Small Project Design

I have a small (lately almost non-existent), solo practice in a small college town in the South.  I have not had any liability insurance, not only because of the expense, but also because of the informal, "a la carte" nature of the way I sell my services.  I usually have only a brief letter of agreement between myself and the client.  I am almost never involved or, I assume, even mentioned in whatever contract the client signs with the contractor.  My drawings are never followed to the letter and have become increasingly less detailed.  Am I being a complete fool, and how much risk and I really exposing myself, and my family, to?


-------------------------------------------
Clayton Rogers
Clayton Rogers Architect
Sewanee TN
-------------------------------------------

Clayton,

I've been operating my own small office specializing in residential remodeling for over 20 years.  During that time we haven't had any E&O insurance.  We've always been very detail oriented and careful with our drawings.  On the (rare) occasion that we did make a mistake, I've always taken care of it out of my own pocket.  I have checked into insurance in the past, but found the rates to be too much to afford.

Or so I thought.

I'm now involved with some clients we did a project for 5 years ago.  After directing the design goals, approving the design, excluding us from CA, and building the project contrary to our drawings, they have now decided that they are unhappy with the design, want to make changes, and want us to pay for them.  The husband, whom we had no contact with during the project, is an attorney and can press a law suit with little to no expense to himself.  Even though I may win in court, I will lose my attorney's fees to defend myself.  These fees could easily approach $100,000.  Our fee for the project was only $15,000.

We're an LLC, which evidently provides no protection as they can go after my personal assets if I don't carry insurance.  With the economy the way it's been, I have little in the way of savings as it is. 

We use a contract that has many protections, we use language in our drawings relieving ourselves of responsibility for unauthorized changes, etc.  My point is, if a client decides to sue you, and even if you prevail in court, you will still spend a great deal of money just to get there.

What are my options?  What have I learned?  I may have to file for bankruptcy to make this go away, which I'm loath to do, but it's looking like a real posibility.  I could decide to refuse to work with attorneys, (I know some architects and contractors who do this), but we've had many attorney clients who've been wonderful.  I'm certainly going to look into getting E&O insurance for future work, but I'm concerned that the rates will be even higher due to this experience.

Any advice or encouragement would be appreciated, this has been discouraging.



-------------------------------------------
Name withheld
-------------------------------------------






Original Message:
Sent: 07-13-2011 09:11
From: Andrew Fethes
Subject: Liability risk

Clayton,

Most would say you are a fool, however the old adage "you can't get blood from a stone" may be apt.  If your are doing 7-digit hospital or school board projects - get insurance - but if you are doing single family homes or small commercial projects then your risk is certainly lower.  While I have PL insurance, I also have all of my assets in joint ownership/tenancy, so if it ever got to a trial a jury would deliberate whether to throw my wife and kids into the street.

I also have a paragraph in my contacts that states something to the effect that if the architect is not hired for CA the Owner assumes that role, and any deviations from the plans are at their own risk, and voids the architect's responsibility.  It's not ironclad, but this one paragraph saved me from being involved in lawsuit between client and contractor. It's best to produce documents that follow the letter of the law, and let the client and or contractor take the responsibility for field changes.

Of course, I am not a lawyer, and cannot dispense legal advice, so you should consult your own attorney about risks.

Good luck

-------------------------------------------
Andrew Fethes AIA
President
Andrew Fethes Architects PA
Oradell NJ
-------------------------------------------






Original Message:
Sent: 07-12-2011 13:56
From: R. Rogers
Subject: Liability risk

I have a small (lately almost non-existent), solo practice in a small college town in the South.  I have not had any liability insurance, not only because of the expense, but also because of the informal, "a la carte" nature of the way I sell my services.  I usually have only a brief letter of agreement between myself and the client.  I am almost never involved or, I assume, even mentioned in whatever contract the client signs with the contractor.  My drawings are never followed to the letter and have become increasingly less detailed.  Am I being a complete fool, and how much risk and I really exposing myself, and my family, to?


-------------------------------------------
Clayton Rogers
Clayton Rogers Architect
Sewanee TN
-------------------------------------------

-------------------------------------------
Thomas Downer AIA
Owner
Downer/Associates
Cambridge MA
-------------------------------------------
I have a similar practice to the one you described, however I have carried E&O insurance for at least 20 years. I pay less than $2000 per year for 100k/300k coverage with $0 deductible with XL Specialty Insurance. Spread out over 10 months, it costs less than my phone bills. My policy restricts certain project types - no condo projects, and I get a yearly credit for education about liability issues and using a Limitation of Liabilty clause in my contracts. It seems to me to be a reasonable cost of doing business.
You should talk to an attorney (if you haven't already). My understanding is that if you have a good paper trail, a lot of courts will toss frivolous cases quickly. Good luck.





