10
OPINION
Imprecise, incorrect contract language may leave AEC firms uninsured for professional liability exposures. Risks of deviating from standard contracts
A ny AEC firms familiar with the popular saying, “You don’t know what you’ve got ‘til it’s gone” might not realize its potential application to standard design contracts. As owners’ attorneys look for ways to transfer more risk to design firms and other project participants, many have moved away from standard contracts provided by the AIA, SBIA and other organizations, either by making significant modifications to the language or by crafting their own agreements. Unfortunately, the consequences of these for design firms can be disastrous, potentially leading to the assumption of excessive and uninsured exposures.
Lauren Martin
While the standard contracts provided by various professional organizations tend to be long, they have stood the test of time and are fully accurate with respect to terminology, roles, and responsibilities. The AIA Design Contract is about 25 pages unedited as is the DBIA contract. EJCDC contracts are about 50 pages, as are the consensus documents contracts. All these contracts have been negotiated over time with lawyers and professionals representing the various parties involved in construction. Their descriptions and references to various construction project participants have been negotiated extensively. Furthermore, there’s widespread agreement that they provide clear, accurate, and balanced representations of each participant’s roles and responsibilities.
Unedited, the contracts have been proven to be largely insurable for design professionals as a result of this negotiation. In addition, the parties involved understand that it is better to have a contract that does not jeopardize the professional liability insurance coverage to respond on the behalf of design professionals should they be negligent in their performance. This is why professional liability carriers uniformly recommend the use of standard contracts. Many insurance advisors are relieved to see an unedited standard contract, or even a lightly edited one. Nowadays, however, it has become more typical for AEC firms to receive an extensively edited contract, which doesn’t resemble the original standard version, or a contract completely drafted by the client’s lawyers.
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THE ZWEIG LETTER OCTOBER 21, 2024, ISSUE 1558
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