FEE: CASE SCENARIOS
POOR DOCUMENTATION AND LIMITED SITE VISITS Many clients, in an effort to save money, limit the number of site visits by the design professional. On a project for a high-end residence, the client and interior designer made many modifications without the architect’s knowledge, including changes to the venting of a third-floor fireplace. These changes were not obvious to the architect during his limited site visits. Five years after completion, the house was completely destroyed by a fire that was traced to the fireplace; damages exceeded $2 million. Unfortunately, the architect’s poor file documentation made it difficult to defend against allegations regarding the agreed-upon level of construction services and he was forced to contribute significantly to the settlement. NEGLIGENCE AND UNINSURED CLIENT A geotechnical engineer was paid $120 to provide a letter concerning the stability of a slope adjacent to a subdivision of homes. The letter stated that the slope was stable. Two years later, the slope gave way and a rockslide destroyed one home and resulted in two others being declared unsafe. Experts agreed that the slope was unstable. The developer was uninsured and refused to negotiate, thus instigating litigation, which included the geotechnical engineer, who was the only viable defendant. The geotech settled for his $250,000 policy limit. IMPROPER FEE COLLECTION An architect, retained by a developer on a high-end commercial project, did not comply with the terms of his own contract. Although he had been invoicing the client for his fees on a regular basis, the client had not paid the invoices and the architect was now, at the end of the job, owed $350,000. When the architect filed suit for his fees, the client counter-sued, alleging negligent design. Although the architect eventually won the counterclaim, he was forced to spend $60,000 in defense costs and had to compromise his fee claim.
FEE CLAIM LEADS TO COUNTER-CLAIM An engineer filed suit against his client for $10,000 in outstanding fees. Although the client had never complained about the engineer’s services, now faced with a fee claim, he counter-sued, alleging dissatisfaction with the engineer’s design for a wastewater system. The engineer spent his $5,000 deductible defending the allegations and then compromised his fee claim by 50%, resulting in a net loss of $10,000.
31 • From Risk to Profit - Benchmarking and Claims Studies
Victor
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