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Material Breach - Future Implications

  • 1.  Material Breach - Future Implications

    Posted 17 days ago
    I am co-AOR for a institutional project and in the midst of construction our client had given our company a letter stating that we've incurred a Material Breach over items that were apparently missed in the design phase. We're pushing back against this however I am unsure how this can eventually pan out in the future. I suspect that if we lose the fight the Error-&-Omissions insurance will be tapped.

    I am an employee of the firm and don't have any partnership role. In the event that E&O is tapped would this be on my 'record' in the future if I decide to move on from my current employer? I worry that premiums for my future insurance will increase. Has anyone had faced this situation or have any insight?

    Thank you,
    Louis

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    Louis
    Dallas, TX
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  • 2.  RE: Material Breach - Future Implications

    Posted 14 days ago

    Louis:
    First question is did you personally sign the drawings? If not then you have nothing to worry about you are not directly involved in the insurance. If you did sign them, first bit of advice going forward is if you do not have an ownership position NEVER sign drawings. Liability goes with the signature. If you leave a company you still have liability but may not have the umbrella of their insurance.

    Either way when an issue that could lead to an insurance claim comes up, even just could, always alert the insurance company. Most big ones have realized than when issues get contentious it is in their (the insurance folks) and their client's best interest for the client to have the advice of an attorney so they get you a specialist attorney in the right state to help you navigate the traps. Most policies DO NOT CHARGE for this help unless a claim is settled in the case in which case you pay the deductible. It is the best service ever. Additionally most insurance policies can be considered voided if there is an issue that the insurance company is not made aware of as early as possible.

    I deal with all contract/claims/insurance issues at my firm. I have incredible brokers and I would be happy to tap their general knowledge for you if you have specific questions just send me a PM.

    Finally, for what it is worth, no set is perfect and at some point most architects will face a problem involving insurance whether or not it is their fault. It is scary but not crippling; after all this is what insurance is for. The first time I did it was a MEP problem but the owner had to sue us to get to them. I lost so many nights sleep...I wish someone had told me then that in the end, it will be ok. So I tell you, you will be ok.

    Best.
    Nea



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    [ Nea May] [Poole] AIA
    [Principal]
    [Poole & Poole Architecture, LLC]
    [Midlothian, ] [Virginia]
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  • 3.  RE: Material Breach - Future Implications

    Posted 14 days ago
    Louis,

    I will answer this from a non-technical perspective because that should really come from your insurance companies legal support.  Do talk to them immediately if you haven't already.  Also, I can't agree enough with the advice Nea provided.  Finally, if everything does go south, remember that the other party is rarely if ever interested in going after the AOR.  They want access to your firm's insurance not you  Also, document everything, Having been there before myself, in the end, you will be OK.

    Regarding your question about the claim following you, I both hire employees as well as fill out the insurance renewals and I have never come across a situation where the AOR is tracked or claims 'tagged' to them.  So IMHO don't worry about that, for what this is worth.  Good luck.

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    David Roselius AIA, NCARB
    CEO/Partner
    Heights Venture Architects, LLP
    Houston TX
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  • 4.  RE: Material Breach - Future Implications

    Posted 13 days ago
    All:

    Please go to an experienced construction law attorney for answers to these questions.  Do not ask an architect for legal advice.  Every circumstance is different.  You would not go to an attorney for design advice.

    JN

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    John Nyfeler FAIA, LEED AP
    John Nyfeler, FAIA
    Austin TX
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  • 5.  RE: Material Breach - Future Implications

    Posted 13 days ago
    All,

    I would like to disagree with Nea on one issue - liability does not simply follow the signature.  If you are a licensed architect and work on a project you have potential liability even if you didn't sign the documents.  The practical matter, however, is that most claimants do not file claims against architects who may have worked on a project but did not sign the documents.  Similarly, most architects that signed the documents are not going to be liable, as most claimants will seek the money from the insurance company.  If the firm is held liable, however, the signing architect may have issues with his state licensing board.

    I certainly agree with Nea that if you do not have ownership in the firm it is best for you that you do not sign the documents - although that may present the firm with a practice act issue (depending on the state) if none of those with ownership in the firm actually supervised the production of the documents.

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    Jeffrey Hamlett AIA
    Attorney-at-Law
    Owner
    Hamlett Risk Management
    Mukilteo WA
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