How To Limit Your Liability As a Designer or Contractor

When designing or building a new project, a single error can lead to expensive project delays, injuries, and other damages. Depending on the nature of the problem and your role in the project, you or your company could potentially be held financially responsible. Fortunately, following best practices can help reduce errors, and limit your liability as a designer or contractor if they should occur.

In general, designers, architects, and engineers can be held liable for damages due to design flaws, while the building contractor is held responsible for poor construction or materials, or job site injuries. However, as the lines between roles of designers and contractors blur, so does their potential for liability. With that in mind, it is wise to be aware of the potential risks, and how to reduce them.

Potential Liability Issues

There are several situations in which designers, contractors, and engineers can run into potential liability issues. If you are a contractor, the more involved you are in the design, the more responsibility you bear if the design contains serious errors. Here are some of the general areas where you could find yourself facing liability issues:

• Job Site Accidents: The contractor firm can be held responsible for any injuries that occur on the job site, especially if they are shown to be using insufficient safety practices.
• Design Errors: If errors in the design lead to project delays, damage, or injuries, the design firm is generally the party held liable.
• Construction Errors: Quality construction practices is the responsibility of the contractors, and the firm can be held liable if errors or poor quality materials lead to damages.

How to Limit Your Liability

There are many ways that designers and contractors can reduce their potential liability. If you are involved in the construction of a project, make sure you are following these best practices:

• Start an LLC or Registered Business: Having a registered business or LLC can shield individuals from personal liability, as it is the company that enters the contract and bears the responsibility.
• Use High Quality Tools and Materials: Be familiar with the companies you are relying on for tools and materials, and choose ones that offer manufacturer’s guarantees for defective products.
• Require Proper Safety Gear: Ensure that all workers and anyone else who enters the job site is wearing the appropriate workwear and personal protective equipment.
• Know Who You Are Working With: Only hire employees with the proper skills and training. This includes any subcontractors you hire for the project, as their employees may attempt to seek damages from you if they are injured on site.
• Carry Liability Insurance: Carrying the appropriate liability insurance can ensure you are adequately protected. General liability insurance covers injuries and property damage, but will not cover damages caused by design errors. There are many options when it comes to liability insurance, so make sure you find a policy that works for the project and have a full understanding of what is and is not covered.

If you are at all involved in the design or engineering side of the project, there are a number of ways you can minimize your liability risk:

• Limitation of Liability Clauses: When drafting a contract, limitation of liability clauses define limitations to which the company and individuals can be held financially responsible. The specific provisions vary depending on the contract, but can include a maximum dollar amount, or excluding liability for certain types of damages or individuals.
• Reliance Disclaimers: Effective reliance disclaimers in your contract should stipulate which parties may rely on the design materials, and exclude all others.
• Qualification of Designs: Include clauses in your contract that shield your company and individuals from issues arising from unexpected situations. These stipulate that the design is based on the currently known evidence, and may change to accommodate real-life scenarios, such as the conditions of the subsurface that is being built upon.
• Define the Reasonable Standard of Care: Defining the standard of care explicitly in the contract can avoid uncertainty and protect against claims of misrepresentation. This allows designers to define the extent of their professional obligations.
• Carry Professional Liability Insurance: While a general liability insurance policy will cover injuries and damages at the project site, professional liability insurance is needed to cover damages caused by design errors or negligence. Professional liability insurance is generally intended to cover damages arising from rendering (or falling to render) a service, but there are numerous coverage options depending on the nature of your projects.

Of course, the ideal situation would be to avoid injuries, delays, and damages altogether. A single small error can have serious repercussions, causing not only construction delays, but potentially serious property damage or injuries. However, there is no protection that is 100% effective for preventing unexpected situations and human error. If you are professionally designing or constructing projects, it is important to educate yourself about your liability risks, and to do your due diligence in order to mitigate those risks.