The Legislature has Spoken:  New Law to Protect Architects and Engineers

(And What This Means For Owners and General Contractors)

            The Florida Legislature passed a new law that will dramatically change design professional liability.  Although the term “design professional” includes other professions, it generally applies to architects and engineers in the construction context.  This new law will become effective July 1, 2010.   

            The Current Law

            Currently, design professionals are individually liable for their own malpractice regardless of any limitation of liability in the contract between the design firm and the owner/GC.  Right now, an owner/GC can sue the design professional individually for malpractice in addition to suing the design firm for breach of contract damages.  (This is similar to doctors and lawyers, who are individually liable for their own malpractice).

            This can be helpful. If the design firm is insolvent, then the owner/GC can still pursue the professional individually for damages suffered on a project.  Plus, the argument exists that individual liability for these professionals will keep their workmanship up to the highest standards or fear a claim for malpractice.  The argument follows that design professionals should not be allowed to hide behind their company’s corporate status if it means they will do better work that protects the general public at large. 

            The New Law

            The new law prevents a party in direct contract with the design firm from pursuing a malpractice claim against the individual design professional (employed by the design firm).   

            Supporters of the new law suggest that design contracts should allocate risk among the design professionals and owners/GC’s.  And, that an individual should be protected by a design firm’s contractual limitations with the owner/GC.  This way, all parties to a design contract understand the risks that they are facing on a project and prepare for that risk accordingly by securing adequate insurance. 

            Note, however, that the new law does not change the liability of design professionals against claims from third parties not in contract with the design firm.  A third party to a design contract (such as a GC) may still pursue a negligence claim against the individual design professional.

            What this means for owners and general contractors

            Now more than ever it is important for owners and general contractors to verify that a design firm is adequately insured on each project.  You do not want to be left suing an underinsured or insolvent design firm if their work is below acceptable standards.  Most importantly, in every design contract, make sure the design firm is required to maintain an “Occurrence-Based” insurance policy rather than a “Claims-Made” policy.  This is important because if a defect in the design is discovered after the construction is completed, only an Occurrence-Based policy will cover malpractice by the design firm on your project.  On the other hand, if the design firm only maintained a Claims-Made policy and it allowed the insurance to lapse before the design defect was discovered, then your project will not be covered.

            The West Palm Beach law firm of Bruce Loren & Associates specializes in the representation of businesses and management in the construction industry.  Adrian J. Alvarez, Esq. focuses his practice on issues affecting the construction industry.