Our books and access to the courses are available for purchase on our website, but you can receive a discount for both by requesting copies from your a/e ProNet broker. (And if your broker isn’t an a/e ProNet member, call your local a/e ProNet broker today!)
• Compensate (someone) for harm or loss.
• Secure (someone) against legal responsibility for their actions.
Imagine a case where an engineering firm was found to have had an expensive duty to defend claims asserted against a developer, even after the engineer’s performance was judged not to have violated the professional standard of care. That was the decision three years ago, in the California Court of Appeals in UDC – Universal Development L.P. v. CH2M Hill. In fact, that case extended another one, decided two years earlier in the California State Supreme Court. (Crawford v. Weather Shield Mfg., Inc.). That decision held that the duty to defend was incurred the moment that the indemnitee (the party that the design firm was contractually bound to indemnify) tendered its defense to the design firm.
Candidly, the indemnity provision underlying the UDC v. CH2M Hill decision was long and rambling, repetitive, and ambiguous. That’s what opened the door to the expansive (and expensive) legal interpretation. The clear message to design professionals was: if you do not want to take on the extensive defense and indemnity obligations implied or required by statute and case law, you must be clear. Further, the longer and more confusing an indemnity provision is, the more likely it is to receive an expansive reading.
California architects can breathe a little easier. Filed June 3, 2013, the Court of Appeals decision in Brisbane Lodging, LP v. Webcor Builders, Inc.held that the section 13.7.1.1 of the 1997 AIA Standard Form of Agreement between Owner and Contractor is enforceable.
This is good news for Design Professionals, as section 13.7.1.1 shortens the statute of limitations period to four years and effectively abrogates the delayed discovery rule in California.
Per an announcement email recently received from Jacqueline Pons-Bunney, a partner at law firm Weil & Drage:
The case involves a contract between an owner and a contractor for the construction of a hotel. The clause at issue reads:
“any applicable statute of limitations shall commence to run and any alleged cause of action shall be deemed to have accrued in any and all events not later than such date of Substantial Completion.”
Substantial completion at the subject project was July 31, 2000. In early 2005, the owner discovered a break in the sewer line which caused waste to flow under the hotel. It was determined that the plumbing problem was a latent defect. Both the contractor and its plumbing subcontractor investigated the problem and attempted repairs. It was ultimately discovered that the plumbing subcontractor had installed ABS pipe rather than cast iron pipe for the sewer line, in violation of the Uniform Plumbing Code. The owner filed a lawsuit in May 2008. Continue reading “California Court Upholds Contractual Statute of Limitations Provision in AIA Standard Form”
At its most basic level, risk management for design firms includes selecting and signing sound contracts. a/e ProNet’s Risk Management & Contract Guide for Design Professionals (2005) can assist with the specifics of this process.
An excerpt from Chapter 7, Some Do’s and Don’ts of Contract Language:
7.2 Words to Avoid
Certain words create the impression that the design firm has a greater duty or responsibility than required by the generally accepted standard of care and scope of services stated elsewhere in the contract. Some words that risk managers often advise the design firm to avoid using in their contracts to the greatest extent possible include the following:
“supervise contractor’s work”
“control contractor’s work”
“direct contractor’s work”
“guarantee or warrant either your services or the contractor’s work”
“certify that contractor’s work meets the plans and specifications”
“inspect contractor’s work to assure it meets the plans and specifications”
This risk management guide was previously out of print, but has since been re-released in electronic format. The book includes three updated optional AIA-approved continuing education courses! Visit the a/e ProNet Web Store to purchase and download your copy today! Also available is our most recent guide, Risk Management for Design Professionals in a World of Change (2009). If you have any questions about these resources, find your local a/e ProNet broker or Contact Us.
The March 2013 issue of ProNetwork Newsis the second installment of a two-part article; the author, Tim Corbett of SmartRiskexplains the origins and principles of project coverage and introduces the reader to two of the four main types of Project Insurance. For a recap of the first part, including details about types 1 (Project Professional Liability Insurance) and 2 (IPD Project Specific Insurance), download the full March issue, or, better yet,download the February 2013 newsletter here.
Now, let’s examine the remaining three types of project coverage.
3. Project Specific Insurance Limits
Sometimes, contracts demand that design professionals carry a higher limit than they usually do. This can occur on any kind of project, but is more common on larger, higher risk projects, and more recently, on public ones. One of the more common strategies for obtaining increased limits for a project is through a Project Specific Insurance Limit. This is provided by endorsement through your current practice policy insurance carrier.
Benefits and typical features of Project Specific Insurance Limits:
Provides a higher limit for the firm, for a specific project only.
Can be more cost effective than raising the limits on the entire practice policy.
