Avoiding the Professional Liability Trap
Standard design services are rife with unforeseen legal consequences. One overlooked area of risk is the job-site visit. As soon as they enter within the boundaries of a project, engineers can find themselves lost in a "Bermuda Triangle" of liability risks. Take the case of one structural engineer—in this instance, a senior partner in a small A/E firm that specializes in multi-family and ...
Standard design services are rife with unforeseen legal consequences. One overlooked area of risk is the job-site visit. As soon as they enter within the boundaries of a project, engineers can find themselves lost in a "Bermuda Triangle" of liability risks.
Take the case of one structural engineer—in this instance, a senior partner in a small A/E firm that specializes in multi-family and commercial condominium projects. Last year, on the corner across from his apartment, a condominium was under construction. He was interested in the project—which had been designed by another firm—and would frequently wander through the site, observing the progress and talking with the contractors. His visits continued throughout the course of construction.
Within two years of completion, a lawsuit—the all too typical destiny of residential condo projects—was filed against the developer by the homeowners' association for massive and pervasive construction defects. The developer cross-complained against the engineer who, again, was simply visiting the site, for his failure to exercise the standard of care required of a professional engineer, despite the fact that neither he nor his firm had anything to do with the design or administration of the project. The suit against him was quickly dismissed, but the story demonstrates the litigious environment within the construction industry.
Taking unnecessary risks
In spite of carefully crafted contract language that attempts to limit liability exposure, an increasing number of design professionals are being sued not only for breach of standard design duties, but also for the duties they informally and voluntarily assumed along the way. In fact, project owners often expect design- and construction-phase services that make architects and engineers responsible for what are essentially the owner's and contractor's duties.
Compounding the increased exposure for design professionals is the owner's reliance on representations that these same designers make concerning the suitability of the contractors' work. For example, job-site communications and field reports pose substantial risk to an engineer who "volunteers" as certifier of work performed by contractors and fabricators.
Thus, long after the construction documents have been published and permits issued, the engineer must avoid flying blindly into the "Bermuda Triangle" of construction-phase services: namely, the review of shop drawings, payment certification and construction observation. To avoid the risks posed by this phase, design professionals must establish solid guidelines that transfer liability back to the client and any others eager to let the design professional be responsible.
Consider the issues that have surfaced in lawsuits where engineer-authored job-site reports were the compelling basis establishing the engineer's liability for defective installation of structural assemblies. In one case, a developer asserted that it was entitled to rely upon the representations made within the engineer's report of observations. Even though the case is a structural engineering matter, the legal issues are relevant to designers of engineered building systems as well.
Here are the specifics: The owner asked the engineer to visit the project site and comment on the placement and connection of hardware to a structural beam. Upon inspection of a steel hanger, it was quite obvious that the contractor had installed bolts that were too short to fully engage the threads of the nut. While on the site, the engineer also noted that the stucco lath and moisture barrier operations had been completed. In his follow-up report of the site visit, the engineer cited the bolting deficiency, with a correction, and also wrote that "the stucco cladding paper and lath is complete, ready for the scratch coat." This report became a key issue in the case against the designer, as the structural design allowed for the stucco cladding to participate in the building's lateral force resistance system.
Two years later, when cracks in the stucco and other collateral finishes were observed, it was determined by forensic experts that the attachment of the lath to the wood frame employed staples that were too short, and that the fastener spacing exceeded the design specifications. Essentially, the weight of the stucco exceeded the capacity of the fasteners to secure it to the frame. The engineer's written report of observation was interpreted by the developer's attorney as an endorsement of the contractor's adherence to the structural design.
Attorneys for the developer cited the field report, indicating that it provided a representation that all of the work observed by the engineer was consistent with industry practices and wisdom. They argued that the engineer's comment that "...the stucco cladding paper and lath is complete" additionally inferred, "...according to building codes and my specs." The court agreed and held that no other individual was better informed and in a better position to observe a defect in the application of the lath than the engineer. The engineer was found by the court to have contributed substantially to the failures of the stucco attachment.
How could this liability risk have been avoided? It's all about duty. In this situation, the engineer snatched liability away from the contractor and the developer by voluntarily assuming the duty of evaluating the contractor's work.
But let's return in time to the developer's initial concern about the structural connection. The engineer observes the same condition, but this time offers a substantially different report about the stucco: "Stucco lath and moisture barrier work appears complete. Since structural integrity of the building depends on the fastener use and placement for positive attachment to the frame, it is strongly recommended that you verify through the building department or a deputy inspector that the details of the specifications were faithfully adhered to."
The engineer has just directed the owner or developer to verify compliance with some other entity and has pointed out that it is a critical component of the building's design. Thus, the liability has been kept in the lap of the owner. The same use of "recommendations" can charge the owner to seek verification from the contractor, thus asserting that the engineer's observation was not an inspection. More importantly, it establishes that inspection of the work is outside of the engineer's scope.
