Standard of Care – Part II

In part 1, we led off with a discussion on the first questions asked when a design professional is accused of negligence, which is, what was the applicable standard of care and was it met? We also discussed the role and responsibility of the design professional in managing client expectations and the potentially uninsurable risks design firms can be exposed to when assuming contractual liability over and above the standard of care.

In part 2, we pick up where I left off in my discussion with Colleen and Lou as we review some examples of where contract language can elevate the standard of care and how best to negotiate this language out of design professional agreements.

So I've got some examples here that I want to run through how now that we've set the stage, if you will, about the standard of care and the wording here in the policies. So as we know, owner-drafted agreements or modified standard agreements are often chock-full of uninsurable language.

And we make the argument that's in nobody's best interest. But blame it on the lawyers or whoever you want but it happens. And I know you both see it all the time. And so I'd like to review some examples of where contract language can elevate the standard of care and get your thoughts, both of your thoughts, on why this language is problematic and what you might do, what a firm might do, a design professional, to modify that language or negotiate that language when they're going through these agreements with their prospective clients.

So let's begin with the oldies but goodies, as Colleen likes to say, on some of these. And this is the superlatives, right? And here you have the best, to the highest, first class, first rate, world class in accordance with client standards, "fit for purpose intended," most sound.

And so, Colleen, I want to start with you on that. I mean, hey, let me turn this around. I'm the owner. I'm hiring you as an architect. Lou, your group, you're the best out there. Why can't I reasonably expect you would be-- wouldn't you be the best? What's unreasonable for me to have that language in there? So Colleen, Lou, talk to us about that.

COLLEEN PALMER: I mean, from my perspective, it goes back to what design professionals are doing versus what general contractors are doing. Design professionals are akin to, as you mentioned earlier, healthcare professionals, accountants, attorneys. They aren't expected to be perfect. You're not so-called judged by A-plus standard. You're kind of judged by the curve. You're judged by a C standard.

So saying you're the best, that it's going to be complete or first class, first rate, you don't really know what those are, but that it's not the C standard. You know that it's somewhat above that. And therefore, it makes it unacceptable and problematic for a design professional that's expected to provide reasonable services but not perfect services.

LOU GALE: I would jump in and also add, it becomes then a question of the eye of the beholder. You, the client, are saying, well, that's not what I wanted and it wasn't the best. And you're left trying to say, well, what was I supposed to do? This is what my peers would have done. This is the performance level you would have gotten had you hired any 10 other architects. And so I'm now left trying to satisfy an unsatisfying standard. And it just leaves no one happy at the end of the day.

COLLEEN PALMER: Same. So you see this particularly troubling language saying that perform to the client's satisfaction. And now we're completely subjective. We don't know. The client could be 98% happy with what you did and upset about one or two little things. Well, that's not complete satisfaction. They're not satisfied. So therefore, according to that contract language, you have not met the standard of care according to how it was defined in your contract.

DAN BUELOW: It's arbitrary, nebulous, yeah? Right? Bottom line is that legal precedent out there, isn't there, where this language has been a real issue for design professionals, because as you mentioned earlier, determining did you meet the standard of care, it often comes down to a battle of experts. And if you have in there the highest, they could very well come in and find somebody and they will. They will say, you know, they did OK but they weren't the highest. This wasn't the best.

And so back to this superlative wording that does have bad legal precedents. So that's an important conversation to have. We want to strike that. You mentioned earlier, too, about the C standard, and I like that, too, Colleen. And I've brought this up, too, in the past and it's sometimes hard to stand that.

Because if I was in your marketing department and you wouldn't want me to be in a design firm's marketing department because I'm risk averse, I see it. But I would write something like, hey, we're ABC architects. We're damn mediocre. We just want to be right down the middle there. We don't want to--

But to that point, you better be reading your brochures, your marketing materials, your websites, and everything else when it comes to the standard care and ask yourself, is there language in here-- in addition to our contracts, is there language in here that's over and above what we really should be declaring here, right?

