs concerning this issue:

Is it wise of General Contractors to require professional subconsultants to sign their usual sub-contract form?

No. Contractors that require the use of the same contract form used for construction sub-contractors may unwittingly void the precise coverage they are seeking from their design professional. Professional Liability (Errors & Omissions, or E&O) policies for design professionals typically exclude warranties and guarantees, which are generally an integral part of construction sub-contracts. If the design firm “agrees” to the warranties and guarantees or any other responsibility excluded by their professional liability policy, the design firm will be assuming the defense costs and payment obligations if an award is granted by the courts.

The General Contractor has requested to be named as an “Additional Insured” on my professional liability policy. Can I accommodate this request?

It is not a good idea to name the contractor as an additional insured in the sub-consultant’s design E&O policy, because an “Insured vs Insured” exclusion exists in virtually all design E&O policies. If the contractor believes he has a cause of action against his subconsultant design firm, this exclusion will eliminate coverage for both the contractor and the design firm.

How can the General Contractor protect themselves?

The General Contractor may purchase Contractor’s Professional Liability insurance. This will protect the General Contractor from vicarious liability claims from third parties and also solves the problem of the “Insured vs Insured” exclusion that would apply if the contractor brings an action against the subconsultant design firm, when named as an additional insured. Another benefit is a separate set of insurance limits. The General Contractor would have their own set of insurance limits that would not be subject to dilution or reduction from other claimants against the design professional’s E&O policy covering their general practice.

Why would the General Contractor need Professional Liability coverage?

Several reasons:

The General Contractor has the same “vicarious liability” for the negligent acts, errors or omissions of their professional subconsultants as they do for the non-professional subcontractors.

The General Contractor cannot rely solely on the hold harmless indemnity clause in the contract document. The hold harmless may not be enforceable in certain jurisdictions because of the language of the indemnity clause.

The subconsultant may not have sufficient insurance or their policy limits may be reduced or exhausted from other claims.

The subconsultant’s policies may be cancelled by the carrier giving notice or for non-payment of premiums. The General Contractor is then left with a false sense of security if they rely on the general liability insurance of the subconsultant, which excludes professional design activities and responsibilities.

Meeting halfway, in this case, really involves helping everyone acquire appropriate coverage. If you are a General Contractor in need of Professional Liability (E&O) insurance, or if you are a design professional who needs someone to explain all this to a General Contractor demanding such ill-advised insurance/contract decisions, please don’t hesitate to call on us.

More answers to Frequently Asked Questions can be found on our FAQ page.

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”

Farm-to-Table Community–The Cannery–Wins Gold Nugget Award

By Lynda

The Cannery–a master-planned, “farm-to-table” community in Davis, California featuring neighborhoods joined by beautiful sets of trails and bike paths–has received the Gold Nugget Award for the Best Residential Housing Community of the Year. Congratulations to a/e ProNet client Jeffrey DeMure + Associates, an integral part of the outstanding team of design professionals responsible for the win!

Shout-out Credit:

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

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.

Commercial Auto Policy Myths

By Lynda

Company cars. Employee drivers. MVRs. Hired and Non-Owned Auto Liability.

Commercial auto insurance is an important coverage for design firms, and it’s also a deceptively simple one. In a short article, a/e ProNet member Walker & Associates Insurance urges design professions to be “aware of the top commercial auto insurance myths. What you don’t know can cost you.” For example:

MYTH: Your insurance covers all employees driving company vehicles.

Many commercial auto insurance policies cover only employees who are specifically named on the policy. When in doubt, check it out before handing the keys to an employee. According to a recent study from the Insurance Research Council, after a period of decline, commercial vehicle personal injury protection claims are on the rise. Should your company vehicle become involved in an accident resulting in injury, expect to pay more to settle that claim if it’s not covered by insurance. — Read the rest of the Walker & Associates Insurance post here

You can find an overview of commercial auto insurance, along with other Typical Coverages for Design Professionals, on our website. If you have additional insurance-related questions, don’t hesitate to call your local a/e ProNet broker.

Are Hackers a Threat to My Design Firm?

By Lynda

Hackers make headlines daily with targets ranging from major Swiss banks to Minecraft users to German nuclear power plants. But what are the risks to architects and engineers?

Professional Liability carrier Victor O. Schinnerer urges design professionals to Take Cyber Liability Exposures Seriously in a recent blog post:

Cyber liability problems that have disrupted firm operations often are based on one of three vectors:

— insiders who are dissatisfied or recognize their ability to tap firm assets and use that access for harm or personal profit;

— past employees who either take digital assets with them or to enact revenge against their former employers corrupt firm systems and information; and

— hackers who know that confidential project data is vulnerable and hold digital information hostage until a ransom is paid.

Hackers Can Wreak Havoc on a Firm

Although internal threats cause many cyber liability breaches, a malicious outsider is one of the greatest fears of professional services firms. A hacker could cause data inaccessibility through alteration or destruction. A firm would lose intellectual property and no longer be able to meet contract objectives and deadlines. Attackers who gain access to a firm’s data can encrypt it using ransom-ware and extort payment to regain access to information. Firms that do not properly preserve digital assets through robust back-up systems often have no alternative but to pay the ransom.

Construction projects today are increasingly dependent on digital technology. The adoption of BIM and the increasing use of digital technologies in designing, constructing, and operating buildings and infrastructure are transforming the way the industry works. The concept of collaborative work through the sharing and use of detailed models and large amounts of digital information requires that parties be aware of vulnerability issues and take appropriate control measures. Improper access controls could lead to an attack severely disrupting progress on a project, causing delays or remedial work that could lead to significant claims from owners, lenders, or other stakeholders. And if confidential information on the structure or systems of projects is accessed by unauthorized parties, the safety of the owners and users of the buildings or infrastructure could be put at risk.

It is possible to insure against these vulnerabilities. Schinnerer’s Cyber Protection Package is one example of such coverage. Here are a few others:

Give your local a/e ProNet broker a call to discuss your options today.