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When asked to pay for construction omissions
4

When asked to pay for construction omissions

When asked to pay for construction omissions

(OP)
Is it generally ethical to ask the design engineer to pay for an omission from his design?

I can understand the idea that a customer needs to be made whole if the design left out some cost, that was not planned for; however, this also would seem to open up controversy, including
1) that the engineer is no longer teamed with the project owner. Such liability will cancel transparency to find solutions.
2) would seem to imply incentive based consulting, that would similarly include compensation for the engineer if the design saves money.
3) could make problem solving or trouble shooting projects not worth the risk involved, if the problems were not all identified.
4) such mechanism could be used by an unscrupulous developer to recover project costs.

Can such liability be reduced by proposing work be completed "under the supervision" of a customer?

RE: When asked to pay for construction omissions

A guy asks you to design a "shed". You design a shed (your idea of a "shed" is four walls, a roof, a window, a door, a slab, one electrical receptical, and a bare bulb light). He starts building and realizes that your design omitted the three 5 piece bathrooms, the kitchen with granite countertops and stainless steel appliances, and the interior walls for his 4 bedrooms. Are you liable for the omissions? I'd be reluctant to step up and call that an omission as much as a failure to communicate. This is a ridiculous example to illustrate where accepting liability for omissions is a pretty slippery slope.

Once one of my designs has been accepted any omission is a new contract. We've found omissions in the review step, that get fixed at my hourly rate. Once the review is done, omissions are new work.

David Simpson, PE
MuleShoe Engineering

Law is the common force organized to act as an obstacle of injustice Frédéric Bastiat

RE: When asked to pay for construction omissions

(OP)
That is similar to the first examples that came to my mind based on old experience:

1) As a student engineering intern I installed new light fixtures in a hearings room because the original design did not anticipate enough light. The engineering company lost the argument and agreed to replace the fixtures, i was probably the cheapest labor possible.

2) I worked alongside a mechanical engineer who paid for auxiliary heating system when his design did not keep a corner of a building adequately warm.

But those are black and white examples, what about when the interpretations become murky, such as when doing remodel work subject to AHJ interpretations. I have completed site power distribution jobs that might have been held up indefinitely and for triple the job cost, because today's code includes location requirements (where to put the power outlets) that were not part of the original installation. I try to propose with enough assumptions stating "this design assumes the existing locations will be accepted". But I seem to recall in Canadian jurisdictions engineers were not allowed to pay for construction to protect from such recovery methods, and wonder if similar laws are typical. I have not found such protection when I searched on line.

RE: When asked to pay for construction omissions

I don't see the ethics consideration here, as phrased by the OP. It is a contractual issue. But you have to distinguish between omissions and errors. Who defined the scope of work? An engineer can't be responsible for omitting something which is not in the scope.

RE: When asked to pay for construction omissions

(OP)
Hokie66,
you bring up a several good points:
distinguishing between errors; and what is in the contract.

I do many small jobs on a short letter of proposal with attached assumptions listed. My experience is that ANYTHING omitted by a professional might be construed later as a error by a blue collar customer. Not unlike the housebuilder who seeks a structural steel carport design and then gets upset that the engineer did not include mandatory fireproofing details. By not including the requirement for fireproofing, does the engineer have an obligation to make the customer "whole" by paying for not only the design, but also the installation of fireproofing? That is the expense I have seen born by others, and seems to be unethical to me.

It seems debatable whether contract language can remove such risk buy stating the work is completed under the customer's direction.


RE: When asked to pay for construction omissions

Oh yes, an adequately written contract can protect from such nonsense. But whether the expense of the contract overrides the benefit, that is for you to decide. For small jobs, it is indeed a problem.

RE: When asked to pay for construction omissions

Errors and Omissions.....both create liability to engineers.
Error are easier to determine. Omissions are moreso determined by standard of care....a little more difficult to determine.

If your omission is something that another engineer practicing in the same area under the same or similar conditions would have done, then you are likely to get tagged. Essentially, omissions are necessities that you should have known would be required. Ignorance is not an excuse for such. Lack of client request for such is also usually not an excuse...you are supposed to be the "expert"....not the client.

