If injuries, deaths, or property damage occur on one of your projects and a claim is filed, then a long period of difficult and expensive activities is likely to follow. This Information Alert, the final installment in the Ames & Gough five-part series on site-safety for A/E firms, describes what to expect if a design firm is sued by a third party (including construction workers) for bodily injuries or property damages.

To make matters more difficult for the design firm, the U.S. legal system is structured to allow an injured party every opportunity to make its case regardless of what actually happened or what is stipulated about site safety in the various contracts. Furthermore, OSHA may conduct its own “independent” investigation; and its findings may have a significant impact on the legal proceedings.

The legal proceeding itself would generally revolve around responses to the following four questions:

1. Did the design firm have a legal duty to respond?
2. Did the design firm have a contractual duty to respond?
3. Did the design firm have an actionable duty to respond?
4. Did the design firm have the opportunity or the capacity to respond?

By following the various recommendations discussed in the site-safety series of Information Alerts, a design firm may have adequate answers with regard to each of the four questions; supporting a no liability finding. However, in dealing with the courts, nothing can be taken for granted. Specific circumstances, the use of certain words (in your contract, project materials, including emails), and/or the application of legal precedents in each of the 50 states may establish liability where a design firm may have presumed none existed.

Flagging Potentially Onerous Contractual Clauses

Here is an annotated checklist of contract clauses a design firm must consider carefully when signing an agreement as each affects liability for site safety.

• Standard of Care – Design firm will perform its services in accordance with generally accepted practices of engineers performing similar services at the same time, in the same locale, and under like conditions and circumstances.

• Third Party Obligations – The services provided by design firm under this Agreement shall not be construed to create, impose, or give rise to any duty of care owed by the design firm to any party except for the party signing this Agreement; i.e., the Client. The services performed as part of this Agreement may not be relied upon by any other person or entity, including all persons employed during construction, without the design firm’s express, written

• Indemnification – Design firm shall not be required under this Agreement to indemnify any party for any reason except for the negligent acts and omissions committed by the design firm. In addition, and to the fullest extent permitted by law, the total financial liability of the design firm for the costs, damages, or losses resulting from any indemnity obligation shall not exceed (Dollar Amount) and any indemnity obligation shall only be applied to design firm and not to persons affiliated with or employed by design firm.

• Duty to Defend – Design firm shall have no Duty to Defend Client for any action brought against Client by a third party whether or not such action is related to the services provided by the design firm.

• Consequential Damages – Client agrees to the fullest extent permitted by law to waive against design firm any and all claims for entitlement to special, incidental, indirect, or consequential damages arising out of, resulting from, or in any way related to the project.

• Services During Construction – When the design firm’s employees are on site during construction they are there to observe and monitor construction activities related primarily to the successful completion of the finished facility. At no time and under no circumstance will the design firm’s employees supervise, direct, or control the project contractor’s means, methods, techniques, sequences or procedures used for construction of the finished facility or, more importantly, for design or construction of any of the temporary structures required for that construction. The project contractor is and shall remain solely responsible to accomplish all of the work as specified in the Contract for construction. The design firm is also not authorized to stop the work which action can only be taken by the project owner’s representative.

• Job Site Safety – The design firm shall not be responsible for job site safety during construction which is the sole responsibility of the project contractor. At no time and under no circumstance will any of the design firm’s employees advise on, issue directives for, or assume control of job site safety. In particular, the contractor’s competent person as defined by OSHA shall be employed by and report directly to the project contractor. When design firm’s employees are on site during construction they are there as guests of the project contractor and shall be trained in and agree to abide by all aspects of the project contractor’s Safety

• Additional Insured – Project owner also agrees to stipulate in its Contract for construction with the project contractor that the project contractor shall list the design firm as an additional insured on the contractor’s general liability

• Contractor Indemnification – The project owner also agrees to stipulate in its Contract for construction with the project contractor that the project contractor shall indemnify and hold harmless the design firm for all costs, damages, or losses arising out of or relating to the means and method of construction or for the safety procedures related

The checklist describes key issues that should be addressed in the design firm’s Agreement with a project owner or a project contractor. The checklist also may apply to issues that might be addressed in other portions of the contract, such as in the project specifications, in project submittals, and in the insurance documents. The design firm must be certain that its proposed scope of services does not assume responsibility for activities that would contradict any points in the list. Furthermore, the design firm must be diligent both during design and construction in an effort to avoid becoming “responsible” for site safety.

Besides evaluating the contractual clauses, such as those in the checklist, design firms should consider tapping the knowledge and expertise of their risk advisors. Notably, insurance brokers and bonding companies have individuals who are quite willing to provide comments about the various contract documents upon request. Additionally, design firms should not hesitate to utilize the services of outside specialized attorneys in design and construction to conduct reviews of complicated and/or potentially onerous contract requirements.

Pay close attention to Indemnification and Duty to Defend clauses

Two clauses cited above that deserve special attention are the Indemnification and the Duty to Defend clauses. Both clauses continue to become increasingly onerous in all aspects of design and construction; design firms must be especially diligent in understanding exactly what will be expected of them under those clauses.

Although it is not possible in the context of this communication to consider all issues that might be included in an Indemnification clause, the Duty to Defend clause could be used by the design firm’s client to require the design firm to pay for the client’s cost to defend itself against a lawsuit for injuries and/or damages even though the lawsuit itself had no relationship whatsoever to the design firm’s proposed scope of services or professional responsibilities.

Furthermore, as discussed in the third Information Alert (An Action Plan for Design Firms Hired by Project Contractors) in the Site-Safety series, a design firm may be required to prepare project specifications and drawings relating to the minimum design criteria for the temporary structures even though the project contractor’s Qualified Professional ultimately should be responsible for the design of those structures.

However, wording in those project specifications about who is responsible for site safety could be (and often is) at odds with wording used in the professional services agreement or with wording used in the General Conditions portion of the contract for construction.

Conclusion: It’s up to design firms to spot and correct onerous contractual wording.

Unfortunately, it largely falls to the design firm to identify any such wording discrepancies and to fix them prior to safety issues being encountered during construction even though those wording “errors” were made by other parties. In the final analysis it is the design firm that suffers the consequences of any “confusion” with respect to who is responsible for site safety even though the problematic wording was prepared by another party.

The issues associated with “problematic wording” become more difficult if the design firm’s agreement for services includes a reference to the agreements or contracts for other parties (often referred to as “flow-down requirements”). This is especially problematic if the design firm is working directly for the project contractor and the design firm’s Agreement for services (sometimes under the guise of a Purchase Order) requires the design firm to be responsible for all of the contractual stipulations indicated in the project contractor’s contract with the project owner.

This is also a potentially serious problem if the design firm is working as a subconsultant to the prime designer and the prime designer attempts to “flow-down” all of its responsibilities with the project owner to its subconsultants. In that case, the lower tier design firm must carefully review the superior document in order to discover exactly what the design firm’s responsibilities would be under the Prime Agreement (which in some cases are actually quite shocking). Lower tier design firms must be highly sensitive to “flow-down” obligations and may, under certain circumstances, be forced to walk away from an assignment if accommodations cannot be made.

While finding a way to short-circuit this process without a legal ruling may be ideal, it usually is not the case. The optimal situation is when everyone involved in a project works together to avoid any accidents. Nonetheless, as this series of Information Alerts has demonstrated, design firms must be extremely diligent in reviewing all contracts and agreements, as well as in adhering to best practices at job sites, to insulate themselves to the extent possible from potential legal actions and related liability exposures related to site-specific accidents and damages.