ProNetwork News

There are two types of design professionals: those who have been stiffed by clients and those who will be. This pithy truism leads to another: obtaining payment for your work is your professional responsibility. Suing for unpaid fees is not equivalent to securing payment in the first place as the mire of litigation will assuredly squander the project’s original profitability. For the discerning design professional, the following is a best-practices guide for ensuring full and timely payment.

It is a fact of doing business in the United States: Lawsuits happen. Regardless of whether the action has any merit, lawsuits are expensive to deal with, damaging to reputations and draining to a business and its executive team. Small to mid-sized private companies, including design firms, can specifically attest—litigation is never a small or inconsequential matter. Any business, regardless of the sector they are in (i.e., design, construction, manufacturing, etc.), can find itself embroiled in a dispute.

A federal district court in Wisconsin held that the contractual liability exclusion of a professional liability policy means that the policy only covers third party claims against an engineer and affords no coverage for claims against the engineer by its own client. Crum & Forster persuaded the court that the “contractual liability” exclusion of the policy meant no claim that arises out of contractual obligations is covered under the policy, even if the breach of contract claim was based on negligent acts, errors and omissions.

Over time, almost all design firms develop documented programs in a sincere effort to improve design quality. Some programs are voluminous in their content. Others are simple checklists intended to guide the firm’s efforts toward quality. The effectiveness of quality programs, however, does not succeed or fail based on page count or never-ending check lists but on day-to-day implementation. This is never more pronounced than when faced with a professional liability claim. Once a claim is filed, you can expect that opposing legal counsel will demand the production of your quality program. Then, and possibly only then, will you discover that your quality program may be more of a liability than an asset.

Bruce Furukawa’s update of John Lakamp’s 1996 newsletter on the topic of jobsite safety.  Originally published through Professional Practice Insurance Brokers, Inc. (PPIB, Inc.)