Rli Corp. · NYSE:RLI
Rli — DPLE 158 AIA/CES continuing education webinar (June 2019)
41 slides from Rli's conference presentation, Jun 5, 2019
Slide 1: A Case Study In Claims Caused by Subconsultants
A Case Study In Claims Caused by Subconsultants RLI Design Professionals DPLE 158 June 5, 2019
Slide 2: AIA/CES Registered Provider Notice
RLI Design Professionals is a Registered Provider with The American Institute of Architects Continuing Education Systems. Credit earned on completion of this program will be reported to CES Records for AIA members. Certificates of Completion for non-AIA members are available on request. This program
Slide 3: Copyright Materials
Copyright Materials This presentation is protected by US and International Copyright laws. Reproduction, distribution, display and use of the presentation without written permission of the speakers is prohibited. © RLI Design Professionals 3
Slide 4: Course Description
Course Description When you’re working with the right team In many cases, design firms work with a variety of different sub consultants on a continuing basis for multiple projects. A certain level of risk is inherent in this relationship and it is important to remember that the client will often loo
Slide 5: Learning Objectives
Learning Objectives Participants in this session will: 1 Examine details of a hypothetical claim stemming from the services of a subconsultant; 2 Determine the cause of the problem, and what steps could have been taken to reduce the risk of it occurring; 3 Review best practices when establishing a s
Slide 6: Retaining a Sub Consultant
Retaining a Sub Consultant Benefits of Retaining a Sub Consultant: Additional/different projects Specialized knowledge No long term commitment Fewer legal obligations
Slide 7: Definition: Vicarious Liability
Definition Vicarious Liability Attachment of responsibility to a person for harm or damages caused by another person (“imputed liability”).
Slide 8: Case Law
Case Law Prime held vicariously liable for $1.3 million in damages caused by the subcontractor’s work, 7 years after completion of the project. *This award was later amended to just over $976k. Marrick Homes LLC v. Rutkowski, 232 Md. App. 689, 711 (Ct Special App. 2017).
Slide 9: Case Law
Case Law Mark and Sandra Smith Adam Rutkowski and Sara Mastropole Client Buyer Marrick Properties, Inc. The Smiths retain Marrick properties to build a Contractor single family home. Marrick subcontracts the construction and installation of safety guardrail to Creative Trim. Creative Trim, Inc. Seve
Slide 10: Negligence: Duty, Breach, Causation, Damages
Negligence 1 Duty Duty of care 2 Breach Violation of duty of care 3 Causation Actual and proximate cause 4 Damages Harm suffered
Slide 11: Duty: General Rule in Maryland
Documentation for Your Defense Duty General Rule in Maryland Employer of an independent contractor is not liable for the physical harm caused to another by an act or omission of the contractor or his employees UNLESS: 1 Negligence of the employer in selecting, instructing, or supervising the contrac
Slide 12: Restatement (Second) of Torts, § 424
Restatement (Second) of Torts, § 424 “ One who by statute or by administrative regulation is under a duty to provide specified safeguards or precautions for the safety of others is subject to liability to the others for whose protection the duty is imposed for harm caused by the failure of a contrac
Slide 13: Breach: Failure to satisfy code requirements
Documentation for Your Defense Breach Failure to satisfy code requirements Construction of guardrail failed to meet building code standards under the facts presented: Requirements/Applicable building code Actual construction of the guardrail Role of the Contractor and the Sub Contractor Standard of
Slide 14: Causation: Failure to comply caused harm
Documentation for Your Defense Causation Failure to comply caused harm Expert witness testified to the following: 1 Use of finishing nails rather than screws to affix the guardrail to the building was why the guardrail failed. 2 Safety guardrail, as constructed, would not have been able to withstand
Slide 15: Choosing the Right Partners
Choosing the Right Partners 3 Steps to Creating the Dream Team Start Early The earlier you start the selection process the better. Check Is the sub consultant qualified for this type of project? Qualifications Contract What to include in the contract. Language
Slide 16: Step #1: Start Early
Step #1: Start Early Benefits of Starting Early: Timely selection Clear understanding Mitigates likelihood of delays
Slide 17: Step #2: Check Qualifications
Step #2: Check Qualifications Is the Sub Right For This Project? Qualifications Fit Size Reputation
Slide 18: Qualifications
Qualifications Check your sub consultant’s qualifications: HELPFUL HINT: Formal qualifications Evidence of proper education in the required discipline. Make sure you select both a reputable firm AND a reputable employee within that firm. Degree of expertise Evidence of appropriate experience in the
Slide 19: Fit
Fit Check your sub consultant’s fit: Resources Financing Special requirements
Slide 20: Reputation
Reputation Check your sub consultant’s reputation: Seek feedback from past client and from trusted colleagues or mentors. Were contract terms honored? Were services completed on time and within budget? What was the quality and usefulness of furnished services? How well does this sub work with others
Slide 21: Double Check the Insurance!
