Reuse of design in manufacturing - fees vs liability 5

[thejonster]

In regard to reuse of design, this is a twist I haven't seen on Eng-tips. I wanted to discuss fees vs liability in manufacturing. I have a question in to my lawyer regarding this and wanted to know what other managers / business owners thought.

I'm being asked to design shear walls for EQ/Wind in a tiny house so they can say it's good for ___ mph basic wind speed, down to the anchor bolts. They are not asking me to seal the design / drawings but I don't think this would absolve me of liability.

In a tract house design, I've seen engineers charge 50% for the first re-use and 25% for each reuse after.
thread768-50364
thread507-212716
100%, 1/2 2nd, 1/3 subsequent
100%/75%/25%/25%+$250-500 after

This reuse fee is not feasible for a manufacturer, so they are looking into my proposal to assume no liability similar to a mechanical part design, as a mechanical engineer friend who runs his own business said that he was told to assume no liability for a design that will be manufactured, they're not hiring you for your insurance coverage, they're hiring you for your expertise. I am using CASE contract #1 with their typical terms, and my insurer gave me a 'Prototype' clause stating that if I'm not hired for CA, I'm not responsible for the product except in the case of neglect as limited in "Risk Allocation", and I will limit my liability to assume none there.

This is related to the question thread784-327637

However, my lawyer told me previously that in regard to residences, there can be no limit to liability in some states, and this manufactured home can be used in any state and will be manufactured multiplied dozens of times, potentially multiplying my exposure.

Do any of you do regular work for manufacturers or is this something structural engineers shouldn't touch? I will update later when I hear my lawyer's response.

 

[dik]

If the projects are very similar and there is little difference, I charge 50% for the second use and 33% for the third and any other usage... Seems to work out OK. If there are numerous changes, I look at it as a slightly new project.

So strange to see the singularity approaching while the entire planet is rapidly turning into a hellscape. -John Coates

-Dik

 

[thejonster]

Thanks dik. I think you're the one in the other threads that said this, which is helpful for tract homes, but the manufacturer of the tiny house said that this is not feasible for them, so I think the only way to manage the liability is to assume no liability and let them use it all they want. I hear that's what ME's do, just not sure if the law lets me do that for homes.

 

[phamENG]

They are not asking me to seal the design / drawings but I don't think this would absolve me of liability.

And could get you in trouble in some states where sealing final work product is mandatory.

I recently turned down something hemi-demi-quasi-similar. It was a foundation company that wanted me to analyze a repair detail, give them a generic stamped letter, and then they could use it whenever somebody called with drywall cracks. I explained the concept of infinite liability and insurance audits, and he went on his way.

Specifically for a manufacturer...I don't know. I wonder if there's sufficient case law about this sort of thing? Mobile homes have been around a long time and I could see them falling back on that, but the construction methods and materials are so different. I could see it swinging more toward a "this is more like a regular wood framed house, that's what you design, so we're going to treat it like that." I'll be curious to hear what your lawyer has to say.

 

[Retrograde]

Can your lawyer draft a clause into the contract such that your client will indemnify you against all liability for the design.

 

[dik]

In some jurisdictions, that could be problematic. Also, there are some types of liabilities, you cannot contract yourself out of... best to check with a lawyer on this.


For the fourth project maybe 25% and for the fifth and greater, maybe 20%... but I wouldn't consider anything less than 20%.

So strange to see the singularity approaching while the entire planet is rapidly turning into a hellscape. -John Coates

-Dik

 

[Aesur]

Why is it not feasible for them? Can they not add a base fee to each one they produce and that fee goes to you to cover your liability. I don't see how you could truly limit yourself (even if they indemnify you) as you are the expert, they are just the manufacturer. A few options I see here is have them pay for and maintain an insurance policy covering you specifically for this project; pay you a reuse fee that covers your liability and some profit (you should benefit on each one of these); have them hire you as an employee temporarily and run it 100% through them and indemnify you when you "quit" working for them; and finally give them a price assuming x number of reuses max per a given period of time, say 30 over 5 years and fee it accordingly, after which they would need to come back to you to get another group of 30 at another fee.

Additionally it may be worth noting that since many states require seals, there may be some grey area here of "practicing in a state you are not licensed". I would think this could be handled with a simple statement to them saying what states you are licensed in and that the license may not be renewed indefinitely and that they may have to seek a licensed engineer in states you are not licensed.

