Cost of E & O insurance

[Allen Brown]

Lew,

I may not agree with everything you say, but I appreciate that you're always a gentleman here and always keep an open mind. Keep up the good work.

I'd like to second that, and add that I have seen many a day when Lew will go online to find some obscure fact and post it here to help someone.

Also Perry, I have seen many threads much like this one, that many people have weighed in on (myself included), and although incorrect assumptions are made, there is enough collective minds on this forum that we will almost always get to the point where many of us learned something we did not know before. And if you go back and read Lew's comments, I can assure you he was not attacking you, but trying to help.

[perryh]

Adam

Come on over I,m 6' 7" and 300 lbs. Ex pro basketball player in Europe long time ago. Glad I learned something in college. I'm just trying to give good advice because of my extensive experience with this. It might be different in your state. Just don't confuse a corp. with an l.l.c partnership.

[johnN]

Condos are a particularly difficult deal. A friend in Reno was approched by one of the national builders to buy some of his land for a condo project. $600K sell.
Even this giant company, he found out, was budgeting $30,000 per unit for insurance coverage against owner lawsuit. As opposed to 5K for a single family home. Having owned some condo investment properties, I can first hand tell you that the owners think that when they buy -all expenses are covered by their fees, they never read the CC&R document, and when things need maintainance they sue the builder/ designer etc. The cost of litigation is so high they almost always settle. One of my neighbors is a "forensic Architect" (LOL) he has made millions trumping up defects. The advice is to stay away from condo projects unless all the drawings appear on the builders title block and you are covered by his insurance. Even then think twice.

[Draw4Food]

If you have a disclaimer which clearly states (among other things) that your liability will be limited to the price you are paid, wouln't that be adequate? Nothing will protect you 100%, of course, but shouldn't this be a reasonably effective firewall?

I ask this from the standpoint of a designer, not an architect. Aren't architects "on the hook" due to the nature of their licensing? Like other professionals who are licensed, like a structural engineer or accountant, their certification implies that they "know what they are doing". Not to demean designers, but we seem to be held in lower esteem and to a lower standard than architects, and I wonder if the courts share this opinion?

Has any designer here ever been sued while having a solid disclaimer in place?

In the interest of Chief users solidarity, I hereby say a curse upon Wendy's legal antagonists.

[lbuttery]

we seem to be held in lower esteem and to a lower standard than architects, and I wonder if the courts share this opinion?


In general, they would. But it depends on the state and the circumstances and while the disclaimer might be a shield it could be pierced.

Wendy's point is that you might eventually be held innocent or not liable but you still have to pay the lawyers to defend you. Arrrgh.

Lew

[WendyWelton]

Draw4Food,

What's your name?

"I hereby say a curse upon Wendy's legal antagonists." Huh? I'm not creating the news, merely reporting it. I'm not trying to throw a wet blanket on anybody's party, I'm trying to educate so that others might avoid the fire that somebody then wants to put out with a wet blanket.

The problem with limiting liability to fees paid is that it only applies to your original client. The big liability with condos is that they are then sold. The purchasers are not a party to the original contract, and the limit does not apply unless the builder writes it into each sales contracts (yeah, right, like that's gonna happen - and like the RE agents won't bounce that clause real fast). Worse, your one client, who's "in the business" - knowledgeable about quality standards and such, then morphs into a dozen or more, who are that perfect storm of uneducated (about construction realities), emotional (about their homes) and worst of all, a committee.

If you're going to do condos, and you don't have insurance - a limit on liability will do you no good. A clause that has the builder "release, indemnify and hold harmless" your company will. Indemnify means the developer pays your legal fees for whatever occurences are specified in the contract. Definately, absolutely get an attorney to write that contract. Oh, and vet the developer to make sure he has insurance that would kick in.

Then of course there's the question of whether the developer will sign it. If you're a licensed architect, you most likely have insurance, so we're talking about non-registrants. The developer is probably hiring a non-registrant to save money (red flag #1). Unless there's a clear discussion about liability and the developer is providing the insurance, I'd walk away. If he's willing to sign that document and doesn't have insurance, he's an idiot (red flags #10-50). If he's not willing to sign it, I'd consider it an amount of risk that simply did not justify the fee.

And, as Lew pointed out, even if your firewall holds, ya still got those (%*(#^# legal fees.

If you've read many of the threads on this topic, you'll know that I myself am still paying tuition to the School of Hard Knocks, in the form of legal fees in a case that started in 2002. Yep - 5 years and still counting.

So, you can discount the advise of those who've already paid for the lesson. I appealed to the gods of economics and the gods of human nature to have those laws repealed just because I didn't think things should be the way they are. They turned me down flat and spanked me on my way out the door.

[sutcac]

Wendy,

Thank for sharing your seemingly limitless supply of would-do-well-to-learn-from experiences. I have learned a great deal and am a big "fan" for lack of a better word.

