Contract Issues Archives - Page 7 of 9

Calling a Ceasefire in the Certificate of Insurance Wars

By Lynda

The following is an excerpt of the February 2013 a/e ProNet Guest Essay, Calling a Cease Fire in the Certificate of Insurance Wars. You may download the full PDF version of the newsletter on our website.

In war, events of importance are the result of trivial causes. – Julius Caesar

Battles about certificates of insurance can sour relationships and sow the seeds of discord with clients at the very beginning of a project. And they are becoming more and more common.

Here is a short history of a typical certificate war: The design firm is awarded a new project. Corks pop. The team assembles. Spirits and expectations are high. The first sign of trouble is a call or an email from the project owner’s certificate checker: Your certificate of insurance is not in compliance with the insurance requirements set forth in our contract. Please reissue. The design firm calls its broker, confident that this little paperwork glitch will be simple to fix. But there is bad news. This is not a case of a misspelled name or a typo. The certificate checker is correct: The design firm’s insurance program does not, in fact, comply with the contract requirements.

This is never a good moment, but the design firm rallies and asks how much it will cost to purchase compliant coverage. But then comes an even worse moment, when the broker explains that the contract requirements are impossible to satisfy. The coverage the owner wants is no longer available, is not available from a stable and financially-sound carrier, or, all too often, never was available at all. The design firm tries to make the owner see reason, but sometimes this drama ends with calls and emails to the design firm, its broker, or both, threatening to award the job to another firm if a compliant certificate is not produced today.

Even if the problem is eventually resolved, the bad impression created by this conflict can tarnish a design firm’s relationship with the owner before it ever gets a chance to shine.

How did we get here? How did a one-page summary of insurance coverage that, by its very terms, does not “amend, extend or alter” any insurance policy become the source of so much trouble? And what can design professionals do to avoid certificate rejections and the problems they cause? Continue reading “Calling a Ceasefire in the Certificate of Insurance Wars”

Veni, Vidi, Vici, Lis Pendens: I came, I saw, I got sued – Part 2 of 2

By Lynda

The following is an excerpt of Part 2 in this two-part series. In Part 1, author Eric Singer covered Veni (I went to the site) and Vidi (I observed for general conformance with design intent).

Lis Pendens – I got sued anyway

Sometimes observable deficiencies get missed, or the timing, relative solvency or insured status of the parties and plain old bad luck conspire to force you to defend your compliance with the standard of care. In tort claims (injuries, property damage or other calamities), most states have procedural mechanisms to apportion fault among the parties or to add parties potentially at fault. Contract lawsuits are different and an owner could choose to pursue the A/E and leave the contractor alone or to settle and join forces with the contractor. In contract cases, many jurisdictions make it difficult for an architect to pursue claims against a contractor without a direct contract. You can defend by blaming the contractor’s “empty chair” or try a more aggressive approach. The general conditions may provide you with some ammunition.

General Conditions frequently contain a warranty in favor of both the owner and the architect. The AIA A201 (2007), for example, provides “The Contractor warrants to the Owner and Architect that materials and equipment furnished under the Contract will be of good quality and new unless the Contract Documents require or permit otherwise. The Contractor further warrants that the Work will conform to the requirements of the Contract Documents and will be free from defects, except for those inherent in the quality of the Work the Contract Documents require or permit.” (A201 – 2007, §3.5). Interpretation of this provision and rights of the architect in these circumstances varies greatly state to state. If viable in your state, a warranty claim against the contractor may prevent the owner and contractor from settling cheap or joining forces against the design team.

To read about Vici, I conquered, visit our website where you may download the full PDF version of this October 2012 issue (and all previous issues) of our ProNetwork Newsletters.

About the Author: Eric Singer is a partner at Ice Miller, LLP. He concentrates his practice in construction law, with emphasis on the representation of architects, engineers, contractors, owners, and lenders as well as other professionals, in litigation and alternative dispute resolution of design and construction issues. Mr. Singer, who was awarded his J.D by the University of Chicago Law School, is a former Professional Affiliate Director of the American Institute of Architects of Chicago and is a member of multiple bar associations and design professional groups. Recently ranked as AV Preeminent by Martindale-Hubbell and listed in The Best Lawyers of America, Construction Law, by those peer-review organizations, Eric is an active speaker and prolific author on the subject of construction litigation and the liability of the design professional. Contact Eric Singer at: eric.singer@icemiller.com

Don’t forget to contact your local a/e ProNet broker if you have any questions!

