Source: Berkley Design Professional, https://www.berkleydp.com/

Auto Dealership Drama

An architect designed an auto dealership and its scope of services included civil engineering and construction contract administration. Several years later, when the owner entered into negotiations to sell the dealership, the purchaser’s inspector discovered multiple construction defects – some of which caused water intrusion that were alleged to be due to design and construction errors. The policyholder’s CCA services were limited, but not clearly defined in its contract with the owner. While most issues were ultimately determined to be construction defects, the lack of sufficient definition of limited CCA phase services created additional exposure to the policyholder. Berkley Design Professional paid $175,000 on behalf of the policyholder plus $176,000 in legal expenses.

Lessons learned:

Construction contract administration services must be performed diligently in accordance with the professional standard of care. Contract language clearly defining the design professionals’ duties and responsibilities is critically important. If the scope of services is modified (reduced) by mutual agreement of the architect and owner, those limitations (including excluded services) should be defined in contract with a hold harmless clause from the owner for services not performed. After the contract is signed, such changes should be documented in a design services change form authorized and agreed to in writing.