What you point out is a common problem
You describe a circumstance where the Owner attempts to impose liability on the Architect for omissions or changes where the quantum exceeds a certain threshold. Said another way, the Architect is responsible by contract for omissions or changes where they exceed say 5% (for example) of the construction contract price
The definition and legal concepts as they apply to errors and omissions and the standard of care don't change - hence the problem.
As I said previously, your insurance covers you for your inadvertent failure to meet the standard of care. The standard of care is applicable in the tort sense and is completely unrelated to contract. If you assume additional duties by contract that would not be imposed upon you but for the contract, your coverage generally does not extend to those duties. In essence, under those clauses, you could be financially responsible to the Owner even though there is no breach of the tort standard of care (remember that there is no limit on the number of errors or omissions that could be made in a manner consistent with the tort standard of care - the standard of care allows for that - and there is no price limit - the mere existence of any particular quantum of errors or omissions does not automatically equate with a breach of the standard of care). Where there is no breach of the standard of care there is no insurance coverage. Likewise, those clauses redefine traditional damage law such that payment by the Owner would be considered a "damage" where under normal principles it would not be. Again, there is no coverage under traditional insurance thinking for damages as defined in that manner.
Those sorts of issues must be carefully reviewed with your carrier. However, as a general proposition, while you have coverage for compliance with the traditional tort standard of care, you have none for obligations that you assume by contract that but for the contract would not exist. These clauses generally fall into the latter category.
I have had success negotiating them away for clients by explaining that to Owners. Other than the insurance coverage, the Architect generally has no real ability to pay anything anyway, so why impose a meaningless obligation on him or her and create an expensive legal battle in the process?
Difficult questions for sure, but ones that are outside the traditional insurance and legal thinking such that they require careful consideration and consultation with insurance and legal professionals
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Frederick Butters FAIA
Attorney
Southfield MI
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Original Message:
Sent: 12-30-2010 10:14
From: Eric Anderson
Subject: defininition of "errors and omissions"
I appreciate the careful and full explanation that Mr. Butters has provided. Another facet of this subject is errors and omissions in the design/build project delivery approach.
We are finding ourselves in a new set of relationships in the design/build project delivery world. Usually we are in a subcontract relationship with a contractor/design builder who holds the prime agreement with the owner, and our design agreement contains all of the flow down provisions of the prime agreement.
In this situation I presume the definition of malpractice doesn't change, but the degree of our responsibilities for errors and omissions may be different from the degree of responsibility we have expected when working under a traditional design agreement with the owner.
I would be interested in Mr. Butters and others comments in this regard.
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Eric Anderson AIA
Director, Facility Design
Woolpert, Inc.
Atlanta GA
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