RE: When asked to pay for construction omissions

I've got a little different opinion than most on this. The only thing the engineer is liable for in an obvious omission (not an error)situation is the difference between the price as competitively bid and the price if it's added as a change order.
Why should the engineer be on the hook for the total price for lighting or heating a room, when if he/she would of designed it in, the owner have to pay for it? Our fees are not large enough to cover these kind of costs.
An error is different. If it needs to be repaired (A W8 needs to be replaced by an W18), well, you might be able to go after the engineer for the repair costs. But that's what E & O insurance is for.

RE: When asked to pay for construction omissions

(OP)
Jed,
your interpretation matches mine, and if not mistaken by memory; what I read the laws were in some jurisdictions. However; the common interpretation (not necessarily legal) is where folks think that "high priced engineer" can pay for everything.

The hypothetical reason I am wondering about this based on a real project where I designed connections to an existing generator. By unconventional calculation the generator was large enough to supply the load and this was verified in test operation. Adequate size was an assumption to proceed with the work, but that was not determined except as a result of my work. However, if the calculations had not turned out favorable, an extension of the common interpretation would include the engineer paying for a larger generator at 20X the value of his fees.

RE: When asked to pay for construction omissions

JC and Electic.....not that simple. I wish that were the case; however, it goes deeper into legal interpretation and insurance litigation. As an example, suppose you did a framing design and you did not show lateral bracing in your details, yet you considered lateral bracing in your design analysis. Is this an error or is this an omission? It could be interpreted either way, and probably would be interpreted both ways but by opposing parties. Is it an error borne of an omission? Does the omission of the bracing detail constitute negligence on the part of the engineer? Who is liable? The contractor doesn't install something that isn't on his plans. If noticed later and he is required to install, shouldn't the contractor be compensated for his work? Of course he should. If the details had shown the bracing they would have presumably been in the original bid. In a fundamental way, the only harm is as JC described....the addition now of the bracing. After all, the owner would have paid for the bracing from the beginning if included in the plans. If caught early in the game, that might be the case. It is rarely so simple. It often involves remediation of already installed pieces and parts. Now who pays for that, since that can be significantly more than the cost of just installing bracing?

RE: When asked to pay for construction omissions

My method:

Error (I size an air conditioning unit too small) -- that's all mine to pay for, including tear-out and replace.

Omission (I leave an air conditioning unit off the drawing) -- I pay 10 percent of the change order cost or the successful bid price.

The thinking is that with an omission, the owner gets the full benefit of the added equipment (air conditioner in this case), but he probably pays a higher price because it wasn't in the original competitive bid.

The omission line is in my contracts.

Best to you,

Goober Dave

Haven't see the forum policies? Do so now: Forum Policies

RE: When asked to pay for construction omissions

I think the discusion is missing a basic point. Why does PE certification exist to begin with? Does a reasonable standard or industrial accepted practice have any bearing? Did the owner suffer any damage, comparable with liquidated damages, or suffer unneccessary high risk due to an error or ommission that conflicts with code or standard practices?

I have been involved as owner's agent on multiple E&O's, and have worked arrangements with bonding agents on multiple occassions after termination of the A-E for E&O. Largest one has been 8 figures, mostly just in the seven figure range.

As an example, working in wet laboratories, a nationally recognized A-E in BSL and lab design decided to ignore NFPA 45. Such ignorance led to exhaust duct being split for 3 floors, and potential exposure of dozens of lab personnel, as well as myself, to dangerous, toxic airborne analytes. The A-E claimed no E&O as they were compliant with NFPA 90A. The decision went to the IMC, which required field interpretation to include mandatory compliance with NFPA 45 and subducting. If you are an ME and work in lab design, you may have sen the IMC subducting field interpretation. That was E&O bot nothing like the E&O that came from their previosuly having the same interpretation on 8 to 9 figure screw-ups on national laboratories in Atlanta and Bethesda. This was definitely an error and not an omssion, very clear cut, with owner warning the PE beforehand that this would be considered an error, and appealed to the IMC. Had to go to the IMC as the Federal governent, in the form of the COE, supported the erroneous position of the PE in question. Egg fart in somebody's face.

Having the owner go at risk, and being cited by OSHA for violations borne from a PE licensed design, is another 7 figure example I could mention. If the PE design leads to the owner receiving a NOV from OSHA, I believe you have a good starting point for an E&O. I've experienced that twice in the state of Maryland. As a result of E&O, literally hundreds of cusomters were exposed to extremely high levels of airborne copper.

