It is not uncommon for a design firm to receive a request from its client owner (Owner) to execute a document required by the Owner's lender. Oftentimes, this is an urgent ‘must-do or the world will end’ request. The form is known by various names, including Consent to Assignment, Collateral Assignment of Architects/Engineers Contract, Architect/Engineer Certification and Consent, and more. In this article, we shall refer to the document as the ‘Lenders’ Consent’. 

Risk management is a vital component of any successful A/E firm. Whether you’re establishing a new program or refining an existing one, taking proactive steps to mitigate risks can safeguard your firm’s reputation, profitability, and future stability. 

Time is a crucial element that all professionals, particularly design professionals, must manage effectively. Few professions are as bound by strict schedules as architecture and engineering (A/E) firms. Frequently, clients of A/E firms demand and expect their projects to be completed as quickly as possible. Many clients mistakenly believe that A/E firms somehow have control over time—control over the project completion dates. Reality is otherwise, but A/E firms can do a poor job of educating their clients about their inability to control project completion in a timely manner. We have all witnessed project schedules go awry for various reasons. While it may be easy to identify a specific cause, multiple factors often contribute to a delay, making it difficult to pinpoint responsibility. 

From the very start of a potential project, time is a significant concern. As owners begin conceptualizing a project, they immediately consider the timelines involved. Owners may face delays in securing funding, selecting a project team, or adhering to deadlines set by others that are non-negotiable. The A/E firm must also contemplate time at the outset of their involvement. Is the proposed schedule realistic? Can they mobilize their staff as required by the schedule. What potential threats could hinder the timeline, such as labor shortages, supply chain issues, permitting problems, or public resistance? Some of these issues are not in the control of the A/E, but the Client may still find reason to put blame on the design firm.  

Navigating the complexities of Mergers and Acquisitions (M&A) involving design firms can often feel like trying to orchestrate a symphony amidst a pile of rubble. However, a beautiful symphony can be had with appropriate strategies and insights. It is of vital importance the firms involved have qualified legal and insurance assistance before beginning this journey.  Not all lawyers nor all insurance agents possess such qualifications.  This newsletter delves into the key insurance considerations of M&A and provides a guide to ensure smooth and successful transactions.  Failure to properly address these issues can result in significant, uninsured losses. 

Understanding the Basics

Some clients, we know, often expect perfection as to projects coming in on time, within budget, and code-compliant.   Many believe the design firm's plans and specifications should be perfect, with no errors, omissions, or deviation from code.  That’s what the client is paying for, is it not?  Of course, the goal of all designers is to meet these expectations.  And most of the time, designers are quite successful in doing so.  Those firms that do not meet such expectations disappear over time.  Success is a wonderful thing.  But we know what happens when it is when the project doesn’t come in on time, comes in over budget, or it is discovered the plans are allegedly not in strict compliance with code.    Owners become unhappy and look to the design firm to ‘make it right’.  

We look at code compliance issues with a broad stroke since so many variables are involved.  Without a contractual promise to provide plans in strict compliance with code, courts will usually determine responsibility based on the standard of care.  In preparing its drawings, did the design firm act within the applicable standard of care? There are important legal distinctions between a claim of negligence (breach of the standard of care) and a breach of contract claim. It is often much easier for a client to prove negligence than a breach of contract.  Remember, most breach of contract claims are simply not insurable under any firm’s professional liability policy.  Such policies are designed to cover negligence claims and usually exclude coverage for breach of contract claims.  So,,,, this is an important issue for design firms.   

Indemnities: The Bane of Design Firms 

Mental Health Comes First in Risk Management 

The Challenge of a Hybrid Workplace for Architects and Engineers 

The following material is provided for informational purposes only. Before taking any action that could have legal or other significant consequences, consult with a qualified professional who can provide guidance tailored to your unique circumstances. 

Leveraging Telematics for Enhanced Fleet Management

When Trouble Strikes: A Crisis Management Guide 

 Regulatory Round-Up July 2024

US High Court to Weigh San Francisco Water Pollutant Limits Challenge

Engineering News Record reports on a case recently taken up by the U.S. Supreme Court dealing with water pollution. In 2019 the EPA and the State of California allowed San Francisco Public Utilities Commission to release pollutants into the ocean in violation of an ordinance passed by the City and County of San Francisco. https://www.enr.com/articles/58748-us-high-court-to-weigh-san-francisco-water-pollutant-limits-challenge

Regulatory Round-Up June 2024

US High Court to Weigh San Francisco Water Pollutant Limits Challenge

Engineering News Record reports on a case recently taken up by the U.S. Supreme Court dealing with water pollution. In 2019 the EPA and the State of California allowed San Francisco Public Utilities Commission to release pollutants into the ocean in violation of an ordinance passed by the City and County of San Francisco. https://www.enr.com/articles/58748-us-high-court-to-weigh-san-francisco-water-pollutant-limits-challenge

Positive Economic Outlook for Engineering Firms

When Your Client Says "Stop!"

The following material is provided for informational purposes only. Before taking any action that could have legal or other significant consequences, consult with a qualified professional who can provide guidance tailored to your unique circumstances.

The Importance of Understanding Payment Provisions

The material provided in these articles is for informational purposes only. Before taking any action that could have legal or other important consequences, speak with a qualified professional who can provide guidance that considers your unique circumstances.

Understanding payment provisions in design professional contracts is vital for a successful project. These provisions specify how, when, and how much professionals will be paid for their design services.

Navigating the world of Design Professional Liability claims can be intimidating. This article sheds light on five common mistakes that architects and engineers often make in professional liability claims. Understanding and addressing these pitfalls is paramount for those committed to delivering high-quality services.

1. Not Reporting

As an employer, if you have had a workers’ compensation claim you are probably aware of and keenly sensitive to your workers’ compensation experience modifier.  Not only does it have a direct impact on the cost of workers’ compensation insurance, but also having a favorable experience modifier is often required to work on certain projects.  Given the importance of the “mod” to your business, we thought it would be important to review some basic information about how it is calculated and equip you with some strategies for making sure it is at the lowest possible.

At the most basic level, your organization’s experience modifier is a measure of whether your organization is likely to have either more or less claims than another company performing similar operations based on claims history.  Having a low mod, below a 1.00, results in a credit on your workers’ compensation premium and having a high mod, or above a 1.00 results in a debit on your workers’ compensation premium. While the calculation is somewhat complex, knowing some key facts about how it is calculated can help your risk management strategy maximize its impact on your mod and workers’ compensation cost.

By Andrew Mendelson, FAIA
Executive Vice President, Chief Risk Management and CX Officer
Berkley Design Professional, a Berkley Company