Original Message:
Sent: 07-14-2011 13:02
From: Tomas Hart
Subject: Liability risk

I've been operating my own small office specializing in residential remodeling for over 20 years.  During that time we haven't had any E&O insurance.  We've always been very detail oriented and careful with our drawings.  On the (rare) occasion that we did make a mistake, I've always taken care of it out of my own pocket.  I have checked into insurance in the past, but found the rates to be too much to afford.

Or so I thought.

I'm now involved with some clients we did a project for 5 years ago.  After directing the design goals, approving the design, excluding us from CA, and building the project contrary to our drawings, they have now decided that they are unhappy with the design, want to make changes, and want us to pay for them.  The husband, whom we had no contact with during the project, is an attorney and can press a law suit with little to no expense to himself.  Even though I may win in court, I will lose my attorney's fees to defend myself.  These fees could easily approach $100,000.  Our fee for the project was only $15,000.

We're an LLC, which evidently provides no protection as they can go after my personal assets if I don't carry insurance.  With the economy the way it's been, I have little in the way of savings as it is. 

We use a contract that has many protections, we use language in our drawings relieving ourselves of responsibility for unauthorized changes, etc.  My point is, if a client decides to sue you, and even if you prevail in court, you will still spend a great deal of money just to get there.

What are my options?  What have I learned?  I may have to file for bankruptcy to make this go away, which I'm loath to do, but it's looking like a real posibility.  I could decide to refuse to work with attorneys, (I know some architects and contractors who do this), but we've had many attorney clients who've been wonderful.  I'm certainly going to look into getting E&O insurance for future work, but I'm concerned that the rates will be even higher due to this experience.

Any advice or encouragement would be appreciated, this has been discouraging.



-------------------------------------------
Name withheld
-------------------------------------------






Original Message:
Sent: 07-13-2011 09:11
From: Andrew Fethes
Subject: Liability risk

Clayton,

Most would say you are a fool, however the old adage "you can't get blood from a stone" may be apt.  If your are doing 7-digit hospital or school board projects - get insurance - but if you are doing single family homes or small commercial projects then your risk is certainly lower.  While I have PL insurance, I also have all of my assets in joint ownership/tenancy, so if it ever got to a trial a jury would deliberate whether to throw my wife and kids into the street.

I also have a paragraph in my contacts that states something to the effect that if the architect is not hired for CA the Owner assumes that role, and any deviations from the plans are at their own risk, and voids the architect's responsibility.  It's not ironclad, but this one paragraph saved me from being involved in lawsuit between client and contractor. It's best to produce documents that follow the letter of the law, and let the client and or contractor take the responsibility for field changes.

Of course, I am not a lawyer, and cannot dispense legal advice, so you should consult your own attorney about risks.

Good luck

-------------------------------------------
Andrew Fethes AIA
President
Andrew Fethes Architects PA
Oradell NJ
-------------------------------------------






Original Message:
Sent: 07-12-2011 13:56
From: R. Rogers
Subject: Liability risk

I have a small (lately almost non-existent), solo practice in a small college town in the South.  I have not had any liability insurance, not only because of the expense, but also because of the informal, "a la carte" nature of the way I sell my services.  I usually have only a brief letter of agreement between myself and the client.  I am almost never involved or, I assume, even mentioned in whatever contract the client signs with the contractor.  My drawings are never followed to the letter and have become increasingly less detailed.  Am I being a complete fool, and how much risk and I really exposing myself, and my family, to?


-------------------------------------------
Clayton Rogers
Clayton Rogers Architect
Sewanee TN
-------------------------------------------

I'm sorry to hear about these difficulties.  I don't have any suggestions regarding this particular situation, but I have two thoughts about protecting yourself in the future--one general and one specific.  

One part of the answer is that your contract should stipulate:
1) Mediation required before lawsuit
2) Prevailing party is entitled to recoup their legal fees.  This will make (ex-client) lawyers launching frivolous suits think twice as they now have something to lose.

Architecture schools should teach contract law and business as required courses.  Otherwise we pay more for our education later. 