But I have to get something off my chest because I've seen it so many times now-

advise- verb
advice- noun

Please don't hate me!

[lbuttery]

"I hereby say a curse upon Wendy's legal antagonists."

Wendy:

Draw4food was giving you sympathy for your legal woes, as all of us do. As in, "whoa, I hope that never happens to me"

Me thinks you read her post too fast ?

Lew

[Allen42acj]

If you screw up you should be held responsible..
If your screw up has to be fixed,some one will want to get paid for material and labor.
If the shoe was on the other foot how would you feel?

This is not about frivolous lawsuits..

[Draw4Food]

Wendy,

Sorry, I might have responded to the wrong thread on the same topic. I wasn't meaning multi-family in my post, but single family.

It might have sounded like I was making a statement with my post, but it was really a question. I struggle with what to do about liability, and if a disclaimer won't work, I want to know now rather than in court.

So, you can discount the advise of those who've already paid for the lesson.
I greatly value your advice. In fact, it was your good advice that tipped the scales and made me choose CA. A couple years ago, you said something to the effect that I would be so happy with chief I would want to send them brownies. I would have, but I always eat the brownies before they are packaged. So I am a huge fan of yours and I find your post very valuable. Where you said Huh?, I meant it as a lighthearted comment to indicate that I was on your side. My post was not intended to accuse you of being a wet blanket. I am trying to determine whether, as a designer, I am less likely than an architect to draw legal fire.

Allan

[Draw4Food]

Me thinks you read her post too fast ?

I must need to change my nickname or writing style. Everybody thinks I am a girl for some reason.

Thanks Lew, that is what I meant.

Allan

[lbuttery]

Draw4food:

Allan:

sorry about that, some bad memory cell must have kicked

My mistake, but a name does help for each posting

Lew

[WendyWelton]

Allan,

Me thinks I totally didn't understand the line I quoted from your post! Many apologies. I think I had also just read something somewhere else that got under my skin - more apologies.

"her"... Hmmm - I could swear there was a Draw4Food here once before, who was a woman. There's an easy way around it. If you go to User CP you can put an automatic signature with your name etc.

Allen,

Yes, absolutely. The problem with certain project types is that the liability can be way way way out of scale with what most non-registrants get paid.

The amounts charged by any business, whether they are the price of a product or fees for service, are also about the Risk/Reward equation.

If you get paid to design 1 unit, built 1, good. Let's say you get $5,000, just for giggles. You make a mistake on a window and they ding you $800 for labor and materials. Yeah, ok. Now multiply that same mistake by 100 units. Uh oh.

Allen,

What to do about liability:

Rule #1 - keep your risk in reasonable relationship to your reward.

Single family house, no insurance - I would include 2 clauses:
1 - limiting liability to fees paid, or whatever your state allows.
2 - a clause clearly limiting your liability to the service provided.

Huh? Yes. If you aren't paid for the time it takes to do a full estimate, you should not be responsible for construction. If you are not paid to review construction weekly, you should not be responsible for verifying that the windows were put in correctly. If you were not paid to do thermal & moisture details...

Without insurance, I wouldn't touch any project where the end users are a whole lot of potential people, unless I got an indemnity clause. Condos, churches, schools, most retail businesses (depends on what you're doing)... I think the legal eagles call all those people potential "third party complainants", who would not be covered by any limits in your contract, 'cause they didn't sign it.

I worked for a firm that got sued because a woman slipped in the water from an overflowing toilet at a retail store we designed. The claim? That we "specified a defective toilet". It was the American Standard that's in half the big box retailers in the country.

Bryce,

Sorry - yes - advice. That bugs me too. I always look at it, ask myself which one, can't remember...

All,

Sorry for going on an on. I guess that when I see posts here that tell me somebody really doesn't know much about this, like this current condo question, I go into Mother Hen mode - getting her chicks ready to cross that big road, where one mistake can be crushing.

[Allen42acj]

Wendy
Thanks..
Just my opinion but multi family=condos should be drawn by the professionals.
Any thing commercial, the rules get to complicated for an average drafter..

People have to take responsibility for what they do.
Blame gets placed on every one else.
The lawyers get a bad reputation on this.
I don't want to draw plans loaded with disclaimers just to cover my butt..

[WendyWelton]

Allen,

I agree - not a bad idea to simply avoid any project where a lot of disclaimers would be needed or where it's too far removed from your core competence.

I do stick by my advice (with a "c"!!!!) to disclaim liability for the portions of a project you were not paid to do. It kind of ***** that in today's world you have to actually state the obvious, but there you have it.

By the way, discussing this type of thing with the client can have other positive impacts. They either mentally put responsibility where it belongs, or they hire you to do that portion - as in, more business. It depends on your individual skills, but a lot of "just drafters" here are quite skilled in estimating or skilled builders who could add real value with paid site visits.