Fee disputes in the design professional industry are not a new phenomenon, but their prevalence has noticeably increased in recent years. Several factors contribute to this rise, including economic fluctuations, evolving client expectations, and the complexity of design projects. As clients become more demanding and projects more intricate, the potential for misunderstandings and disagreements regarding fees increases.
Most fee disputes tended to arise from client changes, so it is important that clients are made aware, in writing, that changes can have a cost. Any changes with a potential cost impact must be detailed in writing, bearing in mind that the client tends to look to the architect automatically to resolve any problems that may arise. Any misunderstanding or miscommunication which is not clarified in writing, in the contract or an amendment to the contract, is guaranteed to increase the potential for a fee dispute due to a lack of clear communication between the design professional and the client.
Common scenarios which we see resulting in fee disputes include: the design professional’s services being terminated at some point during the project because the client believes it can manage the project alone to save money; and where a client is unreasonably demanding, creating undue stress or pressure on the design professional which may escalate into a falling out over fees, or accusations by the client that the design professional’s services were not up to snuff.
If you contemplate bringing a claim to recover fees, it is always good practice to anticipate a counterclaim and assess whether the collective claims are worthwhile prior to commencing fee claim litigation. In addition to the unpaid fess for performance of professional services, a counterclaim asserted against a design professional will have a significant impact as follows:
- Deductible payments for legal fees and costs (note: E&O policies do not provide coverage for fee claims); an insurer will likely assign separate defense counsel who will work in tandem with the insured’s fee collection counsel, or require separate invoices for the prosecution of the collection claim, which does not count against the deductible.
Continue the rest of the article HERE.