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

An architect completed the design for a multi-use project which included retail, office and residential components. The project was put on hold prior to construction. Eighteen months later, the developer approached the architect and wanted to put the project out to bid. Unfortunately, in the interim, several local building codes had changed and the design documents needed to be revised at a fairly substantial cost. When the architect advised the developer of this fact, the developer pointed out that the contract stated that architect “shall comply with all applicable codes” and that the architect needed to absorb the additional costs due to this contract clause. The architect reported the matter to Berkley Design Professional where it was designated a claim as it was a demand for services for no additional fee. This action invoked the policyholder’s deductible. Berkley Design Professional retained local counsel. The counsel was able to negotiate with the developer and their attorney to get partial payment for the revisions to the plans; however, the developer was not happy with the situation and future potential projects are now at risk. Berkley Design Professional paid $150,000 for the code corrections on behalf of the policyholder and $30,000 in defense costs.

Lessons learned:

Codes and regulations can change particularly when projects are on hold for a long period of time. Design professional contract language regarding code compliance should be qualified to “codes and regulations applicable and in force at the time of performance of design services” or similar language defining a date of preparation of design and construction documents. Additional services should be justified in contract when a project is suspended and restarted requiring design or construction document modification for updated codes and regulations.