Makes the cost of the project-specific limit a reimbursable expense.
Cautionary Points and Tactics:
Having a project specific increased limit may not always be the best strategy, and it may not even be available from your practice policy carrier. From an insurance company’s perspective, comparing construction costs to policy limits is part of the underwriting process. Construction value and requested limits may not be in line with the insurer’s potential exposure: those higher limits requested could place a target on the design firm’s back. The insurer doesn’t want to provide the higher limits that could be used as a cost recovery strategy.
Ensure that requested limits are in line with exposures and construction costs. For example, is it necessary to require a $5 million limit of professional liability insurance from a firm performing services on a $20 million project?
Contact the contract administrator, and state that your firm normally carries a lower professional liability limit than requested, and that it is consistent with industry practice. Inquire if your current limit will be acceptable.
* Include language similar to the following in your contract:
“The expense of any additional insurance coverage or limits requested by the Owner in excess of that normally carried by the firm shall be a reimbursable expense paid by the Owner.”
To find out more about types 4 (The Wrap-Up Policy) and 5 (Owner Protective Insurance Policy or OPIP), download the full March 2013 issue from our website.
About the Author: Timothy (Tim) Corbett is Founder and President of SmartRisk, a Pasadena, CA based consultancy with over 25 years of experience providing risk management and performance management solutions to Design and Building Professionals. Mr. Corbett holds a BS Degree in Security & Risk Management, MS Degree in Management; a degree in Environmental studies as well as concentrated studies in Architecture Design and is LEED accredited. For more information on this or other topics, visit the SmartRisk website or email Tim at tcorbett@smartrisk.biz.
Photo via Victor O. Schinnerer’s War Stories: Budget Buster
I shouldn’t need to buy insurance! I’ve never had a claim.
This is a common refrain from architects and engineers purchasing professional liability insurance for the first time. We hear you. There are lots of design professionals who feel this way. That’s why it’s important to recognize that insurance isn’t about punishing you for past claims; it’s about protecting you from future claims. Contractual insurance requirements aren’t merely expensive obstacles to bidding for a job; they’re supposed to protect the individual parties from the far more expensive burden of an uninsured professional liability claim. And, like it or not, industries like Architecture and Engineering are rife with potential claims.
Oh yeah? Like what?
Don’t just take our word for it. Check out this library of War Stories and Claims Scenarios from Architects, Engineers, Surveyors & Consultants, an excellent resource offered by Victor O. Schinnerer, one of the leading Professional Liability insurance companies. These are real life claims stories. Here you can read through scenarios which happened to other firms, often in spite of their best efforts to avoid such things! While the names have been changed, details are included. In each case, you’ll find out what the mistake was. How it was made. How much it ultimately cost. How it could have been avoided.
A couple of examples from the War Stories library:
ABC Engineers provided design services for a residential project. The owner obtained a construction loan from a bank for $2.7 million; believing he could obtain additional funds from the bank if needed. As construction progressed, they expended the $2.7 million budget before the project was complete. The bank believed $2.7 million was adequate to complete the project and denied the owner’s request for an additional $1.3 million. The owner could not obtain additional funds and the contractors stopped working, leaving the project incomplete. Read more at Schinnerer’s website…
Gerard Coins Architecture, a sole proprietor, was retained by a housing authority to provide architectural design for Blanket Apartments, a low income housing development. Gerard Coins Architecture also provided mechanical design, which was permitted by state law. The architect’s design called for standard, 30 gallon water heaters but the owner wanted electric, tankless water heaters instead. The architect checked with a supplier and based on verbal information, sized the water heaters for the apartment units.
After the apartments were built, it was discovered that the water heaters did not supply enough hot water. The architect contacted the water heater manufacturer who told him the water heaters were intended to be used at a source, such as a sink or bathtub—not to heat the water for an entire apartment. Read more at Schinnerer’s website…
Homer Watkins Engineering, a civil engineering firm, was retained to provide a limited inspection and design report for a historic building. Several years later, they provided an inspection report for the sale of the same building.
A painting contractor employee, who was working on the historic building, fell three stories sustaining serious injuries after the railing collapsed on a balcony he leaned against. The painting contractor employee filed suit claiming he was permanently, partially disabled and disfigured. After filing suit against a number of parties, Homer Watkins Engineering’s inspection report was found during discovery and the suit was amended to add them.
The painting contractor employee contended that while Homer Watkins Engineering’s inspection report put the new owner on notice that the railing was too low and posed a safety hazard, it did not go far enough in warning the owner that it should be fixed immediately. While it was felt the height of the railing had nothing to do with the fall, the defense counsel felt the inspection report should have been more detailed as it was dealing with a very old brick and wood building that may have had weaknesses requiring more investigation. Read more at Schinnerer’s website…
Protect yourself and your firm from situations like these by purchasing a Professional Liability policy tailored to the specific needs of design professionals. Our members are specialists in this field, so find and contact your local a/e ProNet broker today.
