True or False? The standard of care of a design professional is perfection.
When we ask this question to a room full of architects and engineers they typically chuckle and get this one right. The answer of course is “No” – design professionals are not held to a standard of perfection. There is no such thing as a perfect set of drawings.
However, if you were to ask this same question to a room full of a design firm’s prospective clients, do you think they would all chuckle and get this right? The answer (of course) is “No”.
In fact, there is often a real disconnect between design professionals and their clients when it comes to the standard of care of a design professional.
This is complicated by the fact that design professionals often work with a wide range of clients – some more sophisticated than others. For example, on one end of the spectrum is the residential homeowner, an emotionally charged unsophisticated consumer when it comes to design and construction projects¹.
On the other end of the spectrum could be a developer, with an attorney rep and a two-page indemnity clause (see my blog on “Managing the Condo Craze”).
And, somewhere in the middle, could be a school board: a bunch of folks with a tight referendum who all know more than you do.
Managing the expectations of this diverse group of clients is no easy task. However, as difficult as it may be, it is in fact the critical responsibility of the design professional to educate prospective clients as to their standard of care. It is “critical” because the vast majority of claims against architects and engineers are not rooted in design errors or omissions but rather are the result of not meeting client expectations.
Educating your clients as to the standard of care
True or False? Design professionals tend to do a good job educating their clients as to their role and responsibilities.
This question was asked by Design Professionals Insurance Company (DPIC) in their “Lessons In Liability” risk management program nearly 30 years ago. Unfortunately, 30 years later, the answer is still “false”!
While some design professionals do a better job than others, as a group, A&E’s tend to do a poor job in educating their clients as to their standard of care.
It’s hard to say why this is. Perhaps it is because design professionals are often more focused on the creative problem-solving aspects of their work to such an extent that they neglect the business aspects of their trade. Whatever the reason, architects and engineers need to do a better job in establishing and managing client expectations in order to effectively manage their risk.
As noted, the A&E is faced with a difficult challenge given the wide range of people they work with – many of whom don’t understand that the standard of care of a contractor is very different from that of an architect and engineer.
There is a legal precedent from the great state of Minnesota that reads something like this:
The standard of care of a design professional is more closely aligned to that of lawyer and a doctor than it is a contractor. And just as a doctor will never guarantee that they will cure every ill, nor will a lawyer ever guarantee they will win every case, a design professional should not guarantee or warranty much of anything.
How to assert the right standard of care
This is important stuff! The courts recognize that the standard of care of an A&E is not perfection and that the liability of a design professional is based on the theories of negligence — whereas the liability of a contractor is based on warranties and guarantees. This is a critical distinction that all parties must understand. The design professional must hold their ground on this and take responsibility in educating their prospective clients as to their standard of care.
This begins by not accepting any contract that references the consultant as a “contractor.” In fact, one of the very best opportunities a design professional has to establish expectations and educate their clients as to their standard of care is though the contract negotiation process. The American Institute of Architects (AIA) and Engineers Joint Contract Documents Committee (EJCDC) contract documents are excellent in that they are both fair and insurable. These contracts have also been vetted through the courts.
I find it disturbing to see some of the owner modifications to these standard agreements. Not only do these modifications often create questions of insurability, the cost all parties would have to incur to decipher extraneous modifications in a court of law could be significant.
While I am definitely in favor of using the AIA and EJCDC agreements, I feel it would be a big mistake to take any of these agreements off the shelf without the parties making the effort to really discuss them. In fact, I would much rather have one of my A&E clients enter into a less-than-perfect agreement, with a lot of discussion around the intent of key clauses, than execute one of these association agreements off the shelf with no dialogue. Taking the time in reviewing these agreements will go a long way toward establishing expectations and avoiding costly headaches in the future.
Client selection is a key Go No-Go consideration for any design firm. If you find that your prospective client is unreasonable and difficult to work with at the contact negotiation stage, it’s fair to assume they might be unreasonable and difficult to work with if you take them on as a client in the future…
Exceeding the standard of care can leave you exposed
An architects and engineers (A&E) standard of care and their professional liability (PL) insurance coverage are closely aligned. A properly drafted PL policy should cover virtually everything an A&E firm does – within their standard of care.
