Warranties: Design Professional Beware – The Importance of Disclaiming Warranties and Guarantees
By Nathan B. Greyard, Esq. and Daniel M. Eggleston, Esq., Lee/Shoemaker PLLC
You do not have a crystal ball. Changes are common in the design and construction process because a project may encounter things that cannot be predicted and designed for in advance, such as unforeseen soil conditions or material costs/availability. Accordingly, design professionals should not provide warranties or guarantees with their design services. Instead, sound risk management disclaims such warranties or guarantees by the language in the design contract.
What is a Warranty or Guarantee?
A warranty or guarantee is an absolute promise that certain conditions will be fulfilled. Accordingly, a warranty or guarantee can make a design professional liable for something regardless of fault and/or control. Warranties or guarantees can be “express,” i.e., plainly written in the contract, or “implied,” meaning inferable through the design professional’s conduct or communications. A common example of a warranty or guarantee is that a project will achieve a certain environmental or energy efficiency certification. While warranty or guarantee clauses have been proposed by project owners as a way to improve facility design and longevity (and protect project owners), these promises can prove to be costly to a design professional and even jeopardize insurance coverage.
Don’t Promise What You Can’t Deliver – Perfection
No design is perfect. Change orders and the requests for interpretation process reflect the inherent unpredictability of a project and the allocation of risk among a project’s stakeholders to achieve a successful project. Similarly, the standard of care for design professionals is not “perfection.” Rather, it is the professional skill and care ordinarily provided by design professionals practicing in the same or similar locality under the same or similar circumstances.
When a claim is advanced that a design professional failed to meet the standard of care, their professional liability insurance is triggered; however, if the claim is based on a contractual warranty or guarantee (as opposed to a breach of the standard of care), such a claim may not be covered by the insurance carrier.
For example, an architect may agree to “ensure that the completed project is fully coordinated and functional and suitable for its intended purposes.” If the insurance carrier took the position that this language constituted a contractual undertaking not covered by the professional liability policy, coverage for a claim based on this provision could be denied—leaving the design professional liable for that promise, without the safety net of its professional liability insurance. The prudent design professional guards against assuming contractual obligations—like warranties and guarantees—that may jeopardize insurance coverage.
Be Wary of Warranties Hidden in Plain Sight
Design professionals should also be conscious of “cloaked” warranties and guarantees. Words like “certify,” “certification,” “ensure,” or “assure” in a contract may be found in various sections of a proposed contract, which—depending on the circumstances—could impose a warranty or guarantee on a design professional (or at least empower the owner’s counsel to advance such an argument). Put another way, the header or title of particular contract section is not conclusive as to whether a term is, or is not, a warranty or guarantee.
Conclusion
Warranties and guarantees can create absolute liability that obligates the design professional to correct project deficiencies that are (1) beyond their control, (2) unforeseeable, and/or (3) beyond what they would be obligated to correct according to their professional standard of care. Warranty and guarantee disclaimers can go a long way in clearly defining the scope and limitations of the design services and prevent misunderstandings and potential disputes by establishing the boundaries within which the design professional’s responsibilities lie.
Allocation of risk should be influenced—not imbalanced—by the specific terms and conditions outlined in the professional services contract. Design professionals should make clear that they are not providing services that expose them to disproportionate risk. Disclaiming warranties and guarantees sets realistic expectations, mitigates liability, and eliminates potential insurance coverage issues.
These disclaimers protect the interests of both the design professional and their clients, setting a more fair and balanced relationship throughout the project. By acknowledging the uncertainties inherent in the design and construction process, you can focus on delivering your expertise while minimizing the potential for disputes and misunderstandings.
Nathan B. Greyard and Daniel M. Eggleston are lawyers at Lee/Shoemaker PLLC, a law firm devoted to the representation of design professionals with offices in Washington, DC and Charlottesville, Virginia. The content of this article was prepared to educate related to potential risks but is not intended to be a substitute for professional legal advice.
Lee/Shoemaker PLLC is an Educational Program Allied Member of AIA Potomac Valley.
