Is a limitation of liability clause in a Design Professionals contract beneficial? Most claims representatives and attorneys say yes! Mostly because the limit of liability doesn’t put your firm out for liability beyond your scope of services within the contract. Additionally, it doesn’t make you a target since your firm has insurance since the limit of liability is clearly stated in the contact. There are some cases when the limit of liability has not held up in court but that is because the scope of services was not reasonable in relation to the limit of liability within the contract.
Common types of limitations include a specified dollar amount, available insurance proceeds, particular types of damages, or change order costs. The limit of liability must make sense as it relates to the project and services provided by the Design Professional.
The following is an example for limits of liability in a Design Professionals contract.
Available insurance proceeds:
The liability of the Design Professional and any of the Design Professional’s consultants to the Owner, for any actions, damages, claims, demands, judgments, losses, costs, and expenses arising out of or resulting from the negligent acts, errors, or omissions of the Design Professional or its consultants is limited to the amount of professional liability insurance available to the Design Professional.
Specified dollar amount:
….. limited to the amount of $50,000 or the fee, whichever is greater.
As always if you ever have any questions your PUI Agent is here to help you out. Also it is very important that you refer to your attorney on contract issues, you want to make sure the contract makes sense for your firm, your client, within your insurance guidelines and within the jurisdiction your firm is providing services.