COLLEEN PALMER: Totally. And I think that design professionals obviously want to put their best foot forward. And you should be putting your best foot forward in your marketing materials. I think a way to combat the potential of elevating your standard of care and your marketing materials is not to say things like, we provide 100% satisfaction to our clients on office buildings but to say, over the last decade, we have completed 520 office projects or whatever the number is.

And that doesn't say we were perfect but it does give an indication that you've been doing this a while. You've done this number of projects. And it's not saying that you are best in the world but it does give an indication to a reader about your experience.

DAN BUELOW: Good points. So this next one is on further instruments. And the parties agree to execute and deliver any instruments in writing necessary to carry out any agreement, term condition, or assurance in this agreement whenever the occasion shall arise and request for such instrument shall be made. So. Colleen, you gave me a few of these examples here and this was one of them. So I'd like you to lead off again. And what's wrong with this or what's the concern?

COLLEEN PALMER: [INAUDIBLE]. This is essentially a guarantee statement, saying that at any point the client can contact you and say, I want you to certify or guarantee your warranty or provide any kind of instrument that the client thinks they need to guarantee the success of the project.

And this is just so unbelievably vague that you can't agree to this because you have really no idea what they may ask for from you. So it's just shocking to me, quite frankly, that I have seen language like this in contracts. But it's out there. And [INAUDIBLE] is so vague, it just needs to be completely deleted, in my view.

DAN BUELOW: It touches on these, as we've brought this up before in contract discussions, around red flag words, right? Where you'll see these-- again, you named them off-- the warranty, guarantee, certify. And then you get into these overly broad any and all real issue and firms need to be aware of that. And in the context, words are important. And now we're talking about contract formation. It's very important. Do you have anything to add to this?

LOU GALE: I do. And you've really touched on it. It's that word any in here. And it creates a circumstance in which, since we're talking about standard of care, that a client can hand you a document and say, will you promise to sign any document? And if that document says something in it that elevates the standard of care, well, guess what? You've already promised ahead of time you'd sign that document.

And so not only is there standard of care issues but I tend to also put on my lawyer hat and I think, well, wait a minute, I'm not going to sign a contract that says I'm going to agree to something else without having ever seen it. This is a bit much. You're asking me to just sign off on anything and everything that might show-- might end up in front of us. We just can't agree in advance to do that.

We're happy to work with you. We're happy to consider what you need. We understand there are going to be documents related to perhaps the financing of the project or perhaps there's some kind of lean waiver or something you may have to ask us to execute. That's all great. Send it to us. We will review. But I'm not agreeing ahead of time [CHUCKLES] to sign whatever you stick under our nose.

DAN BUELOW: In some of these situations, it may not necessarily be a black and white insurability issue but you may be buying a performance-based exposure or taking on more risk than really reasonably should. And you need to be-- because, again, you have a sizable deductible. You want to be very careful with what you're going to be committing to with these words here.

So we had further instruments. This next one is further assurances. "The parties hereto, hereby agree to do such further acts and things and to execute and deliver such additional assurances as either may at any time reasonably request in order to better assure and confirm unto each party their respective rights, powers, and remedies conferred hereunder." Wow, that's like Shakespearean, almost. But talk to us about this, Colleen.

COLLEEN PALMER: Yeah. And this goes hand-in-hand with the same rationale as the prior one talking about further instruments. We've got the very broad any further acts. And I think people can be lulled into this sense of security with a lot of onerous contract provision when they're mutually drafted. So clients will say, hey-- indemnity is a great example but we'll use this one. Hey, design professional, you don't need to worry about this because it's mutual. Well, we're going to do the same thing.

But the fact of the matter is, it's 9 times out of 10, the client going to be requesting the professional to do these [INAUDIBLE] going to be acts, or things, or sign any of these documents. So that argument really falls flat because these really are drafted in favor of the client, even though they are mutual. So this one, again, it's another thing where you don't have any idea what might be asked of you but you're agreeing, like Lou said, you're agreeing ahead of time that you're going to do whatever the client asks.

