The best defense: to protect yourself from liability claims, speak clearly and carry insurance

Residential Architect, August, 2002 by Cheryl Weber

It's the common theme in architects' bad dreams, the stuff of tortured visions in the night. That vinyl wall coveting a developer used in your condo design becomes a breeding ground for virulent mold. A roof leak ruins a client's priceless painting. A crack appears in the foundation wall of a million-dollar home.

When you're an architect, the possible scenarios for getting sued are omnipresent. And as one of life's unpleasantries, a spec or installation gone wrong ranks right up there with a house fire or a car accident. Not only can a claim cost thousands of dollars and damage your reputation, but the process of defending yourself disrupts your productivity and your peace of mind.

Residential claims against small architecture firms are growing at a steady pace, especially among condominium projects, according to a survey conducted by Victor O. Schinnerer & Company, an insurance firm in Chevy Chase, Md. Between 1996 and 2000, the number of claims the company paid involving condo projects increased at an annual rate of 17 percent, compared to 6 percent for all building projects. Even litigation involving townhouse and single-family home projects, considered relatively trouble-free, increased annually by 15 percent. Think about your liabilities too much, and you might start questioning the clients in your life, not to mention your creative freedom.

Yet despite the wild cards inherent in residential design, there's a lot you can do to protect yourself. Many architects have figured out how to institute safeguards--through contract language, office checklists, and that ultimate preventative measure, managing clients--that let them sleep easier at night.

piece of the rock

Professional liability insurance, also called errors and omissions, is the funding source for the truly scary types of claims, those that can result in big money. And it's expensive--not only in monthly premiums, but because you have to purchase it for the long term to keep from throwing your money away. "You have to have the insurance when you make the mistake and when the claim comes up nine years later," says architect and attorney Charles Heuer, FAIA, of the Heuer Law Group based in Charlottesville, Va. How much should you buy? "How much can you afford?" responds Heuer, who also runs the AIA's Legal Line (e-mail, legaline1@aol.com). Some architects feel the threat of claims never goes away, even after they retire.

Manhattan attorney David Pfeffer, LePatner & Associates, says residential architects typically purchase basic policies of $1 million or less. The cost of protection diminishes as you go up from there, much like having an auto policy for $300,000 plus an umbrella policy for $1 million. The coverage architects buy, he says, should be in proportion to the dollar value of what they're designing. It also should be based on past experiences and on the reputation of the contractors they're dealing with. "Even on a small project, money can be eaten away quickly by defense costs, which come off the top of the policy," Pfeffer says. "If there's a delay in construction, the owner sues the contractor, and the contractor points a finger to the architect because of unclear drawings."

Heuer offers a telling perspective on the inner workings of a malpractice suit. On most claims, he says, the homeowner is unable to prove that the architect has made a serious technical error. In order for the plaintiff to win a settlement, your mistakes have to be in the category of gross negligence--you missed something big that nobody else would have missed. "So a homeowner, not familiar with all this stuff, has expectations that everything will be perfect," Heuer says. "The client gets bent out of shape and wants to bring a claim, and gets into court or arbitration, and is unable to prove a negligent mistake, but a lot of money gets spent on attorney fees.

"The key point in liability protection," he adds, "is that most claims against the architect have little or nothing to do with a technical error, and everything to do with communication errors--disappointed expectations. That's why prevention is so important. Once somebody makes a claim, it's big bucks. And for a small firm, that can be killing. Even if the insurance company is paying the money, there's always a deductible."

limiting your liability

One way to reduce your liability is to spread it around. Five years ago, the large Memphis firm Looney Ricks Kiss instituted a new policy to cut back its exposure. Unless the firm is hired for full services (as defined by the AIA's The Architect's Handbook of Professional Practice), which include overseeing construction and approving payment requests from contractors, the contract limits its liability to the total architectural fee. Since adopting that policy, Carson Looney, FAIA, says only three clients have balked. One was a developer building 300 spec homes that wanted the firm to assume liability for all of them. "In the course of negotiations, if the client doesn't like our terms, we'll offer to buy a project-specific insurance and put it into our bill," Looney says. "We get a quote, and they realize what the real issues are. If we're paid to take responsibility, we'll cover it. But we can't possibly be held responsible for things outside our control."