Navigating Purchase Orders as Contracts – What is the Design Professional to do?

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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.

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Shutting Down a Design Firm Doesn’t Necessarily Shut Off the Risk

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By Cinnamon Connally, Underwriter, Berkley Design Professional, a Berkley Company

November 11, 2024

There may be considerable concern when a design firm is ready to close its doors even though this doesn’t just happen without significant planning and preparation. While there are many moving parts when it comes to closing a design firm, the most important is to ensure your architect and engineer clients can protect their assets from any claims that may arise in the future.

In the A&E industry, claims don’t necessarily happen immediately; often claims don’t become apparent until after the design and construction phases are complete. They can even arise years later, long after the firm purchased its last annual professional liability policy. So, how do you help protect your clients?

Here at Berkley Design Professional, we have excellent options to ensure your client is covered. We offer the traditional Extended Reporting Period (ERP) options, as well as a broader coverage, Run-off policy.

ERP coverage is granted via endorsement on the expiring policy. This option is available to all Berkley Design Professional policyholders even those who will be non-renewed. Currently, options available are one-, two- or three-year terms: this coverage is nonrenewable. Starting in 2025, our new filing will provide a 5-year term. The remaining limits from the expiring policy will apply for the full ERP term and there is no coverage for ongoing projects. Lastly, coverage is limited to actual claims only, thus eliminating free circumstance assistance.

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New Berkley Design Professional Online Broker Academy! Learn About Us at Your Own Pace

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By Candelario Lopez, Senior Learning Management Specialist, Berkley Design Professional, a Berkley Company

August 6, 2024

Berkley Design Professional recently released a new exclusive service for appointed agencies and their staff—our own Online Broker Academy!

Our Online Broker Academy was created to help answer the many questions our underwriters and risk management staff answer every day regarding Berkley Design Professional’s products, services and resources. The Academy is another avenue for Berkley Design Professional brokers get the latest updates to help them provide outstanding service to their clients.

Brokers can explore a variety of short videos and at-a-glance content on the easy-to-access platform to get the information they need, when they need it and get back to the business of serving their clients.

Our underwriters have created videos featuring the following topics:

  • Prime Program and Applications
  • Per Project Primary Limit
  • Express Program and Applications
  • Express 24
  • BDP Risk Early Access Program
  • And more…
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Controlling Outcomes and Preserving Relationships Through the Mediation Process

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By Lisa MacKay, Assistant Vice President, Senior Claims Examiner, Berkley Alliance Managers, a Berkley Company
Liz Molina, Assistant Vice President, Senior Claims Examiner, Berkley Alliance Managers, a Berkley Company

June 21, 2024

Controlling Outcomes and Preserving Relationships Through the Mediation Process

As claims handlers, we always look for reasonable opportunities to resolve our claims. Mediation is the most common and beneficial pathway to claims resolution. Most professional liability policies offer incentives for insureds to attend mediation and resolve their disputes. Moreover, mediation provides a means to foster and preserve relationships with insured clients. There are occasions when we can socialize, share some ideas, interact and even find common ground with other insurance professionals as well as attorneys. This ability to connect with others and with the help of a neutral third party or mediator, gives us some control over the outcome of a case and avoids the unknown risk of a decision being rendered by a judge or jury.

With social inflation on the rise and sometimes resulting in extreme jury awards, resolution through mediation is the best way to take the uncertainty and risk of the outcome out of the hands of the judge or jury. The interactive process promotes a free flow of information and allows parties to identify and discuss the strengths and weaknesses of the case in a confidential setting. The mediator assists the parties in exploring legal issues and in evaluating the recoverability of certain damage items that may not have been discussed. An effective mediator also helps to narrow the gap between alleged damages, which are sometimes overstated, and what would ultimately be recoverable to move the parties closer together and to assist them with becoming better informed to evaluate risk and exposure.

