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Limitation of LiabilityRLI Design ProfessionalsDPLE 213June 3, 2020

RLI Design Professionals is a Registered Provider withThe American Institute of Architects Continuing Education Systems.Credit earned on completion of this program will be reported toCES Records for AIA members. Certificates of Completionfor non-AIA members are available on request.This program is registered with the AIA/CES for continuing professional education.As such, it does not include content that may be deemed orconstrued to be an approval or endorsement by the AIA of any materialof construction or any method or manner of handling, using,distributing, or dealing in any material or product. Questionsrelated to specific materials, methods, and services will beaddressed at the conclusion of this presentation.

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DisclaimerNothing presented herein is a substitute for actual legal advice thatcan only be provided in the event that an attorney clientrelationship is formed and agreed to by both the attorney and theclient. Furthermore, the presentation may involve hypotheticalfacts and is no substitute for legal advice based on the actual factsand circumstances of a particular situation.

Course DescriptionThis session will be a discussion onlimitation of liability provisions inprofessional services agreements –what they are, how to negotiate for them,and considerations when crafting a stronglimitation of liability clause for a givenjurisdiction and circumstances.

Learning ObjectivesParticipants will learn:1234Understand various alternatives for limiting liability in professional serviceagreements;Identify appropriate situations in which to discuss limitation of liability(LOL) provisions in professional service agreements;Explore the interrelationship of an LOL clause with other risk reductionclauses that should be part of standard design agreements; andDevelop negotiation strategies for conversations with clientsconcerning limitations of liability.

Limitation of Liability ClauseLimitation of LiabilityIt is a contractual clause betweena design professional and theirclient that limits the damagesrecoverable by the client from thedesign professional.

Case LawLimitation of Liability (LOL) & Public Policy ExceptionDesign firm’s liability cappedat 50,000 where Contractoralleged over 1 million indamages due to a limitationof liability clause in thecontract.*LOL clause upheld because it did not violate public policy.Zirkelbach Construction, Inc. v. DOWL, LLC, 389 Mont. 8 (Montana 2017).

Limitation of Liability ClauseContract Term:To the fullest extent permitted by law, [Design Professional]and Client waive against each other, and the other’semployees, officers, directors, agents, insurers, partners,and consultants any and all claims for or entitlement tospecial, incidental, indirect, or consequential damagesarising out of, resulting from, or in any way related to theProject and agree that [Design Professional]’s total liability toClient under this Agreement shall be limited to 50,000.Zirkelbach Construction, Inc. v. DOWL, LLC, 389 Mont. 8 (Montana 2017).

Third Party ClaimsThird Party ClaimsIt is not applicable in a third partyinjury case – a pedestrian hit byglass that falls out of the buildingor a job site injured worker. Theclaims of these non-signatories tothe design contract are notaffected by the Limitation ofLiability clause.

Basic RequirementsThings to address individual professionals and employees Protectin addition to the firm. Some form of monetary limitation. Broad description of claims limited.

Personal LiabilityFlorida Statute § 471.023*Similar statutes for Architects and Landscape Architects can be found at Florida Statute §§ 481.219 & 481.319.(3) Except as provided in s. 558.0035, the fact that a licensedengineer practices through a business organization does not relievethe licensee from personal liability for negligence, misconduct, orwrongful acts committed by him or her Any officer, agent, oremployee of a business organization other than a partnership shallbe personally liable and accountable only for negligent acts,wrongful acts, or misconduct committed by him or her orcommitted by any person under his or her direct supervision andcontrol, while rendering professional services on behalf of thebusiness organization *See also Florida Statute § 558.0035, allowing design professionals to limit their individual liability in certain instances.

Case LawPersonal LiabilityDesign professional heldpersonally liable for damages inexcess of 4 million where thecourt affirmed a finding thatthe LOL clause did not apply tothe design professional in hisindividual capacity.Witt v. La Gorce Country Club Inc., 35 So. 3d 1033 (Fla. 3d DCA 2010).

Limitation of Liability ClauseContract Term:In recognition of the relative risks and benefits of the project to both[Client] and [Design Firm], the risks have been allocated such that [theClient] agrees, to the fullest extent permitted by law, to limit the liabilityof [Design Firm] and its sub consultants to the total dollar amount of theapproved portions of the scope for the project so that the totalaggregate liability of the [Design Firm] and its sub consultants to all thosenamed shall not exceed the total dollar amount of the approved portionsof the Scope or [Design Firm’s] total fee for services rendered on thisproject, whichever is greater. Such claims and causes include, but are notlimited to negligence, professional errors or omissions, strict liability,breach of contract or warranty.Witt v. La Gorce Country Club Inc., 35 So. 3d 1033 (Fla. 3d DCA 2010).

Monetary Limitation1Set Fee2Contract Price3Insurance Coverage“not to exceed amount.”shall not exceed the total amount of or the total compensationreceived by Engineer under this Agreement, whichever is greater. Higherlimits are available for an additional fee.“not to exceed contract price.”shall not exceed the total compensation received by Engineerunder this Agreement.“to the extent such provisions or indemnity is covered by thedesign professional’s professional liability insurance.”shall not exceed the total insurance proceeds paid on behalf of or to Engineer byEngineer’s insurers in settlement or satisfaction of Owner’s Claims under theterms and conditions of Engineer’s insurance policies applicable thereto (excludingfees, costs and expenses of investigation, claims adjustment, defense, and appeal).EJCDC Document E500-2014, Exhibit I

Covered ClaimsThings to consider: Broad description of covered claims Any exclusions? Any caps?

“Limitation of LiabilityTo the fullest extent permitted by Laws and Regulations, andnotwithstanding any other provision of this Agreement, the total liability,in the aggregate, of Engineer and Engineer’s officers, directors, members,partners, agents, employees, and Consultants, to Owner and anyoneclaiming by, through, or under Owner for any and all injuries, claims,losses, expenses, costs, or damages whatsoever arising out of, resultingfrom, or in any way related to the Project, Engineer’s or its Consultantsservices or this Agreement from any cause or causes whatsoever, includingbut not limited to the negligence, professional errors or omissions, strictliability, breach of contract, indemnity obligations, or warranty express orimplied of Engineer or Engineer’s officers, directors, members, partners,agents, employees, or Consultants shall not exceed the total amount of or the total compensation received by Engineer under thisAgreement, whichever is greater. Higher limits are available for anadditional fee.”EJCDC Document E500-2014, Exhibit I

Sample ClauseAmerican Institute of Architects (AIA)AIA B503-2017Except for acts amounting to willful or intentional wrongs,neither the Architect, Architect’s consultants, nor their agents oremployees shall be jointly, severally or individually liable to theOwner in excess of the compensation to be paid pursuant to thisAgreement or Dollars ( ), whichever is greater.

Sample ClauseAmerican Institute of Architects (AIA)AIA B503-2017Except for acts amounting to willful or intentional wrongs,neither the Architect, Architect’s consultants, nor their agents oremployees shall be jointly, severally or individually liable to theOwner in an amount in excess of the Architect’s compensation.

Sample ClauseAmerican Institute of Architects (AIA)AIA B503-2017Except for acts amounting to willful or intentional wrongs,neither the Architect, Architect’s consultants, nor their agents oremployees shall be jointly, severