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.