Page 49 - CCD Magazine - Winter-Spring 2019 Issue

Debbie L. Roberts Debbie L. Roberts, Contracts Manager, The RMH Group, Inc. Many decision makers want to treat design and construction professionals the same when it comes to their roles and responsibilities, procurement of services and much more. One example of how these professionals are very different is the type of insurance coverage that would apply to designers vs. contractors in the event of a claim. It turns out a design professional’s professional liability insurance (PLI) policy significantly differs from the general liability (GL) insurance policy of a contractor in a variety of ways, including legal defense coverage. A contractor’s GL insurance policy covers the client’s legal defense costs in the event of a claim; however, if a design professional has agreed to defend its client for the design professional’s “alleged” negligence, the design professional will be required to pay for the client’s legal defense “out of pocket” even if the design professional is ultimately cleared of negligence. This is because a design professional’s PLI policy will not cover the client’s legal defense costs until negligence has been proven against the design professional, should that happen at all. Rarely do contracts provide for a reimbursement of defense costs should the design professional be found not negligent. And because legal defense costs can quickly escalate to astronomical figures, the duty to defend contractual obligation could easily bankrupt a design professional’s company. Furthermore, the insurance that would cover upfront legal defense costs does not exist for design professionals to purchase. So why does “duty to defend” and other onerous indemnification clauses end up in so many contractual agreements? It turns out many clients are simply not aware of the differences between a design professional’s PLI policy and the GL insurance policy of a contractor, so, they end up treating them the same way. Some clients may be aware that they are unduly shifting risk to design professionals, but it is assumed these instances are few and far between. In 2015, the Colorado Legislature unanimously passed into law Colorado Revised Statutes Title 13 Courts and Court Procedure § 13-505-102 Right to contribution-- contract or agreement provision to indemnify or hold harmless void against public policy passed into law in 2015, making it against Colorado public policy for public entities to require a design professional to provide upfront legal defense services for their clients. Most Colorado municipalities have rewritten their standard contract templates to comply with this statute but be aware that not all public design contracts have been updated, so you may have to request a revision to make the contract insurable. In the absence of legislation banning all clients from requiring their design professionals to pay for the client’s legal defense, design professionals need to make sure their contracts expressly disclaim a duty to defend. Engineering Colorado Why Non-insurable Contract Terms Are Not in Anyone’s Best Interest by Debbie L. Roberts Colorado Construction & Design | 49