DAN BUELOW: You ever see this one, Lou?

LOU GALE: I do. And I do see it from time-to-time and just as Colleen recommended with the previous one, the further instruments, you have to try to remove this in full because you just leave yourself open to all kinds of extra commitments that you're going to have to make with respect to the project.

And you may not even have necessarily included anything like this in your scope. You're now being asked to go beyond what's expected of you. And when you do that, you're also expanding the areas where your standard of care is going to apply. So it's too much risk.

And I think clients don't really gain much from having this in there. It puts parties at odds as opposed to what a good contract does, which is it's covering things that are likely to arise and that you're going to need to address. And a good contract is also just getting everything on paper that folks are agreeing to.

You don't want to be in a circumstance in which you're promising to do extra work and then now your standard of care is going to apply to that extra work and the client has these expectations of what you're going to do after the fact, after they come to you and say, we expect you to do other things to satisfy our expectations. You want it all in writing. You want to be clear as to who's doing what and when they're doing it, as opposed to these more vague, you're going to come back and make these additional promises to us and therefore, you'll be held to them.

DAN BUELOW: If you read this, the wording, it definitely was drafted by an attorney. This is not some owner made this up. And that's a concern, I think, also or something certainly to be aware of is that an owner may not know exactly what's in their agreement or their attorney drafted it in such a way.

And if hopefully you have that opportunity to connect directly with that prospective client and explain to them why this wording isn't in anyone's interest, or why it's confusing, or why it potentially is an insurability issue, hopefully, again, you connect there and they're agreeable to that or open to addressing that, I would think, is-- But you making the effort to point that out and being able to articulate what the issues are is important.

LOU GALE: And I'll add, one of the things I've found successful, now I'm an attorney, right? So I will talk to another attorney and then we will get into this very legalistic language. I have tried to encourage the project architects and folks on the business side to have a business-to-business discussion about this language because it allows it to become more normal language as opposed to being overly drafted by lawyers.

And you can perhaps reach a consensus that way, as opposed to having two lawyers duke it out, very similar to the potential battle of the experts between two arguing over what's the standard of care. Just get your business people in the room and say, look, you guys try to discuss this and see if you can come to some accommodation without the lawyers battling over all this lengthy legalese.

DAN BUELOW: So this next one is standard of care and, and so here's the wording on this one, "professional shall exercise generally accepted professional standard of care and shall strictly comply with any and all applicable laws, codes, regulations, ordinances in effect at the time of performances of services." There you go, Colleen. We were talking about it, here it is. Here's that any and all, the dreaded and, right?

COLLEEN PALMER: Yeah, that's exactly right. And this is one that if you're reading your contract quickly, you may miss it because you start to read it and you see, oh, yeah, it's referencing an appropriate standard of care language and you kind of gloss over the rest. But the problem is the word "and." This is where I like to stress that every word in a contract does have meaning and it has impact.

Now, if you were to take this provision and say you're going to comply with the standard of care and, comma, subject to the foregoing standard of care, you'll endeavor to comply with codes. That would be appropriate and acceptable because it's tying that obligation back to the standard of care.

But when a contract simply says you're going to comply with the standard of care and you're going to do all these other things, that has the effect of arguably inappropriately elevating the standard of care because it's an addition to. It's an and. It's not a tie back to the standard of care and that's where the problem lies.

DAN BUELOW: Good points. So, Lou, you added some additional ones here. These again are-- let me rattle some of these off that I know are near and dear to your heart here, meet budget.

LOU GALE: So right. I mean, meet budget means meet budget. If there's contractual language that says the architect is going to produce a design that meets the budget, there are a couple of problems. One we've kind of already touched upon, which is you're essentially making a guarantee. You do a design and then it doesn't meet budget.