Toughest one I had to deal with was a design build for renovation of an ABSL-3 lab, directly adjacent to a hot agent BSL-3 laden with anthrax. The construction agent mistakenly cut through exhaust duct from the hot BSC; fortunately, the barometric "dumper damper" in the mechancial room kept the lab from going positive. The construction arm (who was also the GC) stated that they were only following the design hence were not at fault, a risk previously mitigated by the owner. A post award modification, not approved by owner, had the PE issue a change order to cut the exhuast. As the contract was with the GC, the GC owned the error of the PE, paid out 7 figures, was terminated for default, and the bonding agent selected a new design agent (which turned out to be a tremdnous conflict of interest, but worked out well).

If there were not so may bad PE's, and PE's with egos greater than their IQ, E&O would not be such an issue. Errors are a lot easier to identify and punish than omissions. I've never done a 7 figure omission claim, but have recommended on multiple occassions that the cost be equitably shared between owner and A-E, as owner would have need to pay for the omssion to begin with.

RE: When asked to pay for construction omissions

Hmm, some of the description above is a bit puzzling- admittedly I am not engaged in any aspect of building design/construction nor am I any kind of lawyer so I could be very ignorant on this! But I have more than once worked for a company which was customer of, people providing design services including for building construction. The "design services only" contracts I've seen limit the liability of the designer to providing revised design deliverables showing a corrected design, which is sometimes further limited to the total value of fees charged for the work. It is my understanding (and fear, sometimes...) that any contractual limit can be set aside in the case of fundamental breach of contract, which a major and significant error would constitute, and hence the need for E&O insurance. Did I miss something? Is that not how it usually works?

As an example, we paid for a design package for the building our business currently occupies, which we then bid out to construction contractors. The designer failed to properly implement the floor to floor fire separation required in a 2-storey entrance lobby of our office, which was (fortunately) caught by the building inspector. We paid a change order at the last minute to the builder for the retrofit work, and paid nothing additional to the designer, who had to figure out how to solve the problem and then provide design documents showing what needed to be done to make it right. But in the end, the error cost us (the owner) and the designer (his labour only), but cost the constructor nothing- in fact he made more money for his change order work, and we weren't likely to shop around the repair to others so he was more or less sole sourced to make the repair- and of course he charged accordingly. The same designer provided us a totally useless observation area which is blocked by a piece of structural steel set right at eye level...we never bothered to fix that- it stands there as a testament to "failures of imagination" in design.

Who would take on liability for any part up to 100% of a project in built form, in return for only a few percent of the project's total value in fees, only a small portion of THAT being profit? Doing work without a contract to protect you against that disproportionate unfunded liability seems crazy to me.

In the case of design/build or a contract to design, fabricate and deliver a finished engineered article (the business we're in), our contract stipulates what aspects of the work we provide warranty coverage for, what aspects are covered by pass-through warranties from subcontractors or manufacturers of major items bought for our design, etc., and what aspects are the responsibility of the client/owner. We carry product liability insurance to cover major errors in design or fabrication, which fortunately we've never had to claim against.

As far as what you'll cover just to maintain a good relationship with a client or your reputation in the marketplace, that's a different matter entirely as it is much more commercial than contractual or legal decision.

RE: When asked to pay for construction omissions

Ethically what should happen is that if an engineer makes a mistake they should return their fee for the portion of work which was defective and re-engineer the fix for free. They should not pay for any reconstruction work. We as consultants advise owners on how to act in a risky world, though they are the actors and the risk and rewards are both theirs. If a glass fabricator makes a piece of glass which delaminates, their warranty covers replacement of the piece of glass but never covers the reinstallation cost.

In the real world, lawyers get everyone to chip in to the cost of the fix.

In my contracts, I limit my liability to 100% of my fee.

RE: When asked to pay for construction omissions

Also ethically: every construction project is a one off prototype, and assuming there will be zero bugs in the design is unrealistic. How many prototypes does Ford make before it goes into production? How much money did the owner allocate for design phase testing? What level of analysis did they pay for? A consultant's profit is orders of magnitude less than the profit that an owner can make from a development. Design risk is impossible to eliminate completely, or even to a level commensurate with a consultant's profit. It is however commensurate with an owner's risk on the project.

RE: When asked to pay for construction omissions

(OP)
Thanks for some great perspectives.

I will add a few more observations:

1) Projects with experienced customers will often accept an expectation of change orders, say 6%; as indication of a construction documents adequately detailed. To seek 0% change orders has been joked about as allowing engineering budget to approach infinity. Acceptance of contingency seems to diminish with simpler customers, even if the projects are complex.