 

[MotorCity]

You can ASSUME no liability but that does not absolve you of responsibility. If you gave them a design and gave them carte blanche permission to use it, that is responsibility.....regardless of whether or not you have been compensated for granting them permission. Unless they pay you for re-use, I'd run the other way, lots of risk with no reward!

 

[Brad805]

Liability aside, do you make any $$ in this arrangement? We did foundation work for a small trailer co for a while. They were very unorganized and at the end of the day is was more headache than it was worth. Seems you are getting the grind, and those types will dump you the second they find someone to do it for a few pennies less. I bet your lawyer charges you for every hour he does work for you at the agreed rate.

 

[thejonster]

Can your lawyer draft a clause into the contract such that your client will indemnify you against all liability for the design.

Thank you for this reply.. Indemnity where they pay for my defense even in negligence might be the only way I could see this working.

 

[WinelandV]

I bet your lawyer charges you for every hour he does work for you at the agreed rate.

Every attorney I've ever worked with charged out the agreed rate down to the 10th of an hour. Those 10 minute phone calls really start to add up. :-|

Please note that is a "v" (as in Violin) not a "y".

 

[phamENG]

thejonster - keep in mind that that indemnity clause is only as valuable as your clients ability to pay your legal bills, settlements, and/or judgements. Chances are, if you're in that sort of a situation, they've gone belly up and so has the indemnity. Even if they haven't, does their insurance restrict them from offering such indemnities? If it does, do they have the cash on hand to pay for what they'll likely depend on their insurance to pay for them?

 

[thejonster]

As for the issue about stamping and what state I'm licensed or not in, I'm not sure. They've been making these for years without any shear walls. Someone told them they don't need hold downs so they just bolt the bottom plate and don't attach the studs to the anchor.

This is under HUD code so I don't know if they need any design to sell to any state, this is all new to me

 

[TLHS]

If it's the HUD standards, are they certifying these as manufactured homes (i.e. trailer homes that are intended to be transportable after install) or are they modular homes?

The former has to be designed for a bunch of locations, has a data sheet with a map showing the wind areas and things it's allowed to be in and similar, but it looks like the engineering is likely more than just a shear wall design.

The latter, I'm not sure. It's more like a regular house but I don't know if you can use the IRC. I feel like there's likely more engineering in it too.

I'd start by figuring out what the standard they're trying to comply with is, who they have to submit to, and whether you think that what they're asking for makes any sense.

Try to avoid the thing I see a fair amount as an owners engineer where a manufacturer sells whatever they're doing as having been fully engineered, they send you info on the engineer and things, and then when you dig it turns out that he limited his scope to some small component somewhere. I would not be surprised to see a small building company with a standard shear wall design in hand trying to tell people that their building has an engineer responsible for the lateral design even though you've never seen the arrangement they're using for the building. It's not necessarily even in malice, just misunderstanding.

I'm always hesitant of clients who come in with incredibly boxed in scopes that they want done. Engineering is usually in the context.

Aside: There's an ICC standard for what's needed on an ICC report for premanufactured shear walls. People are talking about treating this as a product.
If it were a product, this is what you would need to do. It's likely not somethig anyone would bite on, but interesting info. This may not be the latest:

http://www.floridabuilding.org/upload/PR_Stds_Equiv/FL10454_R0_Equiv_ac130.pdf

 

[thejonster]

Thank you everyone. My lawyer was with you guys and said that the limited fee vs multiplied liability was not worth taking the work. I proposed a 20% fee for each reuse and they turned it down saying it comes right off the bottom line.

A few mechanical engineers weighed in on how liability is managed in their realm, SE's don't do much manufacturing, I hope this is helpful for someone.
thread404-497379

I think that for this to work for the manufacturer & SE there would need to be a process similar to what the ME's in this thread are proposing, but since I don't have the HUD expertise, I'm not the one to move forward with this.

There is a gap between what they are willing to pay for, what I would require to do the work, my knowledge of the legal requirements, and knowing what benefit they would get. I encouraged them to find an SE experienced with manufactured housing design. I hope they do; they're selling these without any hold downs on the shear walls, and the units are small enough they can get away with that.. until they can't

 

[PEinc]

dik is correct in saying, "In some jurisdictions, that could be problematic. Also, there are some types of liabilities, you cannot contract yourself out of... best to check with a lawyer on this." I am just now going through something a little bit similar. My insurance agent told me that, in my state, I can't eliminate the liability but may be able to have an agreement where I reasonably limit my liability and exclude consequential damages. Check with your lawyer.

http://www.PeirceEngineering.com