Documentation for Your Defense Double Check the Insurance! Check your sub consultant’s insurance for: Coverage Make sure your sub consultant has adequate insurance before a project starts. Duration Make sure your sub consultant’s insurance lasts for the time of the statute of limitation in that juri
Slide 22: Finding a Sub Consultant
Finding a Sub Consultant Strategies to finding a sub consultant Previous working relationship Referrals Request for proposals (RFP) Professional organization database
Slide 23: State Board of Registration
State Board of Registration Visit: www.pals.pa.gov/#/page/search
Slide 24: Professional Societies
Professional Membership directory Societies Visit: www.aiadc.com/directory
Slide 25: Step #3: Contract Language - Flow Down Clause
Step #3: Contract Language Flow Down Clause Aka “pass through clause”. Incorporates the terms of the Prime Agreement into lower tier agreements.
Slide 26: Flow Down Provision
Flow Down Provision “To the extent that the provisions of the Prime Agreement apply to This Portion of the Project, the [Design Professional] shall assume toward the Consultant all obligations and responsibilities that the [Design Professional] assumes toward the Owner. Insofar as applicable to this
Slide 27: Sub Consultant's Rights & Remedies
Sub Consultant’s Rights & Remedies “To the extent that the provisions of the Prime Agreement apply to This Portion of the Project, the [Design Professional] shall assume toward the Consultant all obligations and responsibilities that the Owner assumes toward the [Design Professional]. Insofar as app
Slide 28: Prime Consultant's Rights & Remedies
Prime Consultant’s Rights & Remedies “To the extent that the provisions of the Prime Agreement apply to This Portion of the Project, the [Design Professional] shall assume toward the Consultant all obligations and responsibilities that the [Design Professional] assumes toward the Owner. Insofar as a
Slide 29: Case Law
Case Law Prime on the hook for $7 million in damages caused by the subcontractor’s work, when the flow-down clause was found to be ambiguous. *Prime settled with Client for $3 million. Hensel Phelps Constr. Co. v. Thompson Masonry Contr., Inc., 292 Va. 695 (VA, 2016)
Slide 30: Holding
Holding “ While the subcontracts incorporate the prime contract by reference, a general incorporation provision is insufficient to expressly waive a limitations period… ” Hensel Phelps Constr. Co. v. Thompson Masonry Contr., Inc., 292 Va. 695 (VA, 2016)
Slide 31: Contract Language: Flow Down Contract Requirements
Contract Language Flow Down Contract Requirements Examples of contract provisions to flow down: Standard of care Payment terms Insurance Indemnity Dispute resolution
Slide 32: Sample Standard Agreements
Sample Standard Agreements 1 Updated regularly 2 Coordinated documents 3 Easy to modify
Slide 33: Dispute Resolution Provision
Dispute Resolution Provision “ Any claim, dispute, or other matter in question arising out of or related to this Agreement shall be subject to the same dispute resolution provisions as set forth in the Prime Agreement…. ” AIA C401-2017 §8.1.1
Slide 34: Dispute Resolution Provision
Dispute Resolution Provision “ Disputes between the [Design Professional] and Consultant arising out of the Owner’s acts, omissions or responsibilities under the Prime Agreement shall be resolved in accordance with the binding dispute resolution method in the Prime Agreement. In the event of such a
Slide 35: Dispute Resolution
Dispute Resolution Ways to resolve disputes: Mediation Arbitration Litigation Other Settlement Options
Slide 36: Mediation Provision
Mediation Provision “ Should any dispute arise regarding, the terms, conditions, interpretations, rights, duties, obligations, or performance of this Agreement, the Parties agree first to attempt resolution through ” good faith negotiation.
Slide 37: Mediation Provision
Mediation Provision “ Any claim, dispute or other matter in question arising out of or related to this Agreement shall be subject to mediation as a condition precedent to binding dispute resolution ” AIA B101-2017 §8.2.1
Slide 38: Mediation: RLI Policy Language
Mediation RLI Policy Language: If any Claim made against the Insured and reported to the Insurer during the Policy Period is resolved, with the Insurer’s consent and agreement, through the use of Mediation, the Insured’s Deductible as respects the Claim shall be reduced by fifty percent (50%) subjec
Slide 39: Defense, Settlement and Cooperation
Defense, Settlement and Cooperation RLI Policy Language: The Insureds agree not to settle or offer to settle any Claim, incur any Claim Expenses or otherwise assume any obligation or admit any liability with respect to any Claim without the Insurers’ prior written consent, which shall not be unreaso
Slide 40: Inspirational Quote
Inspirational Quote “ I can do things you cannot, You can do things I cannot. Together we can do great things. ” - Often attributed to Mother Teresa
Slide 41: Questions?
Thank you for your time! QUESTIONS? This concludes The American Institute of Architects Continuing Education Systems Program Jennifer Walton, Operations Representative Jennifer.Walton@rlicorp.com Mika Dewitz-Cryan, Client Solutions Manager Mika.Dewitz-Cryan@rlicorp.com
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