2) Defining what constitutes a "mistake" or omission is often a matter of differing interpretations. Many complicated engineering solutions might achieve performance in a matter of degrees rather than black and white failure or mistake. I recall many years ago, hearing a customer seeking an engineer to take responsibility for rehabilitating a failed, partially-constructed, foundation wall. Back-fill had covered the footing that was supposed to extend, and no one knew exactly what existed or what control they might have over the construction project. At that time nobody was willing to accept the work simply because there were so many ways it could go wrong and the customer wanted no responsibility for results. With that customer's expectations, engineering could not be accomplished to public good.

3) When doing troubleshooting work, our answers are often "plausible" without 100% assurance of what happened. I personally worked with a large facility to diagnose a control problem that caused a costly shutdowns. We listed perhaps a half dozen possible causes and the customer was very happy to work through those, as quickly as possible to avoid another shutdown. Performing the work confirmed the cause of the shutdown, this effective approach and teamwork between consultant and customer to a profitable solution would not have been possible if the customer was apt to seek compensation for less likely solutions that ultimately were not the cause. (Perhaps some of this risk is why forensic engineers on commercial projects seek three times the compensation?)

RE: When asked to pay for construction omissions

We have this kind of MBA transactional mentality in construction where folks are looking to offload risk form their books onto others. There is a weaponization of the contracts whereby super onerous clauses are buried in 100+ page agreements which smaller engineers do not have the resources to fully vet out.

One thing that I am struggling to understand is how all this works in the relatively new field of design build where the builder outsources the design to a consultant. My experience is that the tone of the relationship between builder and consultant is pretty congenial, including when there are problems. The builder tends to freak out less about technical problems and reach for lawyers less readily. They also have more resources and can fight with the owner more effectively in terms of shifting blame to the other side of the fence.

RE: When asked to pay for construction omissions

Glass,

DB is hardly a new contract vehicle. It is widely sold to customers as a way of off-loading risk to the contractor, who assumes liability. naturally, with that added liability a preminium is expected.

Now consider use of D-B for federal contracting. Let's a Service Disabled Veteran Owned Small Business is doing a D-B with the VA. If the D-B screws up, who do you think the risk/liability is going to fall on, even though a premium has already been paid for assumption of risk.

I've gotten large amounts in settlements for the Uncle Sugar from incompetent A-E firms that have placed customers at health/life risk, as well as cost of rip out and replacement. Perhaps it is differreent using the FAR and CAS as opposed to AIA and GAAP, especially as the FAR dictates that a determination of "fair and reasonable cost" be adhered to at all times.

I've protected my employer as I am required to do. What I just read about in California about "downstream customers" blew my mind. Makes me happy to work for Uncle Sugar in comparison with State of California.

http://archrecord.construction.com/news/2014/08/14...

RE: When asked to pay for construction omissions

(OP)
URGROSS

your simplistic analysis that some answers are simply "right" or "wrong", and therefor some firms are "incompetent" indicates a lack of professional perspective. Lacking such perspective it then does not surprise me that you think it is fair-game to harvest money from these firms, money that was never considered during the contract writing phase. You are "tricking" sincere consultants into an unsustainable position.

That same simplistic approach is reflected in your "funny" jargon about Uncle Sugar etc. and unfortunately not a rare perspective of folks who seek out the perceived maximum security of government employment. That same simplistic approach often instigates what then becomes a "wrong" answer when an authority having jurisdiction changes their interpretations mid-project, oblivious of the devastation this causes to the design professional.

In your world of punishing design professionals, do you also reward design professionals, with incentive based contracting that allows the engineer to keep 10% of what he might save you the government? How would you feel about an engineering study that cancels the need for a substation; would you award such consultant the $6M cost of a substation or perhaps split the savings?

I've observed the best performing projects derive from a trusting professional relationship. In these relationships the design professional is aligned with the customer to not only design the immediate solution but perhaps suggest the approach to the solution. That is more beneficial to both parties, and the common good; instead of being backed into a defensive position that defines so many government projects.

Your example has nicely demonstrated why in some jurisdictions it is illegal for design professionals to contribute to construction costs, it costs the customers too much. (professional liability is a different matter).

Have a good day.

