Contracts
Contracts are arguably the most important risk management tool at a design professional’s disposal. A well-drafted contract allocates risks to the party that is in the best position to manage those risks, assigns responsibility to only one party, and addresses the authority to execute that responsibility, when appropriate. These are a few of the many factors that must be considered when
evaluating your professional services agreement. Conversely, a contract that shifts risks and responsibilities to the party that is not in the best position to manage those risks can be a source of claims. Contractual language that: raises the standard of care beyond the common law standard; lacks a clear scope of services; requires the design professional to warrant or guarantee professional services; or has insurance requirements that are beyond the scope of professional liability coverage are a few examples that could increase a firm’s risk. Victor offers policyholders a range of tools, including Managing Risk Through Contract Language , to help evaluate contracts .
Claims by Selected Contract Type: Average Indemnity Payment (2010 - 2019)
$400,000
$300,000 $350,000
$250,000
$150,000 $200,000
$100,000
$0 $50,000
Owner Drafted- Private
AIA/EJCDC Contract
Owner Drafted-Public
39 • From Risk to Profit - Benchmarking and Claims Studies
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