Top Ten Ways to Manage Risks and Prevent Losses

From time to time, XL Design Professionals is asked to prepare a summary of our primary loss prevention philosophies -- our top ten list, if you will. So from our home office in Monterey, California, here's the top ten things design professionals can do to manage risks and prevent losses:

1. Eliminate liability illiteracy in your firm.
   Make sure all employees learn how everyday business and technical practices affect your exposure to risk. Institute procedures in your firm that support your commitment to quality and thereby minimize risks.
2. Select projects and clients carefully.
   Certain projects (such as condominiums) and certain clients (such as developers) are higher risk than others. Check into the client's track record and finances before accepting any assignment. Don't accept projects that do not provide adequate fees for your services, restrict your scope of services to an unacceptable level or are outside of your firm's area of expertise.
   Set realistic expectations.
3. Make sure the client understands that error-free projects simply don't exist. Discuss potential problem areas and changes that may be needed. Strive for a commitment from the owner and the contractor to identify and address the inevitable problems at the earliest opportunity and to work together to achieve win-win resolutions.
4. Draft a comprehensive written contract.
   You should negotiate a fair, well-defined professional services agreement that precisely states the intent of both parties. A written agreement helps prevent misunderstandings and makes provisions easily understood by a mediator, judge or jury. This alone may discourage a plaintiff on an otherwise marginal claim.
5. Offer comprehensive design services.
   A full scope of services that includes construction observation provides the design professional the best opportunity to ensure a quality, claim-free project. Services should include a systematic approach to develop and review plans, specifications and calculations and to ensure accurate documentation and clarity of design criteria. You should also list in your contract those services you have explained and offered to the client, but that the client has declined. This could prevent attempts to hold you liable for failing to perform a service the client decided to forgo.
6. Implement mediation provisions in contractual agreements.
   Make every effort to avoid litigation. Instead, agree that your conflicts will be resolved fairly, quickly and inexpensively when handled through mediation and other dispute resolution techniques.
7. Refuse to accept unlimited liability for your services.
   Work for a limitation of liability (LoL) clause in your contracts that makes the amount of liability you assume proportionate to your ability to control risk.
8. Identify "deal-breakers."
   Some risks are so significant that you cannot possibly accept them, such as pre-existing hazardous materials like asbestos. Let clients know that they must retain the liability for such risks contractually (through indemnities) if you are to provide services on the project.
9. Promote the use of partnering.
   It's time to get back to creative cooperation between all parties of the construction process. Partnering gets the owner, contractors and the design team working together toward mutually beneficial goals -- quality projects delivered on time, within budget and litigation free.
10. Look at the project from the contractor's point of view.
    Don't turn away from their problems. Be concerned about overly harsh shifting of risk to contractors in onerous General Conditions provisions, like unfair indemnity clauses, or "liquidated damages" or "no damage for delays" provisions. Think about constructability. When something goes wrong during construction, it is highly likely the design team will be implicated.