Common Claims and How to Avoid Them

Kerrie McLeish , 13 March 2018

Experienced Claims Manager Kerrie McLeish has reviewed countless negligence claims in her work for Focus Underwriting (a division of Planned Cover). Here she discusses the most common claims she sees and gives valuable advice on how to avoid them.

Unfortunately for architects, negligence claims are on the rise. As our society becomes more litigious and our professions are increasingly under attack, it’s essential to become more aware of potential targets for compensation following loss.

Though claims against architects are many and varied, most can be roughly categorised as arising from one of four stages: the initial retainer, the design phase, the documentation phase and the contract administration phase.

The following discussion serves to heighten awareness of the types of claims an architect may experience, so they can be better prepared to either avoid a claim or mitigate the damages claimed.

Initial retainer

Your retainer is the instrument that defines your relationship, your rights and responsibilities with and to your client. It is vital to have a retainer for both commercial and professional reasons and it is important to properly articulate the terms of your relationship with your client and then comply with those agreed terms. If there is confusion or divergence, it can lead to claims.

Failing to adequately define a retainer, particularly as to the extent/scope of services to be provided, can be a recipe for disaster. For example, if it was intended that you provide limited or task-specific services rather than full services, then this must be spelt out. Otherwise, you may be exposed to allegations from your client that you failed to do all that was professionally required from you. This is a particular risk if you are engaging with clients who are not sophisticated in the design/construction arena and who may have incorrect or unrealistic expectations of precisely what you do as a consultant and what services you have agreed to provide.

Be mindful also of adhering to the terms of your retainer when it comes to taking instructions from your “client”. Take instructions and directions only from those with whom you have specifically contracted, or from whom you have been specifically authorised to deal with by your named client. Any changes to design or variations requested by those with whom you have not specifically contracted can be disputed and may lead to allegations of your failure to adhere closely to the retainer.

Design

Many claims emanate from a failure to design within a client’s stated budget or design objectives. While your clients should understand that you are not quantity surveyors and therefore cannot be precise about costings, it is incumbent upon you to provide realistic designs, which are referable and cognisant of your client’s budget. It is important to talk to your client about the potential for containing costs in specific areas and the potential for costs to blow out in others. Often your client’s vision for a project will expand during the design process – remember to remind your client that for each project expansion there is likely to be a corresponding impact on cost. It’s important to avoid a situation where the budget is blown out before the client realises it’s simply not possible to construct their vision on the budget they first set.

You must also design with reference to site and planning conditions. This seems like a commonsense statement. However, we regularly see claims relating to non-adherence to boundary alignments, soil conditions, overlays and permit conditions. Your services are only valuable to a client to the extent that your designs are able to be practically and legally used, and if your designs fall short in this regard, a backlash is likely. This may impact on you commercially if your client refuses to pay your fees, or can impact on you by way of a claim on your professional indemnity insurance.

Documentation

Once you have settled on design concepts, you must then pay particular attention to your documentation. It should reflect your design, and be prepared promptly and with sufficient detail as to be practically useful in the process of converting the concept into reality. Design errors with regard to specifications and detailing appear often in the types of claims made against design professionals as the age-old question is asked, “Is this a design flaw or a workmanship error?”

It is important to have internal (and external) mechanisms in place to check your documentation for obvious and less obvious errors. Peer review of designs and documentation is helpful in this regard, as sometimes this provides opportunity to correct “small” errors and inconsistencies before they become “big” ones.

A strong current focus is the need to check your specifications or any proposed substitutions for compliance issues. The importance of this cannot be overstated. Avoid making mistakes, as there may be attempts to make you accountable for shortfalls, and the best way to defend the assault will be very clear and methodical documentation of your research, findings and assumptions.

Contract Administration

If you are engaged to provide contract administration services, you must adhere strictly to your responsibilities in this regard. Claims arising from the contract administration phase are often many and varied, including allegations of a failure to seek client’s written instructions in relation to variations; failure to detect and take immediate action in relation to defective building work; failure to issue progress certificates/instructions in a timely fashion; certification of progress claims without certificates from the contractor in respect to subcontractors; failure to act impartially as contract administrator or contract superintendent; and the over-certification of progress claims through failure to identify defective work.

In order to avoid claims being made or to place yourself in the best position possible to defend them, you might like to remember three little “c” words – Communicate, Check and Choose.

By communicating openly and effectively with your clients, colleagues, subconsultants and builders, you will minimise misunderstandings in relation to budget, scope of services, state of preparation, detailing etc, and therefore potentially avoid claims.

Checking and double-checking designs, surveys, drawings and specifications will help you avoid errors in your documentation, which might otherwise cause a problem during the construction phase.

Finally, it’s important to wisely choose the types of projects you take on, and the people you agree to work with. Being discerning about clients, subconsultants and builders can lessen the possibility of interruption experienced in your practice as a result of negligence claims made against you.