Strategies to Safeguard Your Design Business from Potential Legal Accusations
Fending Off Legal Troubles in the Design World:
Embracing a new project is a thrilling adventure, brimming with imaginative possibilities. Yet, with each fresh endeavor comes a new set of perils. Risks may arise from various aspects, such as the project's size, complexity, delivery method, or even the scope of involvement. Professional liability claims are a constant threat for businesses offering design services.
Even factors like budget constraints, adoption of green construction strategies, and integration of cutting-edge technology can lead to legal trouble. Claims can originate from a diverse group, including project owners, subsequent property owners, contractors, subcontractors, and other stakeholders. The disruption caused by disputes, defense costs, and bad press can severely impact a firm's operations. In extreme cases, the financial toll from claims and resolutions may prove too much for a firm to bear.
Joseph Jones, Director of Risk Management for Professional Liability at our platform, elucidates, "The multitude of participants and connections in a single project within the design and construction industry often muddies the waters of responsibilities and standards. Spending time at the outset to define and document procedures, roles, and expectations can save time, prevent headaches, and protect everyone's interests."
Here are some steps to help safeguard your design firm from legal woes or professional liability claims:
1. Fastidiously Document Communications
Insightful records elucidate the entire project's progress, helping you defend against potential claims. Implement communication standards for both formal and informal interactions within and outside your firm. Document all digital, physical, and verbal communications, particularly noteworthy changes and decisions with project owners and consultants. Regularly communicate with clients and confirm changes to ensure all parties are informed of crucial aspects. Disseminate project information to all parties on changes and decisions throughout the project lifecycle. Comprehensive receipt acknowledgement, in writing, of critical issues is also essential.
2. Adhere to Industry-Standard Contracts
Clearly outlined agreements with subcontractors and consultants for a project help clarify responsibilities in case of a claim. Strong contracts with clients can also shield your firm from legal threats.
Always obtain a signed contract from clients before engaging in work. Have every agreement, regardless of origin, reviewed by a legal advisor with design and construction industry expertise. Leverage industry-specific language to protect from liability. Avoid contractual provisions that imply guarantees, warranties, or certifications beyond standard professional obligations. Be wary of unspecified responsibilities in contracts, such as impromptu construction site visits with the owner to review progress, which could potentially implicate negligence if deficiencies are not reported. Stay abreast of the standards established by your industry peers to ensure your services align with the applicable standard of care.
3. Specialize Within Your Expertise
Dabbling in projects that fall outside your realm of competency or delegating senior roles to junior staff members can offer growth prospects. However, making assertions of expertise where experience is lacking or unproven can expose you to unnecessary risk if errors occur.
Delegate project tasks to employees with the appropriate level of experience. Invest in expertise for the right opportunity to protect yourself in the long term, rather than "winging it." Thoroughly research subcontractor capabilities and follow up on referrals. An exaggerated mastery or lack of understanding by subcontractors regarding project expectations and the standard of care can place you at risk.
4. Select Clients Thoughtfully
While new business is exciting, it's crucial to assess whether a client is suitable. Each client offers possibilities and risks depending on their industry, corporate structure, and financial standing. Carry out the necessary research to understand each client's unique traits.
Financial instability can result in delayed payments, unstable teams, differing opinions, and sudden priorities. A lack of design and construction experience may necessitate additional time for education and could still lead to alterations that consume resources. A business's private-sector corporate structure may indicate their ability to respond to future issues. Public entities may come with statutory limits or protections that increase your risk. The contract a client proposes—or their reaction to the one you offer—can also indicate potential risk.
5. Guard Your Data Against Threats
Data breaches can expose sensitive information, such as Social Security numbers and other personal data. Loss of intellectual property can cause disruptions with significant financial repercussions. If you and your employees have access to or store your client's sensitive information, you are responsible for keeping it secure.
Implement a robust password management protocol, establish email standards, and require secure password protection for company-owned devices. Establish controls for personal devices that access company information. Implement a protocol for reporting incidents of theft, malware, and other threats. Consider using a reputable IT firm for a cybersecurity audit to better understand the ins and outs of cybersecurity.
6. Contemplate Design Professional Liability Insurance
Though you may take every precaution, you might still become the target of a liability claim, even if you've done nothing wrong. Design professional liability insurance can offer financial protection when you or your firm are faced with a potential liability claim. Look for:
- A professional liability insurance policy tailored to design professionals.
- Coverage for specialized aspects of your design operations, such as design-build services, joint ventures, pollution, asbestos, mold, and pre-claim assistance for potential claims.
"Design professionals prefer focusing on solving their next design challenge rather than worrying about things that might go wrong," Jones says. "By addressing the risks inherent to your business, you'll be better equipped to serve your clients' design needs from a position of safety and stability."
Explore our Design Professional Liability products and services to safeguard your business, or discuss your independent agent or broker.
- Deliberate documentation of communications is essential to defend against potential claims, ensuring all digital, physical, and verbal exchanges are recorded, particularly significant changes and decisions.
- Industry-standard contracts with both clients and subcontractors serve to clarify responsibilities in the event of a claim, providing a robust protection against legal threats.
- Specialized expertise within one's field minimizes risk, as straying from one's area of competency can expose individuals to unnecessary risks.
- Thoughtful client selection based on comprehensive research of their industry, corporate structure, and financial standing can help anticipate and mitigate potential risks.
- Vigilant data protection against threats, such as data breaches, is crucial to safeguard sensitive information and intellectual property from unauthorized access.
- Design professional liability insurance can offer financial protection against potential liability claims, addressing the risks inherent within the design industry and allowing professionals to focus on their work with a sense of safety and stability.
