Tag: Claims

ProNetwork News: Private Arbitration – A better way to resolve construction disputes?

By Lynda

The November issue of ProNetwork News focuses on explaining the benefits of arbitration. The author, Melissa Dewey Brumback, is a litigation partner at Ragsdale Liggett PLLC of Raleigh, North Carolina. The bulk of her practice consists of representing architects and engineers in construction-related claims including construction administration and management, plan defects, testing failure claims and delay claims.

The following is an excerpt from Private Arbitration: A better way to resolve construction disputes?:

Architects and Engineers are very familiar with the concept of arbitration of construction disputes. The three main standard sets of form documents – AIA, EJCDC, and ConsensusDOCS, – all contemplate resolving disputes outside of a courtroom. In the past, the default tribunal was arbitration, and, in the case of AIA documents, arbitration through the American Arbitration Association (AAA).

AAA arbitration is, by and large, successful. The tribunal understands that construction disputes are not like typical breach of contract cases, and that individuals with specialized training and knowledge will likely better understand industry norms and terminology. Leaving such concepts as Requests for Information, Construction Change Orders, Construction Change Directives, Construction Administration v. Construction Management, Acceleration, Critical Path and other industry terms to a lay jury is often deemed unwise. By utilizing AAA arbitration, the parties can instead get a panel of industry experts to hear their case and, presumably, the matter can be dispensed with much more quickly and cheaply than traditional courtroom litigation.

However, if you have ever had a chance to participate in a full AAA arbitration, you know that its benefits come with costs: hefty filing fees, inflexible coordinators, uncertain evidence rules and more chance of a panel “splitting the baby.”

What is the best venue, then, for construction disputes? That depends on the size of your project, the nature of the dispute and the jurisdiction you are in. However, one option that is being used more and more is private arbitration.

Private arbitration can either be negotiated up front, during contract drafting, or after a dispute has arisen. In fact, I have even gotten opposing counsel to agree to private arbitration after they have filed the lawsuit.

Click here for the full-length PDF version of this article.

ProNetwork News is the latest value-added resource produced by a/e ProNet. Each monthly edition includes an informative, timely article relevant to the design industry and authored by an industry expert. Contact your local a/e ProNet broker for early access to these excellent newsletters.

What is Errors & Omissions insurance?

By Lynda

And why should an architect or engineer purchase Errors & Omissions insurance?

Also known as Professional Liability insurance or Malpractice insurance, an Errors & Omissions (E&O) insurance policy provides coverage to defend and indemnify a professional firm against claims alleging negligent acts, errors or omissions in the performance of professional services.

That’s a mouthful, but it sounds more complex than it is. Let’s break it down.

There are several reasons an architecture or engineering firm should purchase Professional Liability insurance:

Defense: Any project can give rise to a claim. Even if your firm employs an excellent risk management strategy, it is vulnerable to being named in a lawsuit. In that case, you’ll need to defend your firm against allegations of negligence. The cost of that defense can mount fast, even if you’re correct and your firm wasn’t in the wrong. A Professional Liability policy covers the cost of defense, along with the indemnity, as described below. (If you have the option to purchase a First Dollar Defense endorsement from your insurance company, you won’t be required to pay your deductible unless the insurance company ultimately pays a settlement payment on your behalf.)

Indemnity: In the event that your firm is found to have been negligent, and that the firm’s negligence gave rise to the claim, your Professional Liability policy will step in and cover your firm for the damages you’re legally obligated to pay, up to the policy limit. Note that, in most cases, defense costs erode the policy limit. Having adequate limits to cover both defense and indemnity is important.

Of course, another reason an architect or engineer should purchase Professional Liability insurance is that most project owners now require this coverage. If you’re in such a position for the first time, you probably have questions about the appropriate limits, deductibles, endorsements, etc., for your firm. The a/e ProNet website offers extensive resources prepared to answer your questions. As well, we can put you in contact with your local a/e ProNet broker. Our members are Professional Liability specialists with extensive experience working with design professionals. They are eager to help you navigate the process of purchasing Professional Liability coverage and appropriately protecting your firm.