We wanted our 100th post here at The ProNet Blog to be something special! So, we decided to use it to give a much deserved shout-out to the a/e ProNet clients who were recently recognized by the AIA Committee on the Environment (COTE).
“The COTE Top Ten Green Projects program, now in its 17th year, is the profession’s best known recognition program for sustainable design excellence. The program celebrates projects that are the result of a thoroughly integrated approach to architecture, natural systems and technology. They make a positive contribution to their communities, improve comfort for building occupants and reduce environmental impacts through strategies such as reuse of existing structures, connection to transit systems, low-impact and regenerative site development, energy and water conservation, use of sustainable or renewable construction materials, and design that improves indoor air quality.”
While we, of course, congratulate all the winners of this important distinction, we are especially excited for the clients of our members, including Leddy Maytum Stacy Architects of San Francisco and Brooks + Scarpa of Los Angeles!
“Located at the edge of Oakland’s Chinatown, this new affordable senior housing transforms an abandoned site near a busy freeway into a community asset for disadvantaged or formerly homeless seniors while setting a high standard for sustainable and universal design. The high-density, transit-oriented project is one of the first new developments planned near the Lake Merritt BART regional transit station. The upper floor apartments respond to the character of the eclectic Pan-Asian neighborhood with colorful and varied porous facades that reflect their orientation. The south façade features an independent screen that provides shading, privacy and acoustical modulation while enlivening the view of passing freeway drivers.”
“This nearly net-zero energy live/work home and office was designed to function not only as a home and commercial office for both parents, but also as a private home for a large and growing family with several children. We sought to create a calm, relaxed and organized environment that emphasizes public space and changes the stereotype of a live/work home for a large family with young kids. Part private home and part business, the house is meant to serve as a place to entertain and a welcoming space for clients and teenagers. It was designed to incorporate sustainable design as a way of teaching a green lifestyle and the offices are purposefully integrated with the home, making both the house and office feel large despite their small combined area. Passive measures, such as a very tight building envelope, reduce energy demand by more than 50 percent. The 12-kW solar system produces 100% of it’s electricity needs.” Continue reading “2013 AIA Top Ten Green Projects List: a/e ProNet Clients Among the Winners!”
Architecture isn’t brain surgery, but it is a mentally demanding profession that requires input and effort from both sides of the brain. Wouldn’t it be cool to know how an architect’s brain works? Now you can.
“While the left brain pays attention to the patterns, measurements it also focuses on meeting deadlines, understanding building and design codes, paying bills , setting appointments and remembering them, “cleaning the refrigerator”, “smelling like vanilla” and going to “sleep at 10 p.m.”(apparently, architects and designers need their sleep).
“The right brain of an architect mainly focuses on the possibilities and potential of a new project and is easily excited by each option that surfaces. However, arriving late at every meeting or appointment, spending $200 on a pen, wearing a scarf in July and leaving sticky notes in the pocket are also some of the activities it controls.”
Explains a lot, right? In fact, I’m pretty sure Mom’s disapproving voice is an area of the brain not unique to architects! Ditto Needs more cowbell.
Partnering with aecKnowledge, one of the nation’s premiere sources of relevant and practical online continuing education for design professionals, a/e ProNet has sponsored a new video series on Project Delivery Methods.
This 5-part series is the culmination of a decade-long look at the exploration and evolution of alternative methods of project delivery. It will help you in your efforts to advise owners on making informed decisions about which project delivery option is most appropriate for each project. Choosing the most appropriate method helps align stakeholders’ goals relative to quality, schedule and cost control, decision-making and risk management, and leverages the skills, knowledge and resources available to each team member. Click here to watch a preview of this series, at no charge.
You will also earn 5 HSW Learning Units and, if you are an AIA member, your AIA credits will be automatically reported after you complete each course.
Purchase the courses in this series following these steps:
1. Register on the aecKnowledge website
2. Go to the Continuing Education module
3. On the right hand side, you will see Suggested Curricula. Click on Project Delivery.
4. Proceed to purchase each of the five courses.
If your insurance broker is a member of a/e ProNet, you are entitled to a 20% discount off of the lowest course prices available to anyone else. Contact your a/e ProNet broker today for the discount code.
Whether you are an architect, engineer, contractor, specialty consultant, owner, CM or advisor, these courses will enable you to make informed decisions about which project delivery method will best achieve your goals and, ultimately, create a better built environment. On behalf of a/e ProNet, we hope you find the Project Delivery Methods video series valuable.
