Given the uncertainty and precariousness of construction projects over the last year, it is all the more important to be rigorous when it comes to the contracts an architect might sign and the commitments they make.
Mark Klimt is a partner at DWF Law and one of the RIBA’s Specialist Practice Consultants. He reports that some contractors or developers who have suffered losses may be tempted to try to recoup losses via opportunistic insurance claims.
An insurance claim will generally “follow the money”: the party that has the best professional indemnity (PI) cover in place may be the prime target for a claim. Such a claim might well be directed at the architect.
“If architects, through their efforts to maintain a good claims record and their good working practices, have remained an acceptable risk for insurers, they need to be alert to the risk that other parties could try to take advantage of them,” Klimt warns.
He suggests a few examples of potential risks. Contractors are not insured for quality of workmanship, he points out. Design and Build contractors, therefore, when passing on possible design issues to the appointed architect, might seek to include any number of workmanship problems. Developers, furthermore, may seek to include enhanced solutions for problems that would have had to be paid for in any event, but for the claim.
These are familiar problems, says Klimt, but have been brought more firmly into focus with the current insurance squeeze, the additional uncertainty swirling around fire safety responsibility, and the economic uncertainty caused by the coronavirus pandemic.
Protection against any potential claims begins with your contract. Make sure your terms of appointment are secure. The most important precautionary steps that architects can take in these circumstances are to make sure that:
- contractual obligations match the insurance cover you have in place
- you are not exposed to any liabilities that a claimant might steer towards you because the other parties are not protected by insurance
Any expedient settlement offered by the architect’s insurer, however undeserved, will obviously impact upon the architect’s future premiums, which have already increased steeply.
Klimt offers five good practice tips that are designed to arm architects against potential opportunistic claims:
- Watertight appointment terms
Have straightforward, unambiguous appointment terms where it is clear not only which services are going to be provided, but also which services are not. In particular, if the architect has restrictions/exclusions on its insurance for, say, fire safety and/or basement work, then the appointment document should be clear that these services do not fall within the architect's compass. Other consultants (fire engineer, structural engineer) need to be engaged.
2. Specific work and the net contributions clause
The appointment should contain an acknowledgement that the client will hold the contractor and/or the other consultants (and not the architect) responsible for the specific work entrusted to those parties.
This is to prevent a client from deliberately focusing on the architect and artificially shaping its claim towards design issues simply because those who are truly responsible are a less attractive target, or no longer in business.
There should also be a "net contributions clause," designed to oust the common law principle of joint and several liability. This will ensure that any shared liability is fairly apportioned, rather than the whole amount of the loss being enforced against the architect because the other parties are, for whatever reason, not able to honour their proportion of liability.
3. Capping the architect’s liability to the insurer’s response
If possible, the architect should consider contractually linking its liability not only to the level of insurance required by the client but also to the availability of that insurance: in other words, the architect’s liability should be capped at the level of their insurer’s positive response to a claim.
4. Sub-consultants
The architect should make sure that any sub-consultants engaged by it on the project are adequately insured.
5. Impeccable record keeping
Because any vulnerability on a project is likely to be exploited, accurate record keeping throughout the history of the project is of particular importance in the current litigious climate. This gives the architect the best chance of identifying an instance where responsibility is being assigned without justification.
The RIBA publish a number of different professional services and building contracts. They are designed to be clear and easy to use; and are suitable for architects, contractors, consultants, commercial businesses, and clients.
They feature baseline clauses, such as net contribution clauses, to ensure rigour, and may provide a useful comparison point if a developer or client insists on a bespoke form.
Mark Klimt will be speaking about how to practice with exclusions to your PI insurance at this year's online RIBA Guerrilla Tactics conference: Stop, Collaborate and Listen.
Thanks to Mark Klimt, Partner (Professional Indemnity), DWF Law LLP.
Text by Neal Morris. This is a professional feature edited by the RIBA Practice team. Send us your feedback and ideas.
RIBA core curriculum topic: Procurement and contracts
As part of the flexible RIBA CPD programme, professional features count as microlearning. See further information on the updated RIBA CPD Core Curriculum and on fulfilling your CPD requirements as an RIBA Chartered Member.
First posted on 3 June 2021.
