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RISK MANAGEMENT FOR CONSTRUCTION PROFESSIONALS AND THEIR INSURERS

Delivering a construction project on time and on budget, to the client’s satisfaction, often requires assistance from teams of industry consultants. These include engineers, architects, surveyors and certifiers who are often assisted by the use of project management, programming and virtual modeling technology.

Whatever the precise role of a project consultant, their work needs to be integrated into the overall project design and contractually specified in a way that is consistent at each level of contracting and that is clear to every contractor.

Not all of this is within the consultant’s control. This simple fact has the potential to create liability issues particularly since professional consultants:

  • have mandatory professional indemnity insurance; and
  • have a higher duty of care than other contractors.

To manage this risk of exposure to liability due to circumstances beyond their control, construction consultants and their insurers should, with the assistance of skilled lawyers:

  • define their contractual scope of works in a way that is clear, precise and commensurate with the degree of control over known or foreseeable risk factors;
  • involve the client in early discussions with design consultants to ensure the client’s requirements are clearly understood;
  • offer to collaborate with other design consultants to ensure that their models are being properly translated into plans and specifications down the chain of construction contracts;
  • if acting as a lead consultant, collaborate and coordinate the work of all consultants engaged on the project for the duration of their engagement including by warning other consultants and the client as soon as practicable of any perceived error;
  • involve insurers in contract negotiations and not be afraid to walk away from a deal with an unreasonable client;
  • consider the use of contractual caps on liability and exclusion/limitation clauses;
  • build a “risk premium” into their price or fee offering where the deal involves risks outside the consultant’s control; and
  • resolve to ensure their systems and processes are sufficient to avoid, wherever possible, being placed in the situation where it is up to the Courts to work out the consultant’s intellectual property and other legal rights based on the vagaries of the evidence in a particular case. Instead, consultants are advised to take control from the start and determine their own rights by engaging skilled lawyers to prepare effective contracts, including adaptation of any appropriate industry contract document. Don’t assume that standard industry contracts or forms provide the best protection of any party’s rights in a given situation. Any number of factors unique to each project could require tailoring of established documents.

HHG Legal Group’s team of experienced construction and dispute resolution lawyers have been advising, educating and representing a wide range of construction professionals on all aspects of risk management and avoidance for many years.

*This information serves as a general guide and does not constitute legal advice. It is based on our research and experience at the time of publication. Please consult our knowledgeable Legal Team for any specific inquiries or advice relevant to your circumstances, as the content may not have been updated subsequently.

 

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