4 Risk Management Webinars for Design Professionals in 2013

By Lynda

In 2013, Professional Liability insurance provider Victor O. Schinnerer will host independent subject-matter experts for four webinars, all geared toward Architects, Engineers, and other Design Professionals:

Employment Liability Issues in a Recovering Economy

February 13, 2013, 1:00 – 2:00 pm eastern

Thomas L. McCally, Esq., Carr Maloney, P.C., Washington, DC

Design firms face various types of employment liability issues during the normal course of business. However, the downturn and subsequent recovery of the economy have brought these issues to the forefront of concerns for design firms. An attorney expert in litigating design firm employment practices claims will discuss the issues firms need to recognize as the economy improves and firms prepare to staff-up for the recovery.

Business Models and Financial Opportunities in a Recovering Economy

April 10, 2013, 1:00 – 2:00 pm eastern

Michael O’Brien, ASA, Rusk, O’Brien, Gido + Partners, Washington, DC

From funding sources to procurement procedures, the financial environment for professional services has significantly changed since the pre-recession economy. Both in the public and private sectors, the rules, risks, and routes to financial success are different. Professional services firms need to adjust their business plans to remain viable and to benefit from the opportunities in a recovering economy. Specializing in solving the business management and ownership challenges of consulting firms, our expert will share thoughts on the needs and responses of firms in the new service environment.

Technology Risks for Design Professionals

September 11, 2013, 1:00 – 2:00 pm eastern

David J. Shannon, Esq., Marshall, Dennehey, Warner, Coleman, Goggin, Philadelphia, PA

Technology risks associated with the business operations and professional services of design professionals is not new. However, the increased use of building information technologies and collaborative delivery methods, such as integrated project delivery, may increase the exposure of firms to traditional technology risks, as well as introduce new risks. Join our discussion with an attorney expert in technology risks to learn what exposures design firms need to be aware of and how to manage those exposures.

Insurance and Legal Questions for the Collaborative Design Team

October 9, 2013, 1:00 – 2:00 pm eastern

Rebecca H. Farnum, Esq., Thompson & Bowie, LLP, Portland, ME

Building information modeling and integrated project delivery provide a platform through which all members of the design and construction team collaborate. As with all new technologies and delivery methods, there are important questions the collaborating team should ask to identify and respond to legal and insurance issues in the open transfer of information in a contractual arrangement of shared risk and reward. Our expert will discuss what types of questions the team should ask before formally entering a collaborative agreement.

Visit our website to download the full PDF version of the 2013 Victor O. Schinnerer webinar schedule.

Building Commissioning: Process Types & Definitions

By Lynda

Excerpted from the August 2012 issue of ProNetwork News:

Commissioning is a quality-oriented process for achieving, verifying, and documenting that the performance of facilities and systems meets defined objectives and criteria. It is a quality-based method that is adopted by the building Owner to achieve successful construction, and it is not intended to be an additional layer of construction or project management. When applied comprehensively, the purpose is to reduce the overall cost of a construction project and increase long-term value to the building owners, occupants, and users, better ensuring reliability of performance.

New Building Commissioning (Cx)

The purpose of New Building Commissioning (Cx) is to facilitate and verify proper system performance of a new building. The Process begins at project inception (during the Pre-Design Phase) and continues for the life of the facility (through the Occupancy and Operations Phase).

Why should Building Commissioning be done?

ASHRAE performed a study of 60 commercial buildings and found that more than half suffered temperature control problems, 40% had problems with HVAC equipment and one-third had sensors that were not operating properly. Amazingly, 15% of the buildings were actually missing specified equipment.

The Commissioning Process is intended to reduce the project capital cost through the first year of operation. It also reduces the life-cycle cost of the facility. By utilizing this process a fully functional, fine-tuned facility is provided, with complete documentation of its systems/assemblies, and with operators and maintenance personnel fully trained.

Building commissioning is of greatest value to the owner when it provides a means of continuously communicating their building systems criteria and rigorously verifying compliance with them, throughout the many phases of design and construction.

