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It is not unusual for a client organisation, particularly one responsible for a large building program, to produce a special set of conditions of engagement for its architects and other professional consultants.
Often client-generated agreements are drafted by professionals who are exclusively protecting the interests of their clients. This results in conditions that may be considered unfair, unreasonable or uninsurable in part or whole. (‘Uninsurable’ means either that insurance cannot be obtained in the first place for the obligations under the specific clause or that, the professional indemnity (PI) insurance policy obtained by the architect, has a relevant exclusion or limitation which may limit the amount of cover the insurer will provide in the event of a claim relating to this particular clause.)
Such client-generated agreements may seek to impose obligations and responsibilities on architects both in terms of the breadth of the obligation, as well as the standard of care expected, that may take an architect's liability beyond that which is imposed by law. Professional indemnity insurance policies are intended to cover an architect for their civil liability arising out of a breach of their professional duty, up to the limit of indemnity. However, this is subject to the terms, conditions and exclusions of the specific policy. It is these terms, conditions and exclusions which limit the amount of cover the specific policy will provide in the event of a claim for damages. Generally speaking, it is common for professional indemnity insurance policies to exclude cover for (amongst other exclusions):
- Any additional liability which may be imposed on the architect over and above that at law by the terms of a consultancy agreement. If your client–architect agreement contains clauses that increase an architect's usual legal liability, such as asking for a ‘fit for purpose warranty’ the additional liability created by the clause over and above that at law may not be insured.
- Any waiver of the architect’s or its insurer’s rights that it has agreed to within the client-architect agreement. That is, clauses that may limit the architect/insurer’s ability to recover damages in the event of a third-party claim made against the architects. For example, a clause within the client-architect agreement that limits the client’s liability to say the fees only. Should this clause mean that the insurer was unable to claim damages from the client in circumstances where they were partially or wholly responsible, this may lead to uninsured losses.
For the reasons outlined above, architects should closely review client-generated agreements and obtain advice from their PI insurer. Architects insured by Planned Cover may obtain advice regarding the extent to which the provisions of a client-generated agreement are insurable.
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