Claim Reduction is a monthly series by the ASCE Committee on Claims Reduction and Management designed to help engineers learn from problems that others have encountered.
By Daniel L. Harpstead
While civil engineers typically lack formal legal training and expertise, they frequently find themselves on the front line of contract negotiations between owners and consultants. Some engineers have considerable contracting experience and understand the importance of this phase of the project, while others see the contract as a hurdle to be overcome before the “real work” can begin.
When reviewing contract language, engineers must understand the significance of word choice. Generally speaking, contract language is carefully and specifically crafted to address and/or solve specific issues or concerns; and engineers need to comprehend the underlying intent behind these clauses. Furthermore, vague language often creeps into contracts, complicating matters when a court is asked to interpret the terms after a dispute arises.
The remainder of this article presents real-life examples of contract language and demonstrates how these clauses may muddy the waters throughout the course of a project or during subsequent litigation.
Safety
Safety often takes center stage during initial project discussions, and it’s not uncommon to encounter contract language such as “consultant will be responsible for the safety of staff at the site.” While a quick reading might suggest that the consultant is only responsible for the safety of its employees while at the site, a broader interpretation could extend this responsibility to all individuals working at the site, including those employed by the contractor, other consultants, and even the owner’s personnel.
When questioned, owners often maintain that this clause applies only to the consultant’s personnel, but the language itself does not support this interpretation. The discussions with the owner should focus the clause specifically to consultant’s employees and subcontractors, making it clear that the overall site safety is the responsibility of the contractor.
While generally not the specific responsibility of the consultant, if a client does intend for the consultant to have a broader safety responsibility, the consultant needs to gather essential information, such as the number of contractor employees at the site and their tasks, the number of other consultants that may be present, and the extent of safety monitoring required for owner employees visiting the site.
Finally, consider the vague definition of “site.” Does it refer to the immediate work area, everything inside the fence, or perhaps even off-site improvements? Clearly defining the scope of the “site” is crucial to ensure a clear understanding of the consultant’s safety responsibilities.
Standard of care
Engineering contracts typically include a standard of care clause, which defines the standard against which an engineer’s performance will be evaluated. In some cases, owners, in an effort to ensure that they receive high-quality work, will modify this clause by inserting words such as “highest” or “best.” However, the meaning of these elevated standards is ambiguous.
One might argue that it refers to the work being performed by the most proficient individual in the world, but even this interpretation lacks clarity as it is practically impossible to define “highest” standard or the “best” engineer. An elevated standard of care creates risk and liability for consultants because of the potential for misinterpretations which imply that the design work will be performed above and beyond what is legally required. Agreeing to a standard of care that exceeds the common law standard of care may lead to uninsured exposure.
The accepted definition for standard of care in engineering consulting is “the degree of care that a reasonably careful professional engineer would use in a similar circumstance in the general area where the project is located.” What might be considered acceptable practice in one area may not be acceptable in another. Standard of care also considers when the work was performed, since methodologies and technologies are constantly improving.
Duty to defend
A problematic provision present in many contracts is the duty to defend clause, which is often part of a larger indemnity/indemnification clause. This duty to defend clause mandates that if a claim is brought against the owner, the consultant is contractually obligated to retain and pay for counsel to defend the owner, even before there has been any finding of fault or negligence by the consultant.
The professional liability insurance typically carried by consultants is negligence based. This means that for the insurance to come into play, there needs to be an allegation of negligence. Since the duty to defend clause generally covers a broad range of project issues, some potential claims may have no connection to the engineer’s role in the project or may not involve negligent work. Moreover, there is typically no duty for an engineer to pay for the defense of a third party in the absence of such an agreement, and professional liability insurance policies typically contain exclusions for liability assumed under a contract or agreement unless the insured would have such liability in the absence of a contract.
The consultant is therefore left with a contractual obligation to pay the owner’s legal expenses directly from their own funds.
Data security
Recent cybersecurity events and new data privacy laws have prompted clients and owners to insert data security clauses into their contracts, which dictate how information can be used and maintain and often impose requirements that only the largest and most sophisticated companies can comply with. As a result, it is important to carefully review these clauses and seek support from IT and legal professionals.
For example, if your contract dictates that access to client data must be limited to “need-to-know,” or “least-privilege,” can your project comply? The concept of need-to-know and least-privilege ensures that only authorized project team members can access client data, preventing unauthorized access by non–project team members, including fellow employees. Additional contract requirements may mandate periodic reviews of client data access, along with maintaining records to demonstrate compliance during annual client cybersecurity assessments.
As a project manager, you should be able to distinguish between sensitive and confidential client data to ensure that proper contractual data-handling requirements are met and maintained. Most consultant computer systems are not set up to appropriately store client data containing personal identifiable information (PII). If PII is involved in a project, seek assistance from appropriate parties.
Words carry meaning
These four examples highlight how contract language may significantly impact the risks you undertake when engaging in new work. However, there are many other clauses that warrant careful attention and consideration. Remember, words carry meaning, and it is crucial to fully understand their intended meaning and potential implications for the scope of work for your project, the costs of providing those services, and a consideration of the risks the owner is transferring through the contractual terms.
Daniel Harpstead, P.E., is a senior vice president at Kleinfelder and currently serves as the risk mitigation director for the company. He works with internal risk management and mitigation committees to identify potential project risks and how to best mitigate them, while also serving in risk mitigation roles on many projects. Harpstead holds a bachelor’s degree in civil engineering from Michigan State University and a master’s degree in civil engineering from Purdue University.