Well, you've breached the-- you've breached your promise to us, which arguably is beyond the standard of care because I'm not a contractor. I don't do pricing. And of course, inflation can change pricing. All I'm doing is exercising my judgment on a design that's going to be consistent with the client's budget. And I may not-- I can't guarantee that that happens.

And second of all, I've kind of just touched on it. I can't control construction costs. I can't control what happens once the project rolls out and we do our design. We can use our-- we can use the ordinary care that other architects would do. But I cannot guarantee that you will meet your budget because it is a lot of things out of my control.

DAN BUELOW: And this is so important because this is where some of the big dollars are spent, aren't they, on these claims. When we get tied into economic loss issues, delay damages, and so forth. And we talked about words are important. Another word that you might see put in the contract is estimate. You're going to provide an estimate where we would prefer opinion of probable cost.

I mean, again, talking through what your intent is in here, when it comes to design build, this is a real issue where the design build, where the consultant gets tied into being responsible somehow for the budget, if you will, on an incomplete set of drawings. But it's a problem with both architects, and engineers, and all delivery methods on this. Colleen, anything to add to that?

COLLEEN PALMER: Well, I'll just reinforce and echo what you both have said. I mean, certainly, if we look back, no one could have predicted a pandemic where construction costs of materials would have triple, quadruple the price that they were prior to. So it's just way beyond the design professional's ability and obligation.

DAN BUELOW: OK, Lou, here's the next one on here. Time is of the essence. It seems like they must teach this in law school to everybody day one?

LOU GALE: Right. So this one, I really love talking about this because time is of the essence is what lawyers like to describe as a term of art. It has specific meaning. These words, when used in that phrase, mean that time is a material term of a contract. It is incredibly important. And it means if you're a day late, that's a breach of the contract. Whatever time frame is spelled out in the contract, you have to meet it exactly. Otherwise, that's a breach of the contract.

And of course, that's very different from a standard of care. If we're required to respond to submittals within five days in the contract and time is of the essence, then every submittal that is later than five days is a breach of the contract.

But of course, some submittals are hundreds of pages. Again, I was a structural engineer. You'd get a giant roll of structural steel drawings that would have to be reviewed. You'd have to go through page-by-page, sheet-by-sheet. You couldn't necessarily get it done in five. You couldn't necessarily get it done in a week. It would depend on how much care was needed to go through that.

But if you have a contract that says time is of the essence and you have to do it within five days, well, now those two things conflict. And you're potentially, in my opinion, raising your standard of care. And maybe at best, you've now got an uninsured contractual obligation. And so it is an incredibly important term that you have to try to either get stricken or softened and tied to the standard of care.

DAN BUELOW: Again, we talked earlier about the standard of care of a design professional is closely aligned to a doctor and a lawyer. Does it make sense to hold the doctor to a time is of the essence when they're doing a procedure or something? There's that analogy as well.

COLLEEN PALMER: Absolutely try to delete this provision. And I see it most of the time, I would say, in contracts. And what I like to do is strike it completely. But if you can't strike it, you certainly want to soften it, as Lou suggests. And one way to do that is to say that the parties understand that the professional's performance must be governed by sound professional practices. And therefore, the professional shall perform only as expeditiously as is consistent with the generally accepted standard of care.

And I think that that does provide some clarification. Now, ideally, you want that kind of language and you want that phrase, "time is of the essence," to be deleted. But you absolutely do not want to just leave that "time is of the essence" statement just bare in your contract.

DAN BUELOW: So the next one here, coordination.

LOU GALE: That's another one of my favorites because that becomes a catch-all in which any error, or omission, or problem that has arisen on the project that is somehow related to your services becomes your fault and your responsibility because you are supposed to quote, "coordinate."

And so you run the risk of raising your standard of care by promising to coordinate, say, all the owner's consultants as well, including your own consultants. And then if there's some disconnect or miss in terms of different elements that conflict on the project, now the question becomes, well, did you fulfill your coordination obligation by pointing out to the client's consultant?