-------------------------------------------
Scott Rodwin AIA
Principal
Rodwin Architecture
Boulder CO
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Original Message:
Sent: 07-14-2011 13:02
From: Tomas Hart
Subject: Liability risk

I've been operating my own small office specializing in residential remodeling for over 20 years.  During that time we haven't had any E&O insurance.  We've always been very detail oriented and careful with our drawings.  On the (rare) occasion that we did make a mistake, I've always taken care of it out of my own pocket.  I have checked into insurance in the past, but found the rates to be too much to afford.

Or so I thought.

I'm now involved with some clients we did a project for 5 years ago.  After directing the design goals, approving the design, excluding us from CA, and building the project contrary to our drawings, they have now decided that they are unhappy with the design, want to make changes, and want us to pay for them.  The husband, whom we had no contact with during the project, is an attorney and can press a law suit with little to no expense to himself.  Even though I may win in court, I will lose my attorney's fees to defend myself.  These fees could easily approach $100,000.  Our fee for the project was only $15,000.

We're an LLC, which evidently provides no protection as they can go after my personal assets if I don't carry insurance.  With the economy the way it's been, I have little in the way of savings as it is. 

We use a contract that has many protections, we use language in our drawings relieving ourselves of responsibility for unauthorized changes, etc.  My point is, if a client decides to sue you, and even if you prevail in court, you will still spend a great deal of money just to get there.

What are my options?  What have I learned?  I may have to file for bankruptcy to make this go away, which I'm loath to do, but it's looking like a real posibility.  I could decide to refuse to work with attorneys, (I know some architects and contractors who do this), but we've had many attorney clients who've been wonderful.  I'm certainly going to look into getting E&O insurance for future work, but I'm concerned that the rates will be even higher due to this experience.

Any advice or encouragement would be appreciated, this has been discouraging.



-------------------------------------------
Name withheld
-------------------------------------------






Original Message:
Sent: 07-13-2011 09:11
From: Andrew Fethes
Subject: Liability risk

Clayton,

Most would say you are a fool, however the old adage "you can't get blood from a stone" may be apt.  If your are doing 7-digit hospital or school board projects - get insurance - but if you are doing single family homes or small commercial projects then your risk is certainly lower.  While I have PL insurance, I also have all of my assets in joint ownership/tenancy, so if it ever got to a trial a jury would deliberate whether to throw my wife and kids into the street.

I also have a paragraph in my contacts that states something to the effect that if the architect is not hired for CA the Owner assumes that role, and any deviations from the plans are at their own risk, and voids the architect's responsibility.  It's not ironclad, but this one paragraph saved me from being involved in lawsuit between client and contractor. It's best to produce documents that follow the letter of the law, and let the client and or contractor take the responsibility for field changes.

Of course, I am not a lawyer, and cannot dispense legal advice, so you should consult your own attorney about risks.

Good luck

-------------------------------------------
Andrew Fethes AIA
President
Andrew Fethes Architects PA
Oradell NJ
-------------------------------------------






Original Message:
Sent: 07-12-2011 13:56
From: R. Rogers
Subject: Liability risk

I have a small (lately almost non-existent), solo practice in a small college town in the South.  I have not had any liability insurance, not only because of the expense, but also because of the informal, "a la carte" nature of the way I sell my services.  I usually have only a brief letter of agreement between myself and the client.  I am almost never involved or, I assume, even mentioned in whatever contract the client signs with the contractor.  My drawings are never followed to the letter and have become increasingly less detailed.  Am I being a complete fool, and how much risk and I really exposing myself, and my family, to?


-------------------------------------------
Clayton Rogers
Clayton Rogers Architect
Sewanee TN
-------------------------------------------

I am sorry to hear about this, as I know others are. This kind of client can suck all the joy out of an already demanding business, and cause you to rethink your career choice. However, there are all kinds of options which are not the "$100,000" wasted attorney's fees for a full trial, but which may require a SMALL investment in legal advice.

1) Meritless cases are disposed of all the time before things even get to the trial stage, such as with a Motion to Dismiss, etc. Does your state require a third-party "certificate of merit" (as does California) before filing a lawsuit against a licensed architect?

2) Many courts REQUIRE an attempt at alternative dispute resolution first. An arbitration or mediation may be not that expensive, particularly if you do most of the "heavy lifting".

3) An attorney who brings a completely meritless case can even face sanctions from the attorney licensing body. But I would not make any "threats"; this wording should be phrased by an attorney.

4) A good attorney might be able to write a very strongly-worded letter, perhaps even indicating expensive counter-claims, that would make the client rethink their legalistic approach.