The challenge for any A&E firm is that they can take themselves over and above the standard of care, and thus in a potentially uninsurable position, by their contracts and/or by their conduct on a jobsite. If, for example, an A&E stops the work on a job-site or takes responsibility for job-site safety or construction means and methods, they would arguably have crossed that line and be over and above the standard of care. They could also face possible OSHA fines as a result of these actions – regardless of whether or not their contract clearly stated that they were not responsible for site safety and construction means and methods. Their actions would have taken them over and above the standard of care. Training your staff as to their role on the job-site and effective construction administration is extremely important for this reason.
Just as design professionals must conduct themselves within the standard of care when on the job-site, they also must be careful not to contractually assume liability over and above their standard of care. This is because every A&E professional liability policy specifically excludes liability of others assumed by contract unless such liability arises as a result of a breach of professional duty and would have existed absent such contract.
Owner-drafted contracts and modified AIA/EJCDC agreements are often loaded with uninsurable contract language. This is unfortunate because it is in nobody’s best interest to have an uninsurable contract – especially if you are the owner! I go into considerable detail on negotiating specific contract clauses and addressing uninsurable contracts in another blog titled, “Contracts From Hell”.
What I want to stress in this blog as it relates to the standard of care and contract negotiations is the importance of addressing a contingency fund in all of your contracts. It’s impossible to negotiate having a contingency fund in place without having a conversation about the standard of care of a design professional. Why do you want a contingency? Is this for change orders? No, this is in recognition that there is no such thing as a perfect set of drawings and the standard of care of a design professional is not perfection.
The cost of imperfection
At our last A&E webinar our special guest speakers, Clark Davis, FAIA, and Stephen Jones, presented a review of a significant project they led, titled “Managing Uncertainty and Expectations”. A finding from this project was that most owners (80%) expect to incur some cost from design errors and omissions in future projects. As an average, they believe that 3%–4% is a reasonable range for the cost of these non-negligent design mistakes, with projects varying based on size and complexity. These issues generally fall well within the standard of care for architects, engineers, consultants, and contractors.
During our webinar Clark Davies commented:
We believe that project contingencies should be developed as a team, considering potential risks and the probabilities that they may be encountered on a particular job. Allowances can be made for program changes, design and technical complications, unforeseen conditions, permitting and regulatory changes, design imperfections, construction market conditions, and other issues. The design professional should take the lead in this process, and owners will value this guidance. By taking these leadership opportunities, architects and engineers can reduce uncertainty and improve project performance for our clients, our own firms, and our industry partners.
It is in nobody’s best interest to have an uninsurable contract!
In closing I’d like to comment on all the over-lawyering we continue to see when it comes to contracts. Architects and engineers are constantly challenged with the fact that many attorneys draft onerous and uninsurable contracts on behalf of project owners. These attorneys either don’t understand the difference between the standard of care of a design professional versus that of a contractor — or they simply don’t care.
Regardless, these attorneys are doing their project owner clients a real disservice whenever they draft uninsurable contract language. This is because:
- An A&E’s professional liability policy is third-party coverage and thus is not for the A&E firm but rather for the owner.
- There are no bonds in place to protect the owner from an A&E’s errors and omissions, nor do most A&E firms have any real assets the owner can go after.
- Therefore, the design firm’s professional liability insurance policy is arguably the only asset the owner can look to in the event there is an error or omission.
Understanding this, it’s fair to say that the design professional is doing their prospective clients a real service when they make the effort to negotiate their contracts, point out any uninsurable clauses – and have a discussion on the standard of care.
Clark is principal consultant with Cameron MacAllister Group and former vice chairman of HOK. Stephen is senior director at Dodge Data & Analytics. This was a research project for the AIA Large Firm Roundtable, AIA, and other industry sponsors. The research was conducted by Dodge Data & Analytics (formerly McGraw Hill Construction) and published in a 2014 report, available without charge through the AIA. This study is based on detailed interviews with 150 owners, 50 architects, and 50 contractors—plus personal insights from respected owners including Crate & Barrel, Disney, GSA, Hines, Sutter Health, the University of Chicago, and Whirlpool Corporation. In addition, an on-line background survey yielded more than 2,500 responses from members of AIA and other industry organizations.