For many people, whether the case involves a personal or professional matter, having a dispute that rises to the level of a claim whether litigated or not, is a new and unfamiliar experience, and often “uncharted territory.” The claim and litigation process can be intimidating, uncomfortable, frustrating and disappointing. This experience is also true in mediation. For example in negotiations, unreasonable opening offers can lead to frustration and irritation and cause parties to become more entrenched and unwilling to concede their position. It is not a natural process to most and there is a lot of gamesmanship and strategy on all sides. We often have preliminary conversations with our insured clients and counsel to set the tone and keep an open mind as we prepare ourselves for unrealistic opening demands. The valuation of a case or position becomes more realistic after discussions or back-and-forth offers are made in mediation. The process itself may take more than one session, especially if the parties are entrenched, to allow them time to process the information and better evaluate risk and exposure.

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Limiting Risk with a Waiver of Consequential Damages Clause in Contracts

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May 14, 2024

Each year, insurers, defense counsel and design professionals are faced with ever increasing damages sought in actions alleging breach of contract and negligence due to the design professional’s alleged error or omission. One reason for the inflation is the tendency by plaintiffs’ counsel to seek an ever-expanding list of damages, including direct and consequential damages.

Direct damages are the costs to repair or replace the error that was caused by the design professional’s negligence. However, plaintiffs’ counsel are also seeking special or indirect damages called “consequential damages”, which include things like lost rents, rental costs for replacement property, damages to business reputation or the loss of goodwill, down time or idle time, material escalations, home office overhead costs, additional energy costs, increased construction management/supervision costs and additional interest and finance charges. For example, the cost to complete unfinished work on time may be very small in comparison to the loss of operating revenue a client might claim as a result of late completion.

Effective risk management in the construction industry begins with drafting a contract that limits the design professional’s exposure to damages. Design professionals, whenever possible, should try to obtain a limitation of liability provision in their contracts so that their liability can be limited to their professional fee or a multiplier of the fee. However, some owners will not agree to such a provision, so design professionals should look to include a mutual wavier of consequential damages in their contracts. This would limit the design professional’s exposure for a loss only to the direct costs to repair or replace the error, which is important since consequential damages can be so out of proportion with the reward of a typical design contract.

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What to Do When a Client Wants to Cut Construction Phase Services

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By Diane Mika
Senior Vice President, Risk Management Officer
Berkley Alliance Managers, a Berkley Company

March 20, 2024

The construction phase is when your design comes to life. It’s also where most claims rise to the surface. When you provide construction administration (CA) services, you are able to observe whether construction is progressing in general conformance with the Construction Documents, assist your client to identify and resolve problems and respond to requests for information (RFIs) to clarify your design intent. Construction phase services are essential to managing your professional liability risk—and your client’s overall project risk.

We frequently see projects where clients want to eliminate the design professional’s construction phase services in a misguided attempt to save money. In this situation, you need to help your client understand that CA services are to their benefit and the overall success of the project—and, in fact, that these duties are an important part of a design professional’s normal standard of care.

The Risks of Not Providing CA Phase Service
If you are not involved in CA, you won’t be available or able to address issues that arise on the project including site observation, interpretation of the construction documents, addressing legitimate RFIs, processing submittals, certifying pay requests and issuing Certificates of Substantial Completion. What’s more, contractors are typically dependent on the design professional for these activities, which are critical for the proper execution of the project during construction. The big question for your client is: How will the project be accomplished without you, as the design professional, providing these services?

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You’re Never Alone

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Free Claim Prevention Assistance

By Anthony Andersen
Senior Vice President, Professional Liability Claims Manager
Berkley Alliance Managers, a Berkley Company

January 25, 2024

Having a Berkley Architects, Engineers & Consultants Professional Liability Policy means that you’re never truly alone. Even when you’re dealing with a situation that isn’t yet a formal claim, but is giving you an uncomfortable feeling that it may soon become one, Berkley Alliance Managers is here for you!