RE: When asked to pay for construction omissions

Electic: in the case of a consultant having eliminated a substation, the design professional would actually be punished by not being paid to design the substation which they eliminated.

The typical system has perverse incentives - punish cost savings, punish mistakes, no opportunity for bonus. It drives folks to be very conservative, even for contractors who design in house. Want do do something other than a concrete bunker? Forget it! You want windows? Too risky!

Urgross: In your design build experience, if a builder's consulting engineer makes a mistake, is their liability more or less than in a classic design-bid-build scenario? In my world the fee is much lower if I work for the builder than if the owner.

Referring to the travesty in California: Suing the architect because the developer cheaped out on the glass for the condo makes me want to puke.

RE: When asked to pay for construction omissions

As I've said in other threads, "Don't do condominium projects!!!" If a huge firm like SOM can't keep clean on a project when they did the right thing, who can? You're putting together hundreds or thousands people with time on their hands, just waiting for a grievance to go to war over.
In my utopian view, if no one will design these litigation monsters, maybe the developers will figure out a bullet proof way to protect the designers.

RE: When asked to pay for construction omissions

Jed: agreed that we should all refuse condos. Reality here on the ground in NYC: there is a frenzy of condo construction, and the designers are falling over themselves to take them on. Rafael Vinoly just finished designing a high profile condo on Park Avenue for free so he could "break into the market". Kill me now!

RE: When asked to pay for construction omissions

Electric,

Your posting was hilarious. I bet you would react differently if you, your colleagues, or your customers were exposed to anthrax, various forms of encepahilits, yellow feveer, etc. As you have obvious limited experience or capacity, I'll leave it at that.

RE: When asked to pay for construction omissions

What happens if a bolt manufacturer supplies $1000 worth of defective bolts to a $1MM building which then falls down. Are they liable for the whole building?

RE: When asked to pay for construction omissions

glass99....we had a 100-year old, family-founded, reputable commercial construction company in the area decide about 10 years ago to "break into the condo market" after being sold to a couple of local entrepreneurs. Banking on the name and reputation, they did just that. The condo market "broke into them" and now they are out of business with more litigation than one can generally imagine!

RE: When asked to pay for construction omissions

(OP)
URGROSS,

If an Engineer might react emotionally, as you suggest, because family or colleagues were involved, such personal attachment would be a good reason to NOT be involved in a project. As a professional it is one's job description to remain analytical, and also to remain outside of laying blame until the full context of what has happened is considered. That is one of the distinctions between professional and tradesman, but unfortunately our customers sometimes rise from the tradesman rank, and some never grow the perspective that would best serve their own projects long term.

I have been involved in many very expensive problem solving assignments, including causes that shut down a million dollar per outage refinery (which also constitutes a substantial life safety hazard) and industrial accidents that sent two workers to the hospital. I have personally completed over 50 of such problem solving cases. In all of these cases there is a team of experts assembled, from as many as six different agencies. Anyone who spouts off with accusatory statements such as "he did it" will be invited to leave the project: these are sincere owners more interested in resolving the problem and preventing recurrence, than some Perry Mason courtroom drama. Even when I find what appears to be a very easy cause of the accident, all wording and statements are carefully conditioned because truly, I was not there to hear what the designer was told at the time this was laid out> Many times what seems like an obvious omission on the surface, may have a complicated history behind it. I point this out because that seems to NOT be in your experience.

I have been blessed to work for such broad minded businesses for most of my career, independently consulting for the past 15 years out of a total of 30 years. It is only recently that the prospect of paying for change order from fees was encountered, ironically by a government agency that our firm first saved about a quarter million dollars for with novel engineering, but due to an interpretation later endured a couple of hundred dollar change order. Not ironically, the fellow who started suggesting this payback used much the same vocabulary and accusatory posture you demonstrate in this thread; all consultants in his mind are overpaid slackers and it is time to seek revenge.

It is ironic that that within a thread started about how to manage a threat to good sustainable engineering practice, that you entered, exclaiming how you beat the H#!! out of those engineers, causing such threat. That was a nice demonstration of how that other side thinks, and I thank you for your contribution.

And to the other posters, thank you for your insights; I think I will avoid Condo projects in the future!

RE: When asked to pay for construction omissions

Electic: I think either the most disgusting or the most enlightening thing is when attorneys talk about litigation like its just another day in the office. It disgusts me because it shows a lack of respect for the fact that the litigants lives are being turned upside down , but its enlightening because at some level we all have a statistical chance of getting into a dispute, and it really is just part of business.