Look, there's an issue. We've got to clear it up. And then who's supposed to be the person that changes their drawings? Is it you or is it the consultant? Or are you both supposed to change your drawings, and change your specs, and meet to do it? So it does become an issue that can elevate the standard of care as well. So you need to have a definition of coordination, at best, that kind of fleshes out who's responsible for what and in what way, to the extent you can.

I do, unfortunately, think you're not going to be able to remove coordination. That is a service that architects and other design professionals provide. It's just who's doing what, and when, and making sure you're not being asked to go beyond the standard of care.

DAN BUELOW: That's a good point. Define what that term is. OK. So good discussion around some specific examples with words and phrases specific to language that can elevate the standard of care. I want to switch gears a little bit in that talk about where this is going in the future, if you will.

And so when we did our biannual Willis A&E survey of 17 professional liability [? carriers ?] in the industry, and Colleen and her group helped a lot with this, we asked the question, do you feel the standard of care is evolving? So the [? carriers ?] would answer this. And we put it in this report that we've released and it's available to everybody to check out.

But here's some specific responses to that question. And the first one is, yes, it is evolving. We see it showing up and evolving in two ways. First, the standard itself is assuming more implicit scope, such as addressing climate factors.

Second, design professionals are taking on broadening scope such as safety issues. Of course, when they take on more scope, they also take on the obligation to perform it in accordance with the standard of care, even if the scope is nontraditional. And so I just want to, again, ask, can I get any input, any thoughts on this that you have? I think these are some interesting responses to this. I've got a couple more but I just want to see if either of you had a thought or a response to that.

COLLEEN PALMER: Yeah, I have a comment, for sure. The standard of care has evolved. It will continue to evolve. And it really should evolve. As we, as a society, change, as our technology changes and improves, as the world changes, so too does the standard of care.

Here's a kind of an easy example. Years ago, of course, asbestos was used pretty regularly in building. And it was a great material. It's strong. It has a lot of wonderful properties. But now, of course, using asbestos is prohibited because of the deleterious health impacts of it.

So the standard of care, back in the '30s, '40s, '50s was to use it. Now if someone specified asbestos, [CHUCKLES] it would be an automatic they breached the standard of care. So as climate changes, as technology changes, as AI comes into play, the standard of care will necessarily evolve. And it, by rights, should evolve.

LOU GALE: I couldn't agree more with what Colleen said. It is just a standard that can change over time. And just like, Dan, you pointed out a different definition. I think it was the EJCDC has a definition for the standard of care. Well, the AIA has a definition. If you took those side-by-side, you'd see that they're slightly different. And so over time, these definitions will evolve and change in order to address the things that Colleen pointed out as the industry changes.

COLLEEN PALMER: But one thing I want to stress is that while the standard changes, the definition that you're judged by what your peers are doing at the same time under the same circumstances, that core remains the same. So while you and your peers may modify what you do as the standard changes, the concept of being judged by what your peers are doing under similar circumstances, that remains the same.

DAN BUELOW: And arguably, professional liability insurance coverage will also evolve to cover that evolving standard of care. And you mentioned climate change and so did they in this. And there's a lot to talk about there when it comes to climate issues and so forth. But I think that one important concept in your contract is around informed consent.

The concern, again, is where a client may be able to opt for the less resilient, less expensive option, and then hold you accountable in the event that it fails in the future because of the climate issues have-- the codes have not kept up with the realities of where the climate change is. So this concept of informed consent, to me, is an important one as well when it comes to discussion around, again, the standard of care, but also you're illustrating something in your contract, I think is important.

Here's another one from the survey. Yes, I think design firms more than ever have to document their services and communication more. And they have to stay apprised during the construction phase without assuming unwanted supervisory liability. A tough balance. Thoughts?

LOU GALE: Yeah, I mean, I think that that is becoming in the age of email, text messages, Teams chats, videos of the construction site, the notion that as a design professional, you're going to be able to say, well, I have no obligation for inspection. And therefore, if there was something on the site occurring, I have no responsibility for that.