The key to this area of practice is to be always mindful of the duty that one can end up assuming as a result of a simple conversation or a brief written memo. Once again, although the case involved a structural design issue, the same practice should be incorporated into the standard policies of all disciplines of engineering. Designers and specifiers should maintain strict control over the actual duties that they assume, and they should avoid even the appearance of approving an owner's and contractor's work. Otherwise, the other players in the construction drama will be delighted to hand the engineer their responsibilities and receive the endorsement of the design professional for the work they have just completed. The construction industry has established the standard that the contractor is responsible for the methods and materials of constructing the project. But as soon as an engineer states, even in ambiguous terms, that the work is "complete," he or she has joined right in on the responsibility. By simply adding, "The Owner should verify with the equipment manufacturer's representative that all connections meet with their specifications for this application," the engineer places responsibility where it belongs—back with the owner.
The use of "recommendation" language cannot be emphasized enough, not only for observation reports of site visits, but also certificates for payment and written requests for information from the contractors. By including a recommendation to verify, confirm, validate or insure that the method or material is appropriate, design professionals place themselves one step further from the inevitable dispute. The following is a suggested checklist:
Limit observations and report language to the purpose of the visit.
Limit oral conversations with the contractor to basic items. Follow up substantive questions in writing.
Include "recommendations to verify" in every report or written correspondence dealing with contractor performance.
Follow up in writing, asking the owner/developer if their verification of the work confirmed compliance by the contractor, manufacturer or fabricator.
Limit the construction-phase services wherever possible. The project rarely has a sufficient budget to allow for detailed verification of design compliance. This is where the risk ultimately lies.
When the "high risk, low margin" aspect of the industry is combined with an aggressive plaintiff's attorney, designers are likely to be brought into the dispute process as a party for construction defect issues that deal more with methods and materials than design errors. There is no better defense against surviving litigation than a well-documented pattern of advising your clients to verify that their contractors are performing to the standard of care they are held to.
Finally, a closing tip regarding record keeping of job site reports and correspondence: Create and maintain records with the foresight that they may become the exhibits in a lawsuit that impugns your professional integrity. The golden rule for legal dispute preparation is, Never show up with the second best evidence. Every letter, memo and report has the possibility of being transformed into an arrow aimed at you. The risk management mindset demands that one become more careful and cautious about describing and limiting the scope of work to design tasks.
Tools for Managing Professional Liability Risk
New documents published by the American Society of Heating, Refrigerating and Air-Conditioning Engineers (ASHRAE) describes how to avoid or, at least, how to limit legal risks.
The ASHRAE Member's Survival Guide - Contracts: A Self-Help Tool for Managing Risk Through the Use of Contract Terms discusses risks faced by consulting engineers, architects, construction managers and others. It also contains information about provisions to which one should not agree, as well as tips for negotiating contracts.
"Given the litigious nature of our society, and the enormous expense, burden, time and stress associated with lawsuits, it is critically important that you consider the risks to which a project will subject you," says author Maralynne Flehner. "This guide describes the steps you can take to avoid and/or limit those risks before you enter a contract for your services."
Flehner is vice chair of ASHRAE's task group on general legal education and co-chair of the group's publications subcommittee. The document is the first in a series titled, The ASHRAE Member's Survival Guide, which was originally conceived in a task group seminar at the ASHRAE 2001 Winter Meeting. The seminar presented an overview of various professional and legal steps that practitioners can take to avoid pitfalls and to resolve disputes, according to Flehner.
"The guide will be comprised of a series of discrete papers, each of which deals with a topic of legal or professional interest to ASHRAE members," she says. "The unifying theme is that all of the papers will be geared to helping members protect themselves in business."
Another new legal reference in the ASHRAE catalog is a DVD that describes how e-mails and other documents are used in litigation. The Good, the Bad and the Ugly (Documents and E-mails): What Every ASHRAE Member Should Know About How Documents and E-mails Are Used in Litigation features a hypothetical lawsuit and a mock trial.
"The fact is that it only takes a couple of missing documents or bad documents, or documents meant to be funny but that can be misconstrued, to make a plaintiff's case," says Christopher McDonald, Esq., from the Kansas City, Mo., firm of Shook, Hardy and Bacon.
Originally presented at the ASHRAE's 2002 Winter Meeting, the program addresses the kinds of documents that should and should not be kept in files; the dangers of losing or destroying documents; ways courts are dealing with electronic discovery issues; how juries learn about documents; and how lawyers use documents and missing documents in cross-examination.
"We will show you what kinds of documents you should always have in your files, what kind of documents you should never have and what can happen if you improvidently create, lose or destroy documents," Flehner says.
The DVD allows for bookmarking of certain sections and can be easily stopped and started for note-taking. Both documents can be ordered on the Internet at: