Disaster and Pro Bono Services
It is unfortunate that, in general, the public discussion about the nation’s infrastructure is driven by the latest natural disaster in the news. The latest calamity is the floodwaters sweeping through the Midwest, leading to ordered evacuations due to levees that failed or are in imminent danger of failing.
Design professionals are often asked to provide professional services on a pro bono basis after a disaster. Generally, a design professional performing voluntary services must do so in accordance with the same care and diligence as other professionals providing similar services. A failure to perform pro bono services in a manner that meets the standard of care could expose the design professional to liability. Our Management Advisory provides more detailed guidance for firms providing pro bono services. Download the Advisory at www.schinnerer.com/risk-mgmt/Documents/ManagementAdvisories/Pro-bono.pdf (limited to current policyholders and brokers only).
Client’s Implied Warranty of the Adequacy of Plans
from the desk of Nahom Gebre
In United States v. Spearin (1918), the U.S. Supreme Court held that a contractor will not be liable to the client for loss or damage caused solely by inadequate information in the plans and specifications that the client provides to the contractor. Over the years, a version of this principle has been adopted in federal courts and most state courts, and it is known as the Spearin Doctrine. The Spearin Doctrine states that there is an implied warranty from the client to the contractor that the client’s plans and specifications have enough information for the contractor to construct the project.
It is important to note that the design professional’s legal obligation is to provide services in a manner that meets the standard of care for the profession. The standard of care required of design professionals is to practice with the same skill and care used by members of the profession practicing under similar circumstances at the same time and in the same locality. Therefore, clients face the risk that they can still be held responsible for any additional costs if the contractor can successfully claim that the plans and specifications did not have enough information to construction the project, even if the design professional’s services met the standard of care.
A recently reviewed contract contained the following provision:
The Engineer/Architect further agrees to indemnify and hold harmless the Owner and Owner's agents and employees against all claims, damages, losses and expenses, including but not limited to attorneys' fees arising out of the Owner's implied warranty of the adequacy of the design and plans prepared by the Engineer/Architect. (emphasis added)
This provision shifts the risk that the client has due to the Spearin Doctrine to the design professional. It is important to note that the design professional would not ordinarily be obligated to indemnify the client for the Spearin Doctrine as long as the services were performed in a non-negligent manner. Prudent risk management requires careful review of contracts so that the client’s attempts to transfer risk to the design professional are identified and negotiated before the contract is signed.
New Resource Guide from AIA
AIA to release guide for sustainable projects at May convention
In 2007, the AIA published standard owner-architect agreements that required the architect to communicate with the project owner on sustainable design alternatives. While this raised the requirements placed on architects and, mostly likely, the expectations of their clients who signed AIA standard contracts, there was a significant lack of guidance for architects on the contractual considerations unique to sustainable design and construction.
Into this void the ConsensusDOCS coalition introduced its Green Building Addendum that defined the goals, set out the expectations, and structured a delivery mechanism for green or high-performance projects by parsing out the roles of the owner, design firm, and constructor of a project.
Now, the AIA has announced that it will release AIA Document D503-2011, Guide for Sustainable Projects, including Agreement Amendments and Supplementary Conditions, which is meant to assist users of AIA documents by providing model language that can be used to amend or supplement key AIA contract documents for use in these types of projects.
According to the AIA, the guide will address the current state of sustainable design and construction, discussing issues and concepts, including:
- Certification systems, codes, and legislation affecting sustainable design and construction projects;
- Risks and responsibilities faced by project owners, contractors, and architects on sustainable design and construction projects; and
- Recommendations for model language to assist the architect in developing a scope of services and to assist all project participants in appropriately allocating risks and responsibilities.
The AIA will not be selling the guide as part of its contract documents system; it will be available as a free download at www.aia.org/sustainableprojectsguide following its introduction in May at the AIA’s annual convention.
LEED Certification
from the desk of Judy Mendoza
The increasing emphasis on sustainability and high-performance buildings presents both opportunities and risks for design professionals. The most important factor in preventing claims based on the underperformance of a sustainable design is that all parties involved understand, and acknowledge in writing, the inherent risks with such a project, the factors that make the outcome unpredictable, and the limits and responsibilities of each stakeholder to manage risks.
We recently reviewed a contract that contained the following provision:
In the event Owner requests but is denied the level of LEED certification it seeks from the U.S. Green Building Council because of deficiencies that are the fault of Engineer with regard to the design or construction of the Project, the required records of the construction or otherwise, then, in such event, Engineer shall be liable to Owner for all costs, expenses, losses, liabilities, diminished value or other damages incurred by Owner as a result of not obtaining such level of LEED certification.
This language increases the insured’s liability to beyond what is expected under the law and could result in claims not covered by insurance. Under U.S. common law, design professionals have the responsibility of using due care in providing their services. There is no warranty of the efficacy of professional services, nor does the design professional provide a warranty for the work of the contractor or others based on the services or instruments of service provided by the design professional. Professional liability insurance policies exclude coverage for claims arising out of express warranties or guarantees. Because coverage is for professional services provided, and not assumed contractual obligations, professional liability insurance does not "stretch" to provide coverage for a warranty of services beyond meeting the standard of care.
Establishing reasonable expectations at the beginning of the project is vital. One way to avoid unreasonable contractual provisions and unrealistic expectations is by informing the client that design services are recommendations that the client has to understand, and once satisfied, accept. It is essential to avoid language that could be construed to establish a warranty of service or results.
The following is an example of language that can be used when a client wants third-party certification of sustainability:
Client has made Design Firm aware that Client intends to pursue [specific certification standard] for this Project. Design Firm shall research the applicable certification requirements, design the Project with the intention of having the Project meet the requirements, and document the design of the Project for submission by the Client to the certifying organization. Client recognizes that certification is not based on design alone, but also on the construction, operation, and maintenance of the Project and therefore agrees that it shall bring no claim against Design Firm if the project is not certified as intended, unless the negligence of the Design Firm is the sole cause of the Project not being certified.
Client also recognizes that during the design of the Project, Design Firm shall use professional judgment in the selection of materials, products, and systems for the Project with the goal of meeting certification criteria, but that Design Firm cannot and does not warrant the performance of any specified material, product, or system. Design Firm will identify for Client any material, product, or system that, in the Design Firm’s judgment based on examination of available performance information, might provide Client with a benefit on this Project, but does not have adequate information on its performance in actual construction or operation. Client acknowledges that it shall look solely to the manufacturer, supplier, or installer of materials, products, or systems if performance does not meet expectations.
Contractual provisions such as disclaimers and other exculpatory language need to be worded carefully and should be drafted with the assistance of local legal counsel.