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TRANSACTIONS RSK GROUP WELCOMES RENOWNED MECHANICAL ENGINEERING FIRM CEETECH RSK Group is expanding its existing mechanical and engineering provision through the acquisition of East Anglia, U.K.-based firm Ceetech. Ceetech designs, specifies, installs and maintains infrastructure for a wide range of public-and private-sector clients including hospitals and education, leisure, retail, industrial, custodial and military facilities. The company has a solid reputation for engineering excellence,
Established in 2001, the firm employs a strong team of about 70 people and has a variety of multi-million-pound design- and-build projects on its books. RSK will expand its existing M&E provision by leveraging Ceetech’s expertise. By combining this with the experience of RSK’s existing consulting engineering practice, Silcock Leedham, the group will be able to provide a full M&E design- and-delivery capability in-house. Kerry Briggs will continue to head the business as the managing director
and will be supported by the existing management team as the business joins RSK’s Geosciences and Engineering division under the direction of Divisional Director George Tuckwell. “These are really exciting times for Ceetech,” stated Briggs. “Everyone has worked very hard over the last 21 years to build a company with an enviable reputation for being user-friendly and delivering quality workmanship from design, through installation to ongoing maintenance; and, with the support of RSK, we can build on this.”
Most professional liability policies specifically exclude liquidated damage claims, as they are not available to the owner unless they are in the contract. However, in that case even if the professional liability policy doesn’t contain a specific liquidated damages exclusion, the contractual liability exclusion will apply, so coverage may be denied on that basis. The only time a design firm’s obligation to pay liquidated damages might fall under their professional liability coverage is if it can be established there were actual and measurable damages to the client caused by a delay attributable to the firm’s negligence in providing professional services. In these situations, the owner would have to allege negligence and prove damages. Depending on the policy language, even these circumstances could be problematic for design firms. Rather than face potentially serious coverage implications because of a liquidated damages clause in a contract, go into contract negotiations well prepared to explain why they are appropriate for contractors, but not for design professionals. Your arguments may include citing the different nature of the design firm’s responsibilities in the contract, as well as the contractor’s role in the preparation and control of the schedule. You can also point out the different sizes of contracts involving design firms versus those for contractors. Make sure the client understands that a liquidated damages provision represents an uninsurable obligation and that taking on uninsured risk is not contemplated in establishing design fees. Take time to remind clients that they require your firm to have professional liability insurance so there will be coverage in the event of negligent performance. Certainly, it isn’t in the owner’s interest to insert obligations that won’t be covered by insurance you’re contractually required to have in place. Finally, you might consider entering contract negotiations ready to suggest a replacement clause as an alternative that recognizes the client’s milestone expectations and ties meeting those milestones to the standard of care. The clause can stipulate that any services be performed as expeditiously as is consistent with professional skill and care and the project’s orderly progress. Lauren Rhodes Martin is a risk manager and claims specialist at Ames & Gough. Connect with her on LinkedIn.
LAUREN RHODES MARTIN , from page 9
liquidated damages clauses into design contracts. This should be a red flag for AEC firms as liquidated damages are not covered under professional liability policies. In some cases, these clauses relate specifically to design completion dates. Of course, a number of factors can contribute to delays in the completion of design documents, including: consultants’ and owner’s consultants’ timely completion of work; permit reviews and comments; and redesign by owners. In the latter circumstances, owners might view their adjustments as minor, but they may in fact have broader impacts. As recent experiences that arose during the pandemic illustrate, there are many intangibles. Furthermore, there typically are low actual damages associated with design delay; a notice to proceed with the construction has not been issued, and no construction has been priced or scheduled. Thus, any actual damages may potentially be less than the amount stipulated in the contract. In other situations, however, the liquidated damages provisions relate to all aspects of the contract, including the construction completion date. Even though the design professional has no responsibility for construction and no control over the schedule, there still are time-related aspects of a design professionals’ performance during contract administration. They include submittal review turnaround, RFI responses, change order review, and review of the payment certifications. If not completed on a timely basis, these issues can affect the contractor. Nonetheless, they generally do not constitute a valid cause of delay. That stated, suppose a contractor claims the design professional failed to meet these time aspects of the contract and delayed construction. In that case, nothing precludes the owner from making a negligence claim against the design firm, passing on the contractor’s claim. Without a liquidated damages clause, this type of claim should not result in significant insurance coverage issues if there is an alleged breach of the standard of care. Professional liability coverage is tied to negligence; claims are paid when it is established that there are breaches of the standard of care and resulting damages.
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THE ZWEIG LETTER JULY 11, 2022, ISSUE 1448
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