8
resolution requirements for laws and venues in the jurisdiction of the home office location of the client. Although this is not necessarily a coverage issue, it can cost time and money should a dispute arise. Furthermore, jury waivers are present in nearly every design contract these days; although not a coverage issue, having a jury increases the potential for appeal or settlement. Juries often want to hear the perspectives of design professionals so removing them from the process is tantamount to agreeing to one, unpaid, arbitrator. Last, but not least, be sure to review the payment provisions. Is there a pay when paid provision? Can the owner withhold fees for issues they perceive as errors or omissions without adjudication? What is the stated time-period for payment following submission of the invoice? If the client doesn’t pay you in a timely manner, are you entitled to charge and receive interest or reimbursement for the cost of recovering your fees? Requiring payment can be instrumental in avoiding claims, so don’t let your account receivables get too large or too old. As their clients continue to move away from standard contracts, design firms need to be vigilant about clauses and language that have the potential to significantly expand their risk while undermining their insurance protection. The time is right for design firms to sharpen their focus on contract hygiene and, if necessary, to seek assistance of experienced attorneys and insurance advisors to make sure their agreements are fair, equitable, and insurable. Lauren Martin is a risk manager and claims specialist at Ames & Gough. She can be reached at lmartin@amesgough.com.
LARUEN MARTIN, from page 7
position with their insurance carrier, lead to substantial uninsured costs, and make the resolution of claims more challenging. Frequently, the standard of care definition is elevated with clauses throughout the contract that imply perfection. The words “negligence” and “negligent” have virtually disappeared from many new design contracts even though the only thing your professional liability policy provides coverage for is your negligence. In many current contracts, the definitions of standard of care often include superlatives. Notably, warranty language and other clauses imply perfection that redefine the standard of care. Express warranties are not covered under professional liability insurance policies, so claims involving “Breach of Warranty” may not be covered. When reviewing any proposed contract be sure to watch for and avoid words like “complete,” “all,” “highest,” and “strict,” and phrases like “fit for intended the purposes” or “to the satisfaction of the client.” WATCH BROAD INDEMNIFICATION LANGUAGE. Another issue: Today, nearly every contract requires indemnity of parties other than the client. However, if those parties demand indemnity, those costs will not be covered under a professional liability insurance policy. In addition, prevailing party clauses appear in many design contracts, and attorney fees awarded as a result of these clauses will not be covered. These issues alone can result in six- or seven-figure awards that are not covered by professional liability insurance. AEC firms also need to be aware of potential issues surrounding dispute resolution clauses. They often have
© Copyright 2025. Zweig Group. All rights reserved.
THE ZWEIG LETTER FEBRUARY 10, 2025, ISSUE 1572
Made with FlippingBook flipbook maker