RE: When asked to pay for construction omissions

(OP)
Glass99,

it seems attorneys are rewarded for turning complex situations into simplified arguments to convince a jury, whether or not that is appropriate. Twice I have encountered prominent lawyers that were great at winning cases but had little appreciation for professional duty or what is even the law governing professional engineering practice (one I was a professional witness for and his attack on the other party made me very nervous). It seems the marketplace desires lawyers that function more as a tradesman than a professional, complete with quick, blue-collar assessment for profit.

I like profit too, but not excessive profit if it will wipe out our future.

RE: When asked to pay for construction omissions

Electic: the legal process is deeply flawed, especially as it pertains to resolving consulting engineers' issues. Its hard to make an argument that a jury trial is any fairer than simply arm wrestling it out. Lawyers are terrible intellectual snobs and would be mortified at the suggestion that they were anything like tradesmen.

RE: When asked to pay for construction omissions

glass99,
I think that is a bit far-reaching, as I have experienced a number of lawyers with sound ethics. But I understand your feelings about the ones you have dealt with.

RE: When asked to pay for construction omissions

Individual lawyers are just people and are as likely to be decent folks as anyone else. The emergent behavior of the pack is the problem.

RE: When asked to pay for construction omissions

glass99: you asked a good question. This is what is meant by fundamental breach:

Quoted from https://ece.uwaterloo.ca/~dwharder/PPE/Significant...

Harbutt's Plasticine Ltd. v. Wayne Tank and Pump Co. Ltd., 1970, Court of Appeals

The plaintiff entered into a contract with the defendant to perform an installation in a factory. The contract limited the liability of the defendant to £2300; however, during the installation, the defendant installed a pipe which was "thoroughly" and "wholly" unsuited for its intended purpose which resulted in a fire costing the plaintiff £170,000. Lord Denning found that the defendant had fundamentally breached the terms of the contract and therefore could not rely on the limitation clause within the contract.

This case introduced the concept of fundamental breach.

References: Marston, pp.155-156.

The way I remember this case being presented in my Professional Ethics and Law course was that it was heat tracing that the defendant installed- on a plastic pipe, and did so incompetently, i.e. with nothing thermally conductive between the trace circuit and the thermostat such that the heat trace was uncontrolled.

Fundamental breach should give most engineers some sleepless nights!

RE: When asked to pay for construction omissions


"Fundamental breach should give most engineers some sleepless nights!"
I would say it should give their E & O insurance carriers some sleepless nights.

RE: When asked to pay for construction omissions

(OP)
Moltenmetal,

great information and though the liability might be thousands of times higher, somehow that situation is less bothersome to me on a principles basis, than a customer simply trying to divert construction costs to a design professional. (in that regard I should be more sympathetic to the examples URGROSS presented) That kind of disaster is the reason we carry high insurance, and if a mistake is made of such consequence, it might be time to reconsider the terms of employment or what our long term career plans are. For the most part, I sleep well at night because also, I limit my work to matters I am familiar with, but perhaps I should not.

RE: When asked to pay for construction omissions

moltenmetal: What's the threshold for a "fundametal breach"? If you acted in good faith with a reasonable degree of care but something important was missed, is that a fundamental breach? I think its quite outrageous to have a boogyman out there of that level of destructiveness without it being a well defined concept.

My conspiracy theory is that these lawyers and judges void contract provisions like liability limitations occasionally just to make the process more mysterious and thus drive up legal fees. If you could write in simple common sense things into contracts like "my liability is capped at my 100% of my fee" and have it be enforceable, who needs lawyers? At a minimum there is a conflict of interest for the legal profession.

RE: When asked to pay for construction omissions

glass99...there are reasons for keeping limitations of liability in contracts and there are reasons for not having them. That's what legal arguments are made of!

Some states in the US are starting to not recognize limitations of liability clauses for a variety of reasons, most prominently for the example you gave. Sometimes one's actions cause much greater harm than either their scope of services or fee would indicate. In short, there's generally no relationship between fee and liability. I have such a provision in my contracts, and fortunately it has never been tested. I would hope that it would hold; however, I'm involved in forensic work and routinely deal with contract provisions that are contested, so I know it can go either way depending on circumstances.

The fundamental breach "test" is concomitant with a breach of the standard of care. Usually one does not occur without the other.

