By Diane Mika
Senior Vice President, Risk Management Officer
Berkley Design Professional, a Berkley Company
June 12, 2025
Signed contracts are recommended for every project. In a perfect world, this would be in the form of a professional services agreement that acknowledges the standard of care and complies with your professional liability insurance coverage. To accomplish this outcome, many design firms incorporate their standard terms and conditions into their proposal documents or use their standard agreements or those written by professional associations such as the AIA or EJCDC.
However, it is not unusual for an architect, engineer, or other design professional to be presented with an owner’s purchase order form (PO) or, for engineering or other design services requested by a contractor (including design-build), with a contractor’s construction subcontract. In general, these forms are not appropriate for design or other professional services and should not be used except for limited scope projects. In that event, there are eight clauses you should add to help reduce risk and properly address professional liability exposure including Standard of Care, Schedule, Disclaimer of Construction Responsibility, Document Ownership and Indemnification, Third-Party Exposure, Limitation of Liability and Waiver of Consequential Damages.
In the example language provided in this document, the term “Consultant” is intended to represent the design professional in contract with the “Client.” You should adapt the language to reflect the defined titles of the parties in your agreement.
1. Standard of Care
Purchase Orders and construction subcontracts are intended for use with product vendors and contractors that operate under a warranty standard—they can guarantee their work product. In contrast, architects and engineers perform design services under a professional Standard of Care (SOC) and carry professional liability insurance (PLI) to cover related errors and/or omissions—perfection is not expected. Therefore, you should establish the SOC as an initial clause in a PO or construction subcontract, with an express disclaimer of warranty and fiduciary relationships.
Standard of Care
[DESIGN FIRM NAME] is a consultant providing professional design services on the Project (“Consultant”). Consultant shall perform its services consistent with the professional skill and care ordinarily provided by consultants practicing in the same or similar locality under the same or similar circumstances (“Standard of Care”). Consultant shall perform its services as expeditiously as is consistent with such professional skill and care and the orderly progress of the Project. Notwithstanding any other representations made elsewhere in this Agreement or in the execution of the Project, this Standard of Care shall not be modified. No warrantees or guarantees are expressed or implied under this Agreement or otherwise in connection with Consultant’s services.
Consultant shall act as an independent contractor at all times during the performance of its services, and no term of this Agreement, either expressed or implied, shall create an agency or fiduciary relationship.
2. Schedule
Your schedule of services should be written in the context of the SOC and a mutually agreeable project schedule subject to revision as the project proceeds—not as a “Time is of the Essence” requirement, which would expose your firm to uninsured strict liability as a performance guarantee.
Project Schedule
Consultant shall provide its services in accordance with the project schedule and schedule for performance of Consultant’s design services, which schedules may be modified periodically with the mutual agreement of Client and Consultant and for factors beyond the control of Consultant. In the event Consultant is hindered, delayed, or prevented from performing its obligations under this Agreement as a result of any cause beyond its reasonable control, including but not limited to delays due to power or data system outages, acts of nature, public health emergencies including but not limited to infectious disease outbreaks and pandemics, governmental orders, or directives, failure of any governmental or other regulatory authority to act in a timely manner, failure of Client to furnish timely information or approve or review Consultant’s services or design documents, delays caused by faulty performance by Client’s contractors or consultants, or other unforeseen conditions, the time for completion of Consultant’s services shall be extended by the period of resulting delay and compensation equitably adjusted. Client agrees that Consultant shall not be responsible for damages, nor shall Consultant be deemed in default of this Agreement due to such delays.
3. Disclaimer of Construction Responsibility and Indemnification by Contractor
In order to avoid potentially severe liability exposure for construction activities, which are not covered by PLI, disclaim responsibility for all aspects of construction. It is also important to be named as an additional insured on the contractor’s CGL insurance policy.
Disclaimer of Construction Responsibility
Consultant has no control over, charge of, or responsibility for construction. Client (owner) shall retain a qualified contractor(s), licensed in the jurisdiction of the project (“Contractor”), to implement the construction of the project (“Work”). Contractor shall coordinate, supervise and direct all portions of the Work and shall be solely responsible for, and have control over, construction means, methods, techniques, sequences and procedures, safety, and security.
