PROFESSIONAL UNDERWRITERS, INC. 39475 W. 13 Mile Road, Suite 106 Novi, MI 48377 www.profunderwriters.com (248) 553-8300 RISK MANAGEMENT & CONTRACT GUIDE FOR DESIGN PROFESSIONALS J. Kent Holland, Esq. 3rd Edition (2019) ConstructionRisk, LLC | Tysons Corner, VA i [Page intentionally blank] 3 Risk Management & Contract Guide For Design Professionals J. Kent Holland, Esq. 3rd Edition (2019) ConstructionRisk, LLC Tysons Corner, VA 3 Risk Management & Contract Guide for Design Professionals © Copyright 2005, 2014 & 2019; a/e ProNet & J. Kent Holland, Jr. All rights reserved. No part of this book shall be reproduced, stored in a retrieval system or database, or transmitted by any means, electronic, mechanical, photocopying, recording, or otherwise, without written permission from the author. Contract clauses herein that are copyrighted by the AIA or EJCDC may not be further reproduced without their permission. No liability is assumed with respect to the use of the information contained herein, nor shall the publisher, distributor, author, or any employer or entity with which the author is affiliated be liable for damages or loss resulting from its use, including but not limited to actual, consequential, or incidental damages, whether foreseeable or unforeseeable. Although every precaution has been taken in the preparation of this book, the author assumes no responsibility for errors or omissions. The opinions expressed herein are solely those of the author, and do not represent the views of any individual, partnership, corporation, institution of learning, or any other entity by which the author is or has been employed or affiliated. The hypothetical situations and contract clauses discussed herein are general in nature, and the suggested responses are not meant to be the only solutions to the issues raised. While this book contains explanations of various legal concepts, it is not legal advice, and should not be construed or relied upon as such. Printed in the United States of America First Printing February 2005 2nd Edition Electronic Publication May 2014 3rd Edition Electronic Publication July 2019 Published and Distributed in the United States by: ConstructionRisk, LLC and Ardent Publications 1950 Old Gallows Rd., Suite 750 Vienna, VA 22182 Library of Congress Control Number ISBN 0972315 4 Table of Contents About a/e ProNet .............................................................................................................................. 1 About the Author.............................................................................................................................. 2 Introduction ...................................................................................................................................... 4 Some Risk Management Essentials ................................................................................................. 6 Documenting Communication between the Parties ......................................................................... 9 Keeping the Records Straight......................................................................................................... 17 Records Retention, Destruction, & Litigation................................................................................ 23 Current Issues and Recent Case Law Affecting Design Professionals .......................................... 27 Contract Essentials ......................................................................................................................... 40 Some Do's and Don'ts of Contract Language................................................................................. 45 Marketing and Promotional Materials ........................................................................................... 47 Insurance ........................................................................................................................................ 49 Allocating Risks Through Contract Terms & Conditions.............................................................. 52 Americans With Disabilities Act (ADA) ............................................................. 53 Certifications ........................................................................................................ 58 Changes in Design Professionals Services........................................................... 62 Change Orders for Construction Work ................................................................ 65 Changed Conditions (Differing Site Conditions)................................................. 67 Choice of Law & Venue ...................................................................................... 71 Compliance with Law .......................................................................................... 73 Confidentiality ..................................................................................................... 77 Cost Estimates...................................................................................................... 79 Damages............................................................................................................... 84 Dispute Resolution ............................................................................................... 89 Environmental Conditions ................................................................................... 98 Incorporation by Reference................................................................................ 105 Indemnification .................................................................................................. 108 Inspection ........................................................................................................... 116 Insurance ............................................................................................................ 119 Limitation of Liability........................................................................................ 123 Notice Requirements.......................................................................................... 129 Owner Provided Data......................................................................................... 131 Ownership and Copyrights of Documents ......................................................... 138 Permits ............................................................................................................... 145 Reliance on Information Provided by Others .................................................... 150 Responsibility for the Services of Others .......................................................... 154 Schedule(Timeliness of Performance) ............................................................... 155 Scope of Service................................................................................................. 159 Severability & Survival...................................................................................... 161 Shop Drawings ................................................................................................... 164 Site Safety .......................................................................................................... 167 Standard of Care................................................................................................. 175 Termination ........................................................................................................ 184 Time Limitations on Litigation .......................................................................... 190 Waiver of Subrogation ....................................................................................... 194 Warranties and Guarantees ................................................................................ 196 5 [Page intentionally blank] Some Risk Management Essentials 1 About a/e ProNet a/e ProNet was formed to bring together insurance professionals whose activities in their own market area had already established them as experienced, knowledgeable and personally committed to service the design professional community. Exceptional expertise, value-added services and independence of ties with any particular insurance company have been membership watchwords from the outset. Since its first formal meeting in January 1988, a/e ProNet’s membership has grown from a handful of members to a group of many firms operating on an international basis with members located in major metropolitan areas throughout the United States, and more recently in the United Kingdom. Geographical location is not a bar to membership. The absence of specialized expertise precludes consideration of membership. The combined a/e ProNet membership represents a significant share of all U.S. design firms and of the total annual premium volume written by domestic and foreign insurers for this specialized coverage. a/e ProNet members work with thousands of design firms nationally accounting for over $300 million in premium volume annually. a/e ProNet’s overall market presence is expected to grow annually irrespective of the growth of its membership. This is due to the exceptional expertise and resources available to a/e ProNet members and made available to a/e ProNet clients. Evidence of the association’s exceptional services is available on the a/e ProNet website at www.aepronet.org. The a/e ProNet website is believed to be the most comprehensive collection of a/e specialized risk management information and resources of its kind. Readers of this manual are encouraged to visit