At any rate, you have some options other than full-blown litigation, but these will require a very good advocate in an attorney skilled in construction law. But you don't need to feel like $100,000 or bankruptcy are your only options. Having faced something vaguely similar, I can attest that an assertive and good attorney can make an unreasonable client "go away" for a pretty minimal expense. But you need the right attorney.

-------------------------------------------
Richard Morrison AIA
Richard Morrison, AIA, ASID
Redwood City CA
-------------------------------------------





-------------------------------------------
I've been operating my own small office specializing in residential remodeling for over 20 years.  During that time we haven't had any E&O insurance.  We've always been very detail oriented and careful with our drawings.  On the (rare) occasion that we did make a mistake, I've always taken care of it out of my own pocket.  I have checked into insurance in the past, but found the rates to be too much to afford.

Or so I thought.

I'm now involved with some clients we did a project for 5 years ago.  After directing the design goals, approving the design, excluding us from CA, and building the project contrary to our drawings, they have now decided that they are unhappy with the design, want to make changes, and want us to pay for them.  The husband, whom we had no contact with during the project, is an attorney and can press a law suit with little to no expense to himself.  Even though I may win in court, I will lose my attorney's fees to defend myself.  These fees could easily approach $100,000.  Our fee for the project was only $15,000.

We're an LLC, which evidently provides no protection as they can go after my personal assets if I don't carry insurance.  With the economy the way it's been, I have little in the way of savings as it is. 

We use a contract that has many protections, we use language in our drawings relieving ourselves of responsibility for unauthorized changes, etc.  My point is, if a client decides to sue you, and even if you prevail in court, you will still spend a great deal of money just to get there.

What are my options?  What have I learned?  I may have to file for bankruptcy to make this go away, which I'm loath to do, but it's looking like a real posibility.  I could decide to refuse to work with attorneys, (I know some architects and contractors who do this), but we've had many attorney clients who've been wonderful.  I'm certainly going to look into getting E&O insurance for future work, but I'm concerned that the rates will be even higher due to this experience.

Any advice or encouragement would be appreciated, this has been discouraging.



-------------------------------------------
Name withheld
-------------------------------------------

The AIA contract documents are well though out and have been though the court system several times.  These documents can help limit some of your exposure.  Professional liability insurance can help, but if you exceed your limit it can be as if you are "bare".

You should not be intimidated just because someone is an attorney - these guys (some of them) like to see if they can get away with being a bully.  With a good attorney if necessary, you can sue to include your legal fees.  Your attorney can explain the details of how this works. 

It is sad, but I really screen a client if he is an attorney.  I have talked with several colleagues over the years and most are extremely selective about working with an attorney as a client if they will even consider it.

Protective entity structuing including trusts are something that everyone in business should have.  If for example you are in a car accident and some tragic result yields millions of dollars in judgment against you, your insurance company is only going to cover you to the limit of your coverage.  There are three states that have very protective homestead type provisions for protecting your assets.  Ever wonder why OJ Simpson still has his Florida home?  It takes a while to set things up, but you would rather pay an attorney to help you structure things so that you have protection in advance of any other legal challenges.

Get some help and face the bully.  A seasoned member of your local AIA chapter can help you relate to some of his or her experiences.  Tell a professional member that you respect, you would like some help from a mentor.  Most of the time, they would agree to spend some time with you. 

-------------------------------------------
Howard Sweatte AIA
Carlsbad CA
-------------------------------------------

Original Message:
Sent: 07-14-2011 13:02
From: Tomas Hart
Subject: Liability risk

I've been operating my own small office specializing in residential remodeling for over 20 years.  During that time we haven't had any E&O insurance.  We've always been very detail oriented and careful with our drawings.  On the (rare) occasion that we did make a mistake, I've always taken care of it out of my own pocket.  I have checked into insurance in the past, but found the rates to be too much to afford.

Or so I thought.

I'm now involved with some clients we did a project for 5 years ago.  After directing the design goals, approving the design, excluding us from CA, and building the project contrary to our drawings, they have now decided that they are unhappy with the design, want to make changes, and want us to pay for them.  The husband, whom we had no contact with during the project, is an attorney and can press a law suit with little to no expense to himself.  Even though I may win in court, I will lose my attorney's fees to defend myself.  These fees could easily approach $100,000.  Our fee for the project was only $15,000.

We're an LLC, which evidently provides no protection as they can go after my personal assets if I don't carry insurance.  With the economy the way it's been, I have little in the way of savings as it is. 