RE: When asked to pay for construction omissions

Ron: Right, "standard of care" is probably correct, though "standard of care" is a vague term. The vagueness is probably my key complaint because it makes business planning so much more difficult. If I was able to definitively transfer a particular risk to say an owner or a subcontractor without it being second guessed by the courts, we could price the risk properly.

RE: When asked to pay for construction omissions

Fundamental breach is a judgment call in the most literal sense, as are all cases where liability limits are set aside. That UW article I posted gives lots of interesting case law around contracts and their terms, and the brief synopses given are worth a read.

For fundamental breach, you are judged against a standard of care which is assessed around the average practitioner, but that standard of care is argued in court by experts in the field...

Even if your E&O insurance covers a case of fundamental breach adequately, it should still give you some sleepless nights. Having to make a major E&O claim is going to have a long list of very unpleasant consequences for you personally as well as for your business.

RE: When asked to pay for construction omissions

I am all for negotiating things in a human way rather than with black and white rules, but not for contracts. As a consulting engineer, it is for practical purposes impossible to participate in the conversation about what constitutes proper "standard of care" in the courtroom because the legal costs are so prohibitive. You literally spend your whole fee on a project just to pay your lawyers to show up in court. If you are a developer spending $500k out of a $100MM project to work through a dispute is not a huge deal, but if your whole fee on the project was $500k, its impossible.

RE: When asked to pay for construction omissions

2
(OP)
"Fundamental breach" seems to include the major disasters that cause buildings to fall, and terrible life safety risk. That is more than sufficient cause to carry heavy insurance.

However, when talking to an attorney, I have been unable to clearly convey he difference between such a catastrophic failure, and a much smaller "difference of opinion" type of omission (which might not be an omission at all). On these smaller difference of opinion matters I have seen the developers try to recover partial construction cost, not the cost of a third party damage, from the consultant's fees. Typical additions include to add an additional power disconnect switch, additional lights to augment the output, a higher volume exhaust fan, additional heating coils etc. I have witnessed consultants paying for these kind of additions out of their own pockets to keep a customer happy. These items were not a LOSS to the developer, but merely more content to the project that rightfully should have been born by the project if communicated at an earlier time.

To recover these costs from an engineer, almost gives incentive to developers to delay information. For example I am presently involved in a project where the developer has game-fully "forgotten" to tell me there will be a fire pump. In court he could insist as a professional engineer I should have anticipated the fire pump in my electrical design. If I had finished design and the project bid from drawings that did not include a fire pump, proceeded with construction without sufficient funding; should I then be responsible to purchase this pump and controls for the project, because it was an omission from my design?

The less the customer communicates, the greater the consultant is liable.

RE: When asked to pay for construction omissions

Electic: good point about the non-catastrophic omissions, and developers failure to supply information.

Why do the consultants pay in the end though? Is it really to keep developers happy? If you are suing each other the relationship is pretty much fried already. I would imagine its more a function of minimizing legal fees.

RE: When asked to pay for construction omissions

(OP)
glass99,

I agree with your comments about why do consultants pay in the end. I have not seen one of these proceed to a lawsuit, but I have seen several times where an "important" customer intimidates the engineer into paying.

Often times the consultant is trying to make deadlines, trying to balance a mixture of different customers, and the customer benefits unfairly because to stop work to settle matters is more time consuming than to concede to the request.

In each case, it seemed the project was the last project completed between parties, mutual respect having been dispersed.

Only once have I been solicited for this. I objected strongly, and even being asked seemed to poison the relationship in my opinion. But it seemed the customer (a small government agency) had previously made up their minds to insist, and cited a long history of claiming construction costs from other consultants. As I negotiated with this customer, it became obvious that each defense I offered was only motivating them to dig in with deeper zeal, I suspect this was the most excitement their team experienced in a long time. It would be nice if such customers could be publicly noted for this expectation, I would avoid them.

RE: When asked to pay for construction omissions

Electic: its all about the cost of your lawyer. When something does go wrong it is actually very reasonable to want to talk about it, but you can't and you finish up with a kludge of a settlement because your legal team is costing you $2000/hr. In the case of your small government dispute, had your lawyer been affordable you could have really drilled down into the issue. Given the ornery attitude of your client it would probably still have ended in a stalemate anyway, but you would have at least hopefully chiseled off a few more of the issues in a sensible way.

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