The only things that are certain in life are death, taxes and insurance claims. About one out of five design firms are dragged into a claim every year and there simply are few professions that take on such a disproportionate amount of risk for the reward as architects and engineers.
As a broker exclusively dedicated to providing insurance and risk management solutions to design professionals, I can tell you that there are certain steps design firms can and should take to mitigate costly claims client disputes.
Real World of Claims & Counter-Claims
One specific area we addressed at our most recent Willis A&E monthly risk management webinar was on counter claims. Our special guest, David Ericksen of the San Francisco law firm Severson & Werson, presented a program titled “Getting Paid Without Getting Sued,” in which he discussed claims by design professionals to collect fees, which frequently lead to “counter” claims for professional negligence. This is an unfortunate position for any design firm as the impacts of counter claims are often grossly disproportionate to the amount being pursued in the first place. The impacts of such professional liability counter-claims can be as follows:
- Deductible obligation
- Lost time and productivity
- Publicity and disclosure of firm’s proprietary information
- “Prevailing party” attorneys’ fees exposure
- Discounted or waived fee claims
Collections – A Project-Long Effort
In an effort to reduce these claims, collections should be considered from the beginning. Therefore, the design professional should create a collection resolution plan. This starts with pursuing a proper investigation into the client’s payment history, negotiating specific payment provisions, and conducting efforts to collect owed fees in conformance with the contractual provisions.
Collections from Cradle to Grave:
- Preparing for & selecting the client and project
- Contractual provisions
- Staying current and heading off trouble especially on public projects
- Collection resolution
Collection Steps & Tools – A Model to Follow
Collections require the firm to establish contractually explicit procedures for consistency and efficiency while collecting outstanding fees. In the process, find those tools that work best for you.
- Pre-contract evaluation form
- Establish a Go / No-Go checklist
To request a copy of the power point or live recording of the Willis A&E “Getting Paid Without Getting Sued” email us at WillisAE@Willis.com