We use a contract that has many protections, we use language in our drawings relieving ourselves of responsibility for unauthorized changes, etc.  My point is, if a client decides to sue you, and even if you prevail in court, you will still spend a great deal of money just to get there.

What are my options?  What have I learned?  I may have to file for bankruptcy to make this go away, which I'm loath to do, but it's looking like a real posibility.  I could decide to refuse to work with attorneys, (I know some architects and contractors who do this), but we've had many attorney clients who've been wonderful.  I'm certainly going to look into getting E&O insurance for future work, but I'm concerned that the rates will be even higher due to this experience.

Any advice or encouragement would be appreciated, this has been discouraging.



-------------------------------------------
Name withheld
-------------------------------------------






Original Message:
Sent: 07-13-2011 09:11
From: Andrew Fethes
Subject: Liability risk

Clayton,

Most would say you are a fool, however the old adage "you can't get blood from a stone" may be apt.  If your are doing 7-digit hospital or school board projects - get insurance - but if you are doing single family homes or small commercial projects then your risk is certainly lower.  While I have PL insurance, I also have all of my assets in joint ownership/tenancy, so if it ever got to a trial a jury would deliberate whether to throw my wife and kids into the street.

I also have a paragraph in my contacts that states something to the effect that if the architect is not hired for CA the Owner assumes that role, and any deviations from the plans are at their own risk, and voids the architect's responsibility.  It's not ironclad, but this one paragraph saved me from being involved in lawsuit between client and contractor. It's best to produce documents that follow the letter of the law, and let the client and or contractor take the responsibility for field changes.

Of course, I am not a lawyer, and cannot dispense legal advice, so you should consult your own attorney about risks.

Good luck

-------------------------------------------
Andrew Fethes AIA
President
Andrew Fethes Architects PA
Oradell NJ
-------------------------------------------






Original Message:
Sent: 07-12-2011 13:56
From: R. Rogers
Subject: Liability risk

I have a small (lately almost non-existent), solo practice in a small college town in the South.  I have not had any liability insurance, not only because of the expense, but also because of the informal, "a la carte" nature of the way I sell my services.  I usually have only a brief letter of agreement between myself and the client.  I am almost never involved or, I assume, even mentioned in whatever contract the client signs with the contractor.  My drawings are never followed to the letter and have become increasingly less detailed.  Am I being a complete fool, and how much risk and I really exposing myself, and my family, to?


-------------------------------------------
Clayton Rogers
Clayton Rogers Architect
Sewanee TN
-------------------------------------------

Wish I had a solution that worked backwards. I can offer some thoughts and ideas. I've always carried a $1M policy - and yes, it costs. Still have huge deductible. No claims in 30 plus years. 

I don't think any business should be without adequate insurance. A closely held family business in a nice small town is no exception. And an architectural practice of any kind should have some kind of legal and financial buffer between it and your family's income and assets.

Your drawings must be submitted to a building official in order to obtain a building permit; that makes you the architect of record. Even if the building permit environment is so casual as to bypass this step, someone somewhere will find out who else they can sue if someone is sufficiently injured or aggrieved during the construction process. This is often out of necessity, as construction is an inherently risky business, and people get hurt or financially damaged during the process, tend to look for solutions, and faced with a choice of no solution or your family's house, they may go for your house. Don't assume an LLC is an adequate buffer.

I'd talk with several liability insurance providers about the simplest, lowest cost policy you can obtain, with the largest deductible you can imagine being able to digest. That at least gets an insurance company-paid attorney sitting next to you at the deposition we hope never happens.

I tend to me more involved with complex projects because of the nature of my specialty, but I have an underlying sour view toward "ala carte" services based on a few unhappy experiences very early in my career. It will be the drawing you didn't draw or the specifications you didn't write that will get you into trouble. Clients never remember the low fee you charged for the limited services when an error or omission costs them some money, and seeing you are not around during the construction phase and the contractor is, guess who will come out looking like the Bad Guy?

One of the AIA's membership benefits is access to some expert phone consultation with legal and risk management advisors; I've found a couple of those conversations very valuable.

Best of success in your practice!

-------------------------------------------
Philip Kabza AIA
Partner and Dir Technical Services
SpecGuy
Charlotte NC
-------------------------------------------






Original Message:
Sent: 07-12-2011 13:56
From: R. Rogers
Subject: Liability risk

I have a small (lately almost non-existent), solo practice in a small college town in the South.  I have not had any liability insurance, not only because of the expense, but also because of the informal, "a la carte" nature of the way I sell my services.  I usually have only a brief letter of agreement between myself and the client.  I am almost never involved or, I assume, even mentioned in whatever contract the client signs with the contractor.  My drawings are never followed to the letter and have become increasingly less detailed.  Am I being a complete fool, and how much risk and I really exposing myself, and my family, to?