Prior to design, the Commissioning Authority (CxA) will assist the Owner in evaluating the facility’s requirements regarding such issues as energy conservation, indoor environment, staff training, and operation and maintenance. Continue reading “Building Commissioning: Process Types & Definitions”

Getting Paid For Design Services

By Lynda

The last few years have been challenging for many design firms. Adding fuel to this fire, many firms are having difficulty obtaining payment for their services. In a recent and ongoing SmartRisk Survey: 81% indicated trouble with getting paid. Successful account receivable programs do not have to be time consuming or daunting. By implementing some straightforward practices, a firm can implement an effective program that gets invoices paid on time along with maintaining a positive relationship with clients.

Establishing Financial Expectations. In an initial meeting with clients, explain in a clear and concise manner exactly what your services will be and the value you bring to the project, along with clearly stating your compensation terms. Your communication should be clear in establishing the financial expectations with the client. At this face-to-face meeting, you will obtain a sense of the client’s financial capability and ability to pay for your services. If you don’t get that warm and fuzzy financial feeling, this is the time to walk away.

Contract Agreement. The boundaries discussed at the initial meeting should be outlined in the contract agreement. Include a specific scope of services for the project, associated fees, expenses and cost of additional services. In basic terms, the agreement should explicitly state your client owes you money for services you will be rendering. The agreement should also specify the terms of payment, including any payment in advance of services. Continue reading “Getting Paid For Design Services”

a/e ProNet’s Annual Fall Meeting (Oct 3 – 5, 2012)

By Lynda

This week, 46 a/e ProNet members from 27 member agencies are expected to attend our annual meeting in Chicago, Illinois. Over the course of two and half days, twelve top-tier Professional Liability insurance companies will present to our membership. Each company will take this opportunity to announce policy form changes, new endorsements, and pricing expectations for the coming year; as well, they will alert us to industry trends surrounding claims and risk management.

Because a/e ProNet brokers are independent, that-is, not tied to any single insurance company, the insurance companies sending representatives to this event know that they are in competition for our business. It is in their best interest to make their programs as comprehensive and beneficial to our clients as possible. The companies attending this event include: RLI, Travelers, Victor O. Schinnerer, Liberty, Beazley, Catlin, HCC, Hanover, Navigators, Insight, All Risks, and AXIS.

Our Thursday night reception for members and insurance company representatives will be held at a new venue this year: The Grand Army of the Republic (GAR) Rotunda at the Chicago Cultural Center.

Our clients are architects and engineers, and we appreciate what they do today, as well as what they have created in the past. We chose the Chicago Cultural Center, opened in 1897, because it is “one of the city’s most popular attractions and is considered one of the most comprehensive arts showcases in the United States.” In other words, it’s beautiful! A Chicago landmark, located in the Loop, across Michigan Avenue from Millennium Park, the GAR Memorial consists of a large hall and rotunda in the north wing of the building. The hall is “faced with deep green Vermont marble, broken by a series of arches for windows and mahogany doors. The rotunda features 30-foot walls of Knoxville pink marble, mosaic floor, and a fine, stained-glass dome in Renaissance pattern by the firm of Healy and Millet.”

If you have questions about this meeting, or a question about a/e ProNet, don’t hesitate to contact us. You can also find your local a/e ProNet broker through our website.

Case Study: No Common Law Indemnification Duty Owed by General Contractor

By Lynda

No Common Law Indemnification Duty Owed by General Contractor to Project Owner for Subcontractor Employee Injuries Where GC Did Not Control and Supervise the Subcontractor’s Work

In a case whose principles apply to design professionals as well as general contractors, a GC was performing a build-out for a store tenant (not the project owner) and retained the services of a subcontractor for certain work. An employee of the subcontractor was injured by falling from a ladder, and the project owner sued the contractor for common law indemnification and contractual indemnification for damages for which the Owner had been found vicariously liable under the state’s statutory law.

Although the general contractor had not itself been found to be directly liable or vicariously liable for the subcontractor employee injuries, the property owners argued they were entitled to common law indemnification. They asserted the general contractor contractually assumed sole responsibility and control of the entire project, and had the contractual authority to (1) direct, supervise and control the means and methods of plaintiff’s work, and (2) institute safety precautions to protect the workers.

The Owner asked the Court to adopt a general rule that a party may be liable for common-law indemnification upon a showing that the party (i.e., the proposed indemnitor) either was actually negligent or had the authority to direct, control or supervise the injury-producing work, even if it did not exercise that authority. What the Owner asked to court to do was equate a party that merely has authority to direct, control or supervise the work with a party who is actively at fault in bringing about the injury suffered by the plaintiff.