We all know that issues on projects arise every day and working your way through them is just part of doing business in the design and construction world. But sometimes our policyholders are presented with circumstances that give them pause and where they might like to have some guidance.

Maybe you’ve received a subpoena for your records or deposition. Or perhaps there’s been an accident at the job site and parties are starting to point fingers at your work product as a potential cause. Maybe you’ve encountered certain unanticipated conditions on a job site that will increase costs and it appears that those costs may be sought from you. Or perhaps a local inspector or government agency is delaying the project by refusing to approve your work. These are all potential issues where the Free Claim Prevention Assistance coverage on the Berkley Architects Engineers & Consultants Professional Liability Policy could be used to help a policyholder avoid any missteps and guide the matter away from a claim or lawsuit.

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Celebrating a Decade Together!

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November 14, 2023

As the leaves change and the year comes to a close, we find ourselves reflecting on the journey of Berkley Design Professional. As you know, this year marks a significant milestone for us – our 10th Anniversary!

A decade ago, we embarked on a mission to provide outstanding service and expertise in the A&E professional liability insurance industry. Today, we’re proud to have achieved and surpassed many of our goals, thanks to your support and trust.

A Look Back

Over the past ten years, we’ve faced challenges, celebrated successes and forged lasting relationships. From our humble beginnings to becoming an industry leader, our growth story has been nothing short of remarkable. We’ve introduced innovative solutions, expanded our reach and most importantly, served thousands of satisfied clients.

Our Gratitude

Our success would not have been possible without our dedicated team and you, our valued brokers. Your feedback, loyalty and partnership have been the cornerstone of our achievements. As we celebrate this milestone, we want to extend our heartfelt gratitude to each one of you. Your belief in our vision and services has propelled us to new heights.

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Design/Construction Standards and Building Codes Evolving to Address Climate Change

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By Andrew Mendelson, FAIA
Executive Vice President, Chief Risk Management & CX Officer
Berkley Design Professional, a Berkley Company

October 23, 2023

Climate change is already having a significant impact on the design and construction industry and this impact is only going to grow in the years to come. Extreme weather events such as hurricanes, floods, wildfires and tornadoes are becoming more frequent and severe and buildings and infrastructure are increasingly being damaged or destroyed.

In response to these challenges, building codes and construction standards are changing to address climate and extreme weather concerns. Local, State and Federal agencies are also working to update design and building requirements, a meaningful factor in the evolution of the standard of care for professionals in the industry.

Changes to building codes and construction standards

One of the most significant changes is an increasing focus on resiliency. Resilient buildings are designed to withstand extreme weather events and quickly regain functionality when damaged.

Specific changes include:

  • Higher wind load requirements: Buildings in areas prone to hurricanes and other high-wind events are compelled to withstand higher wind speeds.
  • Flood-resistant design: Buildings in flood zones are required to be elevated above the floodplain and to have flood-resistant materials and construction methods.
  • Wildfire-resistant design: Buildings in areas prone to wildfires are required to utilize fire-resistant materials and to create site features such as defensible perimeters and flame-resistant plantings.
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Retirement Planning for Design Professionals – Are Your Clients Covered for Professional Liability?

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By Barbara Block
Vice President, Supervising Underwriter
Berkley Design Professional, a Berkley Company

June 6, 2023

Retirement for a design professional doesn’t just happen, it takes careful planning and preparation. Having a transition plan, a buy-sell agreement, successor development and planning are all considerations, but one area retiring professionals may overlook is having adequate professional liability coverage.

Given the current climate of increasing litigation, simply relying on the design professional’s prior firm to maintain their professional liability insurance policy in addition to having necessary limits to protect their assets in retirement is not necessarily the best or safest option.

When it comes to professional liability coverage for architects and engineers, claims don’t just occur when the project is underway. Claims can arise years after the project is complete and if the design professional is no longer a named insured under their prior firms’ policy, problems can occur.

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