-------------------------------------------
Clayton Rogers
Clayton Rogers Architect
Sewanee TN
-------------------------------------------

For me, professional liability insurance is extremely important. My business is set up as an LLC, but I am a sole practitioner working from a home office. I do residential projects, mostly remodeling, but a few custom homes, too. CA services are part of my contract and I don't recall anyone quibbling about the fee for that part of the project. I've been in business for almost 14 years and one of the very first things I did when I started my company was obtain liability insurance. It's has been pretty expensive some years, but the prices have gone down a lot recently and I am now paying half of what I paid in 2005 (and this is the lowest price I've had for liability insurance since I started my business in 1997).

I'd recommend that you check into getting coverage now.

My sympathies to the architect who is being sued by his attorney client (although you removed your signature, your name is still visible in the "from" field, so you might want to delete your post). It sounds like you did nothing wrong. It might be worthwhile to negotiate a settlement of some kind - maybe you can pay for part of the changes and have the client sign off on a letter saying that you are admitting no wrongdoing. I would definitely talk to the AIA legal counsel as Mr. Kabza suggested.

-------------------------------------------
Dawn Zuber AIA
Owner
Studio Z Architecture
Canton MI
-------------------------------------------

I'm actually a little astonished that anyone "goes bare" in our modern world. Our Materials & Construction professor told us way back in 3rd year that an architect has a 100% chance of getting sued over the course of his/her career, no matter how careful or detail oriented s/he may be. This is just as true for a small practice as a large one, and for the cost (as Thomas said, above, ~$2000 a year, and I carry $1mil coverage b/c my corporate clients require it), it's well worth the cost for the peace of mind. The one time I thought I was going to be sued - a residential remodel/addition, nothing big or complicated - my insurance company's attorneys took good care of me and prevented a claim from being filed. 

To Tomas Hart:

Daniel makes a very good point about insurance companies.  While they do seem to be your advocate in a dispute, they are first and foremost covering themselves and their shareholders. They would gladly settle with a deadbeat client with a modicum of credibility rather than prove your innocence if it will be more financially productive; and then when the time comes for a renewal, increase your premiums based on your claim history.

Clayton,
Practicing architecture as you described without laibility insurance is a gamble.  No matter how good you are, or how much you backcheck or supervise your staff (I know how hard it is to check your own work), you will soon be asked to pay for four windows that don't meet egress, a door that has the wrong hardware, a foundation that is in the wrong place due to a dimensional error. 

Check around for a $250,000 to $500,000 PL policy and build this into your fee.  They generally base the cost on your gross billings and type of work, but you could be in the 4k-6k range.  And they will finance the premimum.

You are risking everything for who - your clients?  Is that really worth the gamble?  Charging an extra $4 per hour isn't going to hurt your business, and while those four windows would be under your deductible, that foundation could be expensive if the house is finished and starts to settle.  That 250k-500k policy could save your future.   Bite the bullet and do it.

-------------------------------------------
David Clark AIA
Principal
David A. Clark Architects, PLLC
Auburn WA
-------------------------------------------






Original Message:
Sent: 07-18-2011 10:07
From: Andrew Fethes
Subject: Liability risk

Daniel makes a very good point about insurance companies.  While they do seem to be your advocate in a dispute, they are first and foremost covering themselves and their shareholders. They would gladly settle with a deadbeat client with a modicum of credibility rather than prove your innocence if it will be more financially productive; and then when the time comes for a renewal, increase your premiums based on your claim history.

I'm also not sure about the "limit of liability" clause as any real protection.  I doubt that I could design a totally deficient structure that causes millions of dollars of damages, and then tell the client you only paid me $$,$$$$, so here it is. Any good attorney can run circles around that. At best it could be a good screening clause to see the temperament of a potential client - if they balk at the clause you might have a troublemaker on your hands.  Furthermore, my insurance carrier doesn't give me any type of break for having this clause in my agreements, so why protect them even further?  I would be curious how others feel about this.