Client-Contractor Insurance and Indemnification Requirements
Client agrees to require the General Contractor or Construction Manager (“Contractor”) and its subcontractors to provide Client and Consultant with Commercial General Liability Insurance which names Client, Consultant, and Consultant’s employees and subconsultants as additional insureds for their interests on the Project as they may exist. Said insurance shall be primary to any other insurance offering the same or similar coverage and this shall be reflected on the certificate of insurance. Proof of such insurance in the form of a standard Accord certificate shall be sent to Client and Consultant prior to Contractor’s commencement of construction. Client also agrees to require Contractor to indemnify, hold harmless, and defend Client, Consultant, and Consultant’s employees and subconsultants from and against any and all claims, damages, losses, and expenses (“Claims”) including but not limited to reasonable attorneys’ fees and economic or consequential damages, arising in whole or in part out of any act or omission of Contractor, any subcontractor, or anyone directly or indirectly employed by any of them.
4. Document Ownership
Clients and contractors often desire ownership rights in the documents (instruments of service) you prepare, rather than the preferred method of granting a limited license for use of your documents. When your client insists on transfer of document ownership, you should include protective language with regard to payment requirements, your firm’s standard details and specifications, allowable use of your documents, and indemnification protections for their future use.
Document Assignment
All documents and digital files prepared or furnished by Consultant pursuant to this Agreement are instruments of Consultant’s professional service. Consultant assigns ownership of instruments of service prepared specifically for this Project including copyright to Client upon payment for services rendered and expenses incurred, except Consultant retains copyright in its standard systems, sections, details, and specifications. Consultant grants Client a license to use Consultant’s standard systems, sections, details, specifications, and other information, data (including source codes), and intellectual property prepared or owned by Consultant prior to or not specific to the Project (collectively “Consultant’s Proprietary Material”). Consultant grants Client a license to use Consultant’s standard systems, sections, details, and specifications but only for this Project. Use of the instruments of service including Consultant’s Proprietary Material without engagement of Consultant by Client shall be at Client’s sole risk, and Client agrees to indemnify, defend, and hold Consultant harmless from all claims, damages, and expenses, including attorneys’ fees, arising out of such use by Client or by others acting through Client.
5. Indemnification
For limited scope projects, we advise against inclusion of any design professional indemnity obligations. Again, these clauses are common in POs and construction subcontracts but are usually written in a manner that is overly broad and includes uninsurable obligations for a design professional. If your client insists on an indemnification clause, it must be one that disclaims the duty to defend, fairly allocates risk on a proportionate basis, and uses a narrow list of indemnitees so it will be covered by PLI.
Indemnification
Consultant shall indemnify and hold Client and Client’s officers and employees harmless, but not defend, from and against damages, losses and judgments arising from claims by third parties, including reasonable attorneys’ fees and expenses recoverable under applicable law, but only to the extent they are caused by the negligent acts or omissions of Consultant, its employees, and its subconsultants in the performance of professional services under this Agreement. Consultant has no obligation to pay for any of the indemnitees’ costs prior to a final determination of liability or to pay any amount that exceeds Consultant’s finally determined percentage of liability based upon the comparative fault of Consultant, its employees, and its subconsultants.
6. Third-Party Exposure
Third-party exposure occurs when there is an implied or express duty in your contract to benefit another party aside from the client. Granting third-party rights increases the number of people and entities who may sue you and thereby increases exposure to potential claims you might face, some of which may be uninsurable. To minimize potential third-party exposure, your contracts should include a disclaimer.
Third-Party Exposure
Nothing contained in this Agreement shall create a contractual relationship with or a cause of action in favor of a third party against either Client or Consultant.
7. Limitation of Liability
Since your services are limited in scope, a limitation of liability equal to your fee or a reasonable multiplier of that fee is recommended.
Limitation of Liability (Lump Sum)
Neither Consultant, Consultant’s subconsultants, nor their agents or employees shall be jointly, severally, or individually liable to Client in excess of the compensation to be paid pursuant to this Agreement or _________________Dollars ($____), whichever is greater, by reason of any act or omission, in tort or contract, including breach of contract, breach of warranty, or negligence.
8. Waiver of Consequential Damages
When a contract is breached, the recognized remedy for the client is recovery of direct damages, such as the cost to repair or complete the work in accordance with corrected Contract Documents. Consequential damages include loss of the client’s profit or revenue.
Consequential damages create multiple potential exposures, and the design professional is often blamed, culpable or not, by the contractor for construction-related delays. Because consequential damages can be so out of proportion with the reward of a typical design contract, they should be waived or limited. We recommend the inclusion of a mutual waiver as shown below:
Waiver of Consequential Damages
Consultant and Client waive consequential damages (such as lost profits, lost revenues, loss of use, loss of financing, and loss of reputation) for claims, disputes, or other matters in question arising out of or relating to this Agreement. This mutual waiver is applicable, without limitation, to all consequential damages whether arising in contract, warranty, tort (including negligence), strict liability, or equity, or that might arise out of the parties’ indemnification obligations.
If consequential damages are not waived or limited, the design professional should thoroughly document known causes of delay during construction to mitigate the potential of unfairly becoming a scapegoat for a contractor’s failure to perform its duties and responsibilities.
Modifying a Client-Supplied Form
For limited-scope projects, here is some sample wording you can insert at the beginning of a PO or construction subcontract’s terms and conditions:
If you are working on a direct contract or PO:
“Consultant is providing professional services as specifically defined as the Consultant’s scope of services in this Agreement and is not a construction contractor or subcontractor nor a provider of goods and materials. Notwithstanding the terms and conditions in this Agreement, the following clauses apply to Consultant’s professional services for the scope of services defined in this Agreement.
[INSERT THE 8 CLAUSES NOTED ABOVE.]
If there are discrepancies in terms and conditions of this Agreement with the above-listed clauses, the above-listed clauses take precedence with regard to Consultant’s duties and obligations in its performance of professional services.”
If you are working under a contract in which a Prime Agreement is referenced or incorporated:
“Consultant is providing professional services as specifically defined as the Consultant’s scope of services in this Agreement and is not a construction contractor or subcontractor nor a provider of goods and materials. Notwithstanding the terms and conditions in this Agreement, nor any other terms and conditions in the Prime Agreement, the following clauses apply to Consultant’s professional services for the scope of services defined in this Agreement.
[INSERT THE 8 CLAUSES NOTED ABOVE.]
The above-listed terms are incorporated into this Agreement. If there are discrepancies in terms and conditions of this Agreement with the Prime Agreement, this Agreement and the above-listed clauses take precedence with regard to Consultant’s duties and obligations in its performance of professional services.”
Information provided by Berkley Design Professional is for general interest and risk management purposes only and should not be construed as legal advice nor confirmation of insurance coverage. As laws regarding the use and enforceability of the information contained herein will vary depending upon jurisdiction, the user of the information should consult with an attorney experienced in the laws and regulations of the appropriate jurisdiction for the full legal implications of the information.
Practice management recommendations should be carefully reviewed and adapted for the particular project requirements, firm standards and protocols established by the design professional.
Products and services are provided by one or more insurance company subsidiaries of W. R. Berkley Corporation. Not all products and services are available in every jurisdiction, and the precise coverage afforded by any insurer is subject to the actual terms and conditions of the policies as issued.
About the Author
Diane has more than 25 years of experience in professional liability insurance, focused on risk management and loss prevention education. Since joining Berkley Design Professional in 2014, Diane has led the development of the award-winning BDP Risk® Learning Management System and the creation of risk management resources, live workshops, on-demand courses and curated learning plans to help architects and engineers improve their business practices and mitigate loss.
In her career, she has led in-depth claim studies to reveal the breakdowns in business practices that can lead to risk exposure, translating that heightened awareness of the risks that design professionals face into meaningful and effective training programs.
Diane is a regular speaker at professional industry and association events. She reviews contracts and is the editor of the BDP Contract Review Guide, as well as the author of numerous articles, guides and courses on topics including communication, documentation, contracts, scope creep and more. She holds a Bachelor of Science degree in Organizational Behavior from the University of San Francisco and is also a certified instructional designer. Diane is based in Monterey, California. Contact Diane at [email protected].
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