What is a surveyor's best risk management tool? As leading providers of insurance for surveyors, our clients often ask us how to reduce the number of lawsuits or disputes that come their way. Of course, there is no single solution. But our first piece of advice is to always use a clearly and concisely written contract on every project.
Written vs. Oral Contracts: Why the Pen is Mightier than the TongueMany surveyors and mappers may look upon written contracts as a burden or as a mere formality. But a written agreement presents a significant opportunity for risk management-before a project even begins. There are four distinct advantages to a written contract over an oral agreement:
1. Written contracts encourage careful consideration. The act of putting an agreement in writing encourages serious thought. It compels both parties to seriously consider the terms they have requested and the manner in which they are phrased. A written contract may also curtail some of the more taxing requests that clients may devise; by virtue of having to put their demands in writing, clients will be more conscientious of their requirements.
2. Written contracts allow both or all parties to review their sides of the agreement. Having agreements in writing enables all parties to check and double-check their obligations-at their leisure. Both parties are allowed ample opportunity to become comfortable with their individual responsibilities.
3. Written contracts enable surveyors and mappers to evaluate their clients' expectations. In the contract negotiation phase, surveyors and mappers get the opportunity to examine their clients' attitudes toward their services. Does the client want the surveyor to take on all of the responsibility for a project? Does he or she demand "perfection"? Since taking on unbalanced risk and responsibility can lead to trouble, it is important to know what the client expects upfront. But most importantly-and less sinister-is the opportunity a written contract gives the surveyor to define his or her client's expectations, reducing the possibility of confusion or conflict, which can lead to litigation. And speaking of litigation"¦
4. Written agreements are objective, documented evidence, which can be crucial in the case of a lawsuit. Without a written contract, a surveyor's obligation comes down to his or her recollection of the agreement-which may differ considerably from the client's perspective. This becomes all the more critical if the surveyor becomes involved in a lawsuit. In court, a written agreement provides substantially better evidence than conflicting third-party testimony.
Agreeing to use written contracts on every project is the first step. The next step is to make sure the contracts are well-written.
Taxing Contractual Terms: Taking on the Weight of the WorldWritten contracts may provide significant possibility for trouble, especially if a client tries to shift too much responsibility to the surveyor. Two of the most common pitfalls in surveying contracts exist in the sections concerning indemnity and the standard of care.
Shifting Risk through Indemnity Provisions
Clients may ask surveyors and mappers to add indemnity provisions to contracts. Indemnity clauses are contractual agreements where one party agrees to assume a responsibility should a specified event occur. Indemnity agreements are fine, as long as the risk is both assumed by the person most able to control it and covered by some form of insurance. For example, a contractor may agree to indemnify the owner for liability resulting from bodily injury claims onsite. This makes sense since the contractor has the most control over the physical management of the site. Thus, if a worker injures himself and sues the owner, the contractor would reimburse the owner.
Common law, as well as most state laws, require surveyors and mappers to pay for liabilities incurred by their clients that were directly caused by the surveyors' or mappers' negligent acts, errors or omissions. The surveyor is the best person to control his acts, errors or omissions. Therefore, he should bear the risk.
But when a client asks the surveyor to take on an indemnity provision that goes beyond these terms, it can get risky. Sometimes, indemnity clauses inappropriately shift risk to a party with a weaker bargaining position, whether or not that party has any control over the risk. The bad news? That party ends up with an unfairly large portion of the project's risk. The worse news? Professional liability insurance may not cover it.
Professional liability insurance is designed to provide protection for liability caused by negligent performance of professional services. It specifically excludes breaches of contract-unless the breach is caused by negligent performance of the professional standard of care. Thus, it is critical to make the direct causal link between the negligence and the indemnity provision. Our suggested provision is (with the key phrase in bold for reference):
Sample provision: Client and Surveyor each agree to indemnify and hold the other harmless, and their respective officers, employees, agents and representatives, from and against liability for all claims, losses, damages and expenses, including reasonable attorneys' fees, to the extent such claims, losses, damages, or expenses are caused by the indemnifying party's negligent acts, errors or omissions. In the event claims, losses, damages or expenses are caused by the joint or concurrent negligence of Client and Surveyor, they shall be borne by each party in proportion to its negligence.