With all that said, I had a situation where I was brought into a dispute with a client and their contractor. The client was an attorney (surprise!) and stiffed me for about $3,500 at the end of the project with the threat of legal action for what she saw as deficiencies in my work. I made a business decision not to pursue the money and hoped that karma would deal with her. After 18 months of construction I was asked to give deposition by the contractor against the client who had brought suit against him, his subcontractors, their husbands and wives, and anyone else involved.  I fortunately was not named in the suit because I had a CA disclaimer in my agreement that was so clear the client-attorney knew that it wouldn't hold up in court. Nevertheless, I went to my insurance company with the deposition, and they assigned a construction attorney to my "case" who dealt with the other attorneys, made copies of all my files, and kept me clear of any involvement. When the discovery period ended without another request for deposition, the case was closed and I was relieved of any further action.  Because my policy has "first dollar defense" I was not out-of-pocket for anything more than my time and a little anxiety.  Because a claim was not made, nor was any money paid against a claim, and the legals fees were small in comparison to my premiums, I did not even see an increase when it came to renew my policy.  A win-win in my book.

-------------------------------------------
Andrew Fethes AIA
President
Andrew Fethes Architects PA
Oradell NJ
-------------------------------------------






Original Message:
Sent: 07-15-2011 11:46
From: Daniel Alter
Subject: Liability risk

To Tomas Hart:

I really feel for you. Being sued is no fun at all, especially for something that you did many years ago. As others have noted, there is no successful strategy to avoid being sued if you practice architecture, only successful strategies to manage a lawsuit and its aftermath.

I will add a note of caution to those that do carry E & O insurance: do not for a moment believe that insurance companies have your best interests at heart. They do not. Insurance companies are running a business themselves and their interests and yours do not always align. You must continue to be vigilant and actively involved in every aspect of your defense because, believe it or not, the carrier appointed attorney (or in your case your own appointed attorney) may not be as fluent in the particulars of your role as you would like to believe.

Best of luck to you.
-------------------------------------------
Daniel Alter AIA
Daniel Alter Architect PLLC
Brooklyn NY
-------------------------------------------

All -
This is a great discussion.  For more information on professional liability please try the AIA Risk Management Center: 

http://www.aia.org/practicing/AIAS078707?dvid=&recspec=AIAS078707

-------------------------------------------
James Cline AIA
Principal, SPP AG Chair
Cline Architects
San Francisco CA
-------------------------------------------






Original Message:
Sent: 07-18-2011 10:07
From: Andrew Fethes
Subject: Liability risk

Daniel makes a very good point about insurance companies.  While they do seem to be your advocate in a dispute, they are first and foremost covering themselves and their shareholders. They would gladly settle with a deadbeat client with a modicum of credibility rather than prove your innocence if it will be more financially productive; and then when the time comes for a renewal, increase your premiums based on your claim history.

I'm also not sure about the "limit of liability" clause as any real protection.  I doubt that I could design a totally deficient structure that causes millions of dollars of damages, and then tell the client you only paid me $$,$$$$, so here it is. Any good attorney can run circles around that. At best it could be a good screening clause to see the temperament of a potential client - if they balk at the clause you might have a troublemaker on your hands.  Furthermore, my insurance carrier doesn't give me any type of break for having this clause in my agreements, so why protect them even further?  I would be curious how others feel about this.

With all that said, I had a situation where I was brought into a dispute with a client and their contractor. The client was an attorney (surprise!) and stiffed me for about $3,500 at the end of the project with the threat of legal action for what she saw as deficiencies in my work. I made a business decision not to pursue the money and hoped that karma would deal with her. After 18 months of construction I was asked to give deposition by the contractor against the client who had brought suit against him, his subcontractors, their husbands and wives, and anyone else involved.  I fortunately was not named in the suit because I had a CA disclaimer in my agreement that was so clear the client-attorney knew that it wouldn't hold up in court. Nevertheless, I went to my insurance company with the deposition, and they assigned a construction attorney to my "case" who dealt with the other attorneys, made copies of all my files, and kept me clear of any involvement. When the discovery period ended without another request for deposition, the case was closed and I was relieved of any further action.  Because my policy has "first dollar defense" I was not out-of-pocket for anything more than my time and a little anxiety.  Because a claim was not made, nor was any money paid against a claim, and the legals fees were small in comparison to my premiums, I did not even see an increase when it came to renew my policy.  A win-win in my book.

-------------------------------------------
Andrew Fethes AIA
President
Andrew Fethes Architects PA
Oradell NJ
-------------------------------------------






Original Message:
Sent: 07-15-2011 11:46
From: Daniel Alter
Subject: Liability risk

To Tomas Hart:

I really feel for you. Being sued is no fun at all, especially for something that you did many years ago. As others have noted, there is no successful strategy to avoid being sued if you practice architecture, only successful strategies to manage a lawsuit and its aftermath.

