WTW A&E Technical Brief: Climate change risk considerations

There is no one contract clause that will alleviate our concerns about claims arising from climate change. WTW A&E recommends a documented process where an owner is offered resilient and adaptive design alternatives with associated costs identified and the client decides what level of risk to accept. CNA Insurance has offered the following guidance:

Ask your client about specific resiliency concerns:

• What parameters related to climate change should be considered during design?
• What investments is the client willing to make to increase resiliency?

Questions should be:

• Project-type specific
• Geographically specific
• Identify known conditions or anticipated changes

CNA has also provided the following examples of beneficial contract language:

• EJCDC E-500 Engineer’s Services as Owner’s Option: Based on applicable codes and standards, review with Owner the susceptibility of the proposed improvements to extreme or unusual natural and man-made hazards and, upon Owner request, identify such additional risk assessment studies or tools to further evaluate system resiliency.
• Informed consent: The Design Professional will design in compliance with existing codes and regulations in place and applicable to the design services at the time the design is prepared. Project Owner understands that the Design Professional cannot anticipate changes in the project’s site or environment unless the Project Owner specifically has those possible changes analyzed by a consultant and contractually requires that the changes be considered during the design stage of the project. Project Owner recognizes that the Design Professional has a right to rely on the information provided through the Project Owner by the Project Owner’s consultant.
• Disclaimers: During the Project design, Design Professional shall examine current codes and standards and shall use professional skill and care to design Project to meet the requirements of current codes and standards identified as applicable to the Project. Design Professional by training and experience does not possess the expertise to assess the effects of climate change or extreme climate events not addressed by current codes and standards on the Project and assumes no responsibility beyond the professional skill and care in designing to current codes and standards.
• Waivers: Because disruptive climate events are unforeseeable at the time this contract for services was negotiated, Project Owner agrees that it will waive any claim against the Design Professional related to climate events that exceed those addressed by existing codes and standards. Project Owner waives all consequential damages caused by disruptive climate events that are not identified in the contract as needing to be addressed by the Design Professional. Consequential damages include but are not limited to loss of use, income, profit, financing, business or reputation.
• Limitation of liability: Project Owner limits the Design Professional’s liability to the Project Owner and anyone claiming through the Project Owner for costs, losses, or damages resulting from changes in the environment and site that exceed existing and applicable codes and are not identified at the time of the design as design parameters. Design Firm’s sole liability will be based on actual damages to the extent caused by the Design Firm’s failure to design to existing and applicable codes.
• Contractual indemnity obligation: In recognition of Project Owner’s decision to have Design Professional design only to existing codes and standards, Project Owner agrees to defend Design Professional against any third-party claims alleging harm caused by Design Professional’s failure to design to climate events not addressed by existing codes and standards and to indemnify Design Professional for any costs, losses, or damages to Design Professional resulting from such allegations.
• Prohibition of third-party beneficiaries: Services provided by the Design Professional are solely for the Project Owner’s benefit and no third party is granted the right to rely on the design services provided by Design Professional.

Attorney David Ericksen has offered the following clauses:

• Climate change risk consideration: Client acknowledges that future weather or climate change or volatility may impact the use, operation, maintenance and performance of the Project. Such impacts are uncertain. Client has or will consider such future impacts and the relevant options, risks and costs and has directed and authorized the design to proceed consistent with its decisions. As weather and climate impacts and demands may change in the future, Client accepts that risk or corresponding future impacts.
• Operation and mintenance: Consultant’s services do not include any responsibility for operation or maintenance of the Project following substantial completion.Operation, inspection and maintenance are the sole responsibility of the Project Owner. Consultant shall have no responsibility for any failures by the Owner or others to properly operate, inspect, or maintain the Project.

Consider including clauses like these in your agreements as part of a larger strategy to document the acknowledgement of climate-related risks and the allocation of those risks to the party best able to control those risks.

Additional resources

• The American Institute of Architects has created a Hazard and Climate Risk Acknowledgement form that examines the hazard risk profile of the project, possible future extreme conditions, and identifies project resilience performance requirements.
• The Natural Hazard Mitigation Saves: 2019 Report is a multi-disciplinary study (funded by the United States Department of Housing and Urban Development and released by the National Institute of Building Sciences) which provides a cost-benefit analysis that can be used to demonstrate the benefits of exceeding current codes to address climate change issues.

Disclaimer

Willis Towers Watson hopes you found the general information provided in this publication informative and helpful. The information contained herein is not intended to constitute legal or other professional advice and should not be relied upon in lieu of consultation with your own legal advisors. In the event you would like more information regarding your insurance coverage, please do not hesitate to reach out to us. In North America, Willis Towers Watson offers insurance products through licensed entities, including Willis Towers Watson Northeast, Inc. (in the United States) and Willis Canada Inc. (in Canada).