Fairness and Pragmatism
Industry associations have promoted the need for fairer contract language in a number of states. A California law enacted this year clarifies how a duty to defend obligation will apply in contracts with public agencies. It would relieve design professionals of a defense obligation to a public agency against a third-party lawsuit unless there is a finding of negligence, recklessness or willful misconduct on the part of the professional.
Owners and their attorneys need to be educated about the need for improved contract terms. While an understanding of A/E/C professionals' roles and responsibilities is key, owners must become better informed about what insurance coverage is available to back the project obligations of these practitioners.
While owners hold a clear negotiating advantage, they need to balance their desire to shift away risk with an on-site reality that calls for fairness and pragmatism. At the same time, architects, engineers and construction professionals need to recognize that by agreeing to onerous contractual clauses, they may be taking on more risk than a project is worth.
Mike Herlihy is an executive vice president and partner at Ames & Gough, an insurance broker and risk consultant headquartered in Washington, D.C.