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O P I N I O N
Onerous indemnification clauses If improperly worded, they not only can shift significant risks, but do so in ways that leave design professionals exposed to potentially large claims.
A critical component of effective risk management for design firms involves practicing good contract hygiene. This includes reviewing any prospective contract to evaluate the risk associated not only with the professional services to be performed, but also related to any contractual risk transfer that can create or expand liability for the architect, engineer, or construction manager.
Dan Knise
Significantly, the policies exclude contractual assumption of liability other than “liability that would have attached in the absence of the contract.” So, when architects or engineers agree contractually to indemnify a client for anything “When architects or engineers agree contractually to indemnify a client for anything unrelated to the design firm’s negligence, it won’t be insured.”
While many provisions can shift risk (e.g., standard of care, warranties, and guarantees, etc.), one of the most important is indemnification clauses. If improperly worded, these clauses not only can shift significant risks, but do so in ways that leave design professionals exposed to potentially large claims that may not be covered under their professional liability insurance. In assessing the potential impact of an indemnification clause, A/E firms must first recognize that their coverage under professional liability insurance policies is typically restricted to liabilities that arise from negligent acts, errors, or omissions in the rendering of, or the failure to render, their services.
See DAN KNISE, page 12
THE ZWEIG LETTER January 23, 2017, ISSUE 1184
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