Protecting Profitability: Managing Professional and Contractual Exposures

In every professional services agreement, architects accept not only professional exposures but create or accept commercial exposures through the contract language used. Client-generated contracts often include onerous cost-recovery provisions that exceed the normal legal liability of firms in their provision of professional services. Few contracts are balanced, fair, and focused on a productive relationship. Professional liability claims happen. In any year, an average of about one-quarter of all design firms insured by the CNA professional liability insurance program experiences a claim alleging harm from the negligent performance of professional services. While only about a third of these claims end up with an insurance payment to rectify harm or to pay for a cost, a loss, or damage, all claims take a design firms time, affect the firms profitability, and impair the firms reputation. Some architects succeed in adding provisions that protect their business interests and reduce their professional liability exposures. The standard AIA B101 includes ten valuable provisions that confine the exposure of the architect; in the B103 there are at least a dozen. This webinar describes the legal basis for professional liability claims, analyzes the statistics and trends of claims including who brings them against architects, and how firms can protect their assets and remain viable by managing their exposures including through the purchase of professional liability insurance. The webinar discussion uses the language of the standard AIA agreements in the Architects Contract Documents program to suggest alternative provisions and actions, architects might take to mitigate both professional and contractual risks.

Learning Objectives:

• Understand how the American legal system treats professional service firms including how tort law concepts define the professional standard of care.
• Learn who brings claims against design firms and what actions or inactions of the design firms engender professional liability claims.
• Recognize the business and professional risks generated by onerous contractual provisions and evaluate their risk when facing owner-generated provisions by gaining an understanding of how clients and their attorneys attempt to shift unmanageable and uninsurable risks to them that challenges their professionalism.
• Appreciate the need to educate themselves and their clients on contract language as a guide to professional performance, realize the background for the AIA standard contract language, and appreciate the value of carefully crafted contractual provisions.

Viewers who watch this webinar and take the self-assessment will earn 1.5 CEUs.