Professional services contracts typically include a clause stating that the consultant shall provide all services consistent with all laws, regulations, ordinance and codes. Although this may seem like an appropriate requirement, it could create an uninsurable warranty. The duty is made absolute. It is not conditioned on the designer following the Standard of Care. This becomes an uninsurable express warranty. How can it be remedied in the contract? Make compliance with law subject to the exercise of the Standard of Care. That’s insurable. See the short ConstructionRisk, LLC video on this subject.
Risk Management Comment:
An example of an uninsurable warranty of code compliance can easily occur with regard to fire code issues. I have represented consulting firms that were required to compensate their owner/clients for damages because the Owner was required by the fire marshal to change things in a building based on the fire marshal’s interpretation of code requirements – which code interpretation was not what would have been expected of a consultant exercising the reasonable standard of care. Likewise, building inspectors can interpret codes more stringently than a consultant might reasonably expect. Again, this can result in significant costs being incurred to correct something that the consultant believes met the standard of care. Unless the clause makes compliance with laws and codes a matter of exercising the standard of care, the consultant may be unable to defend itself with expert witnesses testifying that it acted reasonably in its code interpretation that differed from that of the code official.
About the author: Article written by J. Kent Holland, Jr., a construction lawyer located in Tysons Corner, Virginia, with a national practice (formerly with Wickwire Gavin, P.C. and now with ConstructionRisk Counsel, PLLC) representing design professionals, contractors and project owners. He is founder and president of a consulting firm, ConstructionRisk, LLC, providing consulting services to owners, design professionals, contractors and attorneys on construction projects. He is publisher of ConstructionRisk Report and may be reached at Kent@ConstructionRisk.com or by calling 703-623-1932. This article is published in ConstructionRisk Report, Vol. 24, No. 6 (July 2022).
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