I will add a note of caution to those that do carry E & O insurance: do not for a moment believe that insurance companies have your best interests at heart. They do not. Insurance companies are running a business themselves and their interests and yours do not always align. You must continue to be vigilant and actively involved in every aspect of your defense because, believe it or not, the carrier appointed attorney (or in your case your own appointed attorney) may not be as fluent in the particulars of your role as you would like to believe.

Best of luck to you.
-------------------------------------------
Daniel Alter AIA
Daniel Alter Architect PLLC
Brooklyn NY
-------------------------------------------

Another result of this ruthless economy, is that customers seem even more reluctant to pay for our services. To help avoid paying, it occasionally means they hide behind fabricated claims of negligence or accusations and exaggerations of E & O.

What this means to me, is that we have to do more (checking and coordination) with less (fees). Good Luck all!

-------------------------------------------
Steven Secon AIA
Steven Secon, Architect P.C.
Rye NY
-------------------------------------------






Original Message:
Sent: 07-20-2011 12:49
From: James Cline
Subject: Liability risk

All -
This is a great discussion.  For more information on professional liability please try the AIA Risk Management Center: 

http://www.aia.org/practicing/AIAS078707?dvid=&recspec=AIAS078707

-------------------------------------------
James Cline AIA
Principal, SPP AG Chair
Cline Architects
San Francisco CA
-------------------------------------------






Original Message:
Sent: 07-18-2011 10:07
From: Andrew Fethes
Subject: Liability risk

Daniel makes a very good point about insurance companies.  While they do seem to be your advocate in a dispute, they are first and foremost covering themselves and their shareholders. They would gladly settle with a deadbeat client with a modicum of credibility rather than prove your innocence if it will be more financially productive; and then when the time comes for a renewal, increase your premiums based on your claim history.

I'm also not sure about the "limit of liability" clause as any real protection.  I doubt that I could design a totally deficient structure that causes millions of dollars of damages, and then tell the client you only paid me $$,$$$$, so here it is. Any good attorney can run circles around that. At best it could be a good screening clause to see the temperament of a potential client - if they balk at the clause you might have a troublemaker on your hands.  Furthermore, my insurance carrier doesn't give me any type of break for having this clause in my agreements, so why protect them even further?  I would be curious how others feel about this.

With all that said, I had a situation where I was brought into a dispute with a client and their contractor. The client was an attorney (surprise!) and stiffed me for about $3,500 at the end of the project with the threat of legal action for what she saw as deficiencies in my work. I made a business decision not to pursue the money and hoped that karma would deal with her. After 18 months of construction I was asked to give deposition by the contractor against the client who had brought suit against him, his subcontractors, their husbands and wives, and anyone else involved.  I fortunately was not named in the suit because I had a CA disclaimer in my agreement that was so clear the client-attorney knew that it wouldn't hold up in court. Nevertheless, I went to my insurance company with the deposition, and they assigned a construction attorney to my "case" who dealt with the other attorneys, made copies of all my files, and kept me clear of any involvement. When the discovery period ended without another request for deposition, the case was closed and I was relieved of any further action.  Because my policy has "first dollar defense" I was not out-of-pocket for anything more than my time and a little anxiety.  Because a claim was not made, nor was any money paid against a claim, and the legals fees were small in comparison to my premiums, I did not even see an increase when it came to renew my policy.  A win-win in my book.

-------------------------------------------
Andrew Fethes AIA
President
Andrew Fethes Architects PA
Oradell NJ
-------------------------------------------






Original Message:
Sent: 07-15-2011 11:46
From: Daniel Alter
Subject: Liability risk

To Tomas Hart:

I really feel for you. Being sued is no fun at all, especially for something that you did many years ago. As others have noted, there is no successful strategy to avoid being sued if you practice architecture, only successful strategies to manage a lawsuit and its aftermath.

I will add a note of caution to those that do carry E & O insurance: do not for a moment believe that insurance companies have your best interests at heart. They do not. Insurance companies are running a business themselves and their interests and yours do not always align. You must continue to be vigilant and actively involved in every aspect of your defense because, believe it or not, the carrier appointed attorney (or in your case your own appointed attorney) may not be as fluent in the particulars of your role as you would like to believe.

Best of luck to you.
-------------------------------------------
Daniel Alter AIA
Daniel Alter Architect PLLC
Brooklyn NY
-------------------------------------------