Using a construction contract for design services may well alter a design firm’s Standard of Care, particularly if the construction contract contains warranties or guarantees.
Warranties and guarantees may be found in numerous forms. They may include (but are not limited to) construction costs not exceeding original estimates, project completion by a specific date, time of the essence clauses, the design meeting the project objectives, penalties for project delays, construction safety responsibilities and other obligations normally the contractor’s responsibility.
The common law standards for a design professional do not require the design professional to “warrant or guarantee” their design services, only that the design professional meet a standard that a prudent professional would perform with comparable education, training and experience in the same area of expertise and locale where the services are being rendered.
HOWEVER, if a design firm AGREES to the increased obligations of a construction contract or any owner drafted agreement, in all likelihood, the design professional will be bound by the contract terms, regardless if the contract provisions impose responsibility beyond the common law standard. Signing a contract with an elevated standard of care is not necessarily binding on the designer’s insurance company.
Agreeing to warranties and guarantees as well as other “excluded” activities will mean the design firm will be “uninsured” in these areas and claims for allegations excluded by the policy form will have to be defended and paid, if found negligent, by the design firm.
Contact one our Design Insurance professional today for a review of your client’s a/e professional liability program.
PDI is an Indianapolis-based wholesale brokerage firm with a national network that includes thousands of insurance agents, brokers, architects, engineers and contractors in all 50 states. Since PDI’s beginning in 1980, we’ve handled a single line of coverage: errors & omissions (E&O) for design professionals.