The appellate court held that in the absence of proof of any negligence or actual supervision of a general contractor, the mere authority the general contractor has to supervise the work and implement safety procedures is not a sufficient basis to require common law indemnification of the project owner. McCarthy v. Turner Construction, Inc., 953 N.E. 2d 794, (New York, 2011).

Although the GC interacted with the subcontractor and the sub-subcontractor firm whose employee was injured, the GC had no supervisory authority over the sub-subcontractor’s work and it provided no tools or ladders to subcontractors that worked at the site.

No Contractual Indemnification

Citing case law that stands for the proposition that through a contractual indemnification clause, an owner who is only vicariously liable by statute may seek full indemnification from the party that is wholly responsible for the accident, the court found in this case that there was no direct contractual relationship between the project owner and the general contractor. The contract was in fact between the contractor and a store tenant of the project owner. In addition, the owner had no third party beneficiary rights under the contract between the contractor and the store tenant. For these reasons, the contractual indemnification claim was dismissed on summary judgment by the trial court, and that dismissal was affirmed on appeal.

This has been an excerpt of the June 2012 edition of ProNetwork News. Download the full PDF version of this newsletter to read more about Common Law Indemnification and the implications for design professionals.

About the Author: J. Kent Holland is a construction lawyer with the risk management consulting firm Construction Risk Counsel, PLLC, in Tysons Corner – Vienna, Virginia. The firm provides consulting services including: Contract Risk Management and Insurability Review; Change Order and Claim Preparation and Analysis; Insurance Risk Management; Insurance policy and endorsement review and drafting; and Risk Management Training. Mr. Holland is admitted to practice law in Virginia and Maryland and concentrates on construction and environmental law, insurance and risk management. For more information, call 703-623-1932 or e-mail Kent@ConstructionRisk.com. This article is adapted from one originally published in ConstructionRisk.com Report, Vol. 14, No. 5 (May 2012). and is used here with permission.

Blog Love: Schinnerer’s RM Blog

By Lynda

Time to return some Blog Love!

We are big fans of Victor O. Schinnerer’s Risk Management Blog. Several times a month, this long-standing professional liability insurance provider posts brief, timely, helpful articles that are relevant to the design industry. The emphasis is on risk management for design firms, and posts often include links back to pertinent studies and claims scenarios.

A few recent posts:

Building Reuse Provides Environmental Value — 27 August

“Earlier this year the National Trust for Historic Preservation released a report by its Preservation Green Lab that provides the most comprehensive analysis yet of the potential environmental benefits of retrofitting the existing building stock. The study, The Greenest Building: Quantifying the Environmental Value of Building Reuse is available from the organization’s PreservationNation.org/Sustainability website.

“The report concludes that when comparing buildings of equivalent size and function, building reuse almost always offers environmental savings over demotion and new construction. The report states that it can take between 10 and 80 years for a new energy-efficient building to overcome, through efficient operations, the climate change impacts created by its constriction. For the majority of building types in different climates, the study points to 20 to 30 years of use to offset the initial carbon impacts from construction. The study recognizes that the environmental benefits of reuse are maximized when a minimum of new materials are used; renovation projects that require many new materials can reduce or even negate the benefits of reuse.” Continue reading… Continue reading “Blog Love: Schinnerer’s RM Blog”

Integrated Project Delivery: Changing the Insurance Landscape

By Lynda

With more project owners demanding the use of Building Information Modeling (BIM), project delivery is necessarily carried out through greater contributions of design input by the general contractor and the major trade subcontractors. The design professionals are no longer the sole authors of the project design. This collaborative project delivery method has been called integrated project delivery (IPD). The contribution of design input from each of the various project players using IPD is a significant break from the traditional division of responsibility recognized in the standard design-bid-build project delivery method. Players who never participated in the project design now face potential risk of professional liability. Additionally, the new, cutting-edge technologies being used for BIM expand the types of risks born by the design professional if there are errors and omissions within the computer modeling system or the improper management of the computerized data.

What is BIM?

BIM involves computerized design software tools that help create a model that reflects all of the building components’ geometric and functional qualities. The general contractor and trade subcontractors provide product-specific information for building components and that data is inputted into the model, including performance specifications, connection details and cost data. However, the model is more than a mere representation of the design in a three-dimensional computer graphic. Embedded within the design programs are rules that define each of the components’ relation to the other components. Continue reading “Integrated Project Delivery: Changing the Insurance Landscape”