I think that I don't want it to shift this direction. But given the volume of data, it's difficult to then take a position that I, as a design professional, didn't have an obligation to raise my hand or to say anything in the context of this information.

Because I used to have-- we still have a rule with respect to photographs of try not to take anything between 3 feet and 30 feet. That's kind of the goal. Either you want to be right up close next to the thing you're photographing or so far away you've just got some general photographs because you don't want to be in a position where someone can say, here's a picture. I know you're trying to take a picture of that wall. But by the way, you can see in the corner very clearly that issue with the duct you didn't say anything about. But here it is in your picture and you didn't document it in your field report.

Well, now multiply that by a thousand given all of the information that we've got and how ubiquitous the sharing of that information is. You're going to be-- not only your architects aren't going to be copied on this documentation, they're going to be involved in it. And so how do we manage the standard of care in that context, I think, is going to be an emerging issue for the design professional.

DAN BUELOW: Excellent. So that wraps up our conversation on the standard of care here. I want to ask Colleen and Lou if you have any parting comments, words of wisdom on this topic for us before we depart. Colleen?

COLLEEN PALMER: I think I would say for parting comments that obviously, you want to ensure, as a threshold, that standard of care is appropriately addressed in your contract. You don't want to go into a project already agreeing to problematic standard of care language.

And hand-in-hand with that, keep in mind that the contract negotiation is a great opportunity for you to understand what the client expects of you. If your contract has elevated standard of care language, and you discuss that with the client, and they say, oh, yeah, that's not a typo. We really do expect that you're going to have no errors or omissions.

Then you know from the outset, wow, this client doesn't understand or doesn't want to accept the fact that as a design professional, we will not perform perfectly. And then you will need to make further decisions about whether to take the project, whether to work with this client, et cetera. But as a threshold matter, you want to understand what the client expects of you and make sure that what's in your contract is appropriate for you.

DAN BUELOW: Good point. Having that definition of the standard of care in your agreement's important. And we know that every owner-drafted agreement is not necessarily going to volunteer that clause, are they? That would be something we'd want to add.

I think that's where it's important to have a checklist if you're looking at contracts where you're looking for those important clauses. When you have an owner-drafted agreement, certain clauses are not going to be there, perhaps, that you would want. The hazardous material clause is one I always come up with. It belongs in every one. But in an owner-drafted agreement, it might not be in there. So that would be another good example. That's a great point, Colleen. Lou?

LOU GALE: So I would say that it's client selection with the context of the standard of care that's important to also keep in mind. When you're having, as Colleen pointed out and we've talked about many times, as you're having these conversations with the client, if there's this misalignment with respect to the standard of care and the client, it may be time to think about not working with that client.

Because if their expectations are beyond what you can meet and they're not even willing to agree to change it in the contract, or let's say, they are willing to agree to change it in the contract but there's sort of a wink and a nod like, oh, yeah, we'll change the language.

Now, again, it's that client expectation because that's the source of claims. That's the source of issues, when you're not meeting their expectations. And I've had plenty of contracts with plenty of good standard of care language. But if that expectation isn't met, it can lead you down a very difficult path with respect to resolving any issues that arise on the project.

DAN BUELOW: Excellent closing points. Well, this has been fun. I want to thank my special guest, Colleen Palmer, Risk Manager for Beazley, and Lou Gale, General Counsel for the Chicago Architecture Firms SCB. Thanks again for joining us for another episode of Talk to Me About A&E.

For a full listing of all of our Talk to Me About A&E podcasts, as well as our Willis A&E webinars, on-demand education programs, and technical briefs, check out our Education Center located on our website at www.wtwae.com. And again, Lou, Colleen, thank you.

COLLEEN PALMER: Thank you for having me.

LOU GALE: Yes, thanks for having me. It was fun.

DAN BUELOW: Well, thanks, everybody. Talk to you soon. Take care.

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