By linking the two, this provision brings the indemnity agreement within the scope of professional liability coverage. Notice that this example provides a concurrent indemnification provision. Any client who asks for an indemnity provision should also be willing to protect the surveyor from the harm caused by the client and the client's agents, contractors and consultants.
High Hopes for Your Standards of Care
Surveyors and mappers can also get themselves into trouble when negotiating provisions related to the standard of care. According to common law, a professional is required to act as competently as could reasonably be expected of other professionals practicing under similar circumstances. The law does not require perfection, merely reasonable skill and care.
However, a client may ask a surveyor to take it one step further and include a clause such as: "Surveyor shall perform in accordance with the highest professional standard of care." Besides increasing the surveyor's obligation above and beyond what the law requires-and creating an obligation that is highly subjective and difficult to define-including such a clause may also open the surveyor up to breach of contract claims alleging that he or she may not have met the "highest" or "best" professional standard. Most professional liability policies exclude coverage for contractual obligations beyond what would have existed in the absence of a contract.
One suggested provision, which embodies the normal legal liability level, is:
Sample provision: The standard of care for all professional services performed or furnished by Surveyor under this Agreement will be the skill and care used by members of Surveyor's profession practicing under similar circumstances at the same time and in the same locality. Surveyor makes no warranties, express or implied, under this Agreement or otherwise, in connection with Surveyor's services.
When this situation arises, surveyors and mappers should make sure they carefully discuss their clients' expectations for projects. If a client still wishes to impose a higher standard of care than is normally legally required, it should be measurable. The surveyor should also be properly compensated in proportion to the increase in service and risk.
Looking Out for Number One: Protecting Your Own InterestsWe've briefly covered the requests clients might make in the contract negotiation process, but what should surveyors and mappers include? One of the most recent hot issues to pop up is electronic media. While providing clients with electronic copies of the surveyor's instruments of service is a convenient method of transfer, there are several risks involved.
Some clients may view electronic copies as an easy way to reuse the information they have been provided. Surveyors and mappers do not want to be held responsible for any problems this reuse may cause. Additionally, when media switches from system to system, there is no guarantee that it will display the same way as it was on the surveyor's computer. For this reason, it is important to state that, where conflicts between electronic and printed media exist, the printed (and sealed) copies rule.
To deal with these issues, we recommend inserting a clause such as:
Sample provision: Copies of documents that may be relied upon by Client are limited to the printed copies (also known as hard copies) that are signed or sealed by Surveyor. Files in electronic formats, or other types of information furnished by Surveyor to Client such as text, data or graphics, are only for convenience of Client. Any conclusion or information obtained or derived from such electronic files will be at the user's sole risk. When transferring documents in electronic formats, Surveyor makes no representations as to long-term compatibility, usability, or readability of documents resulting from the use of software application packages, operating systems or computer hardware differing from those in use by Surveyor at the beginning of this project.
Additional ResourcesIn this article, we've recommended wording for three common contractual clauses. These are by no means the only ones to be paid attention. CNA/Schinnerer recently published The Surveyor's Terms and Conditions Review Guide, a handy manual that covers 12 contract problem spots and provides recommended language. This guide is exclusively for CNA/Schinnerer clients, but similar material can be found in CNA/Schinnerer's Surveyor's Contracts and Risk Management Manual, available for purchase through the ACSM website at www.acsm.net.
While the sample contractual language provided above has been carefully crafted based on our knowledge and experience, there is no magic bullet contract language that eliminates all possible risk. Our suggestions may help surveyors and mappers avoid some of the more common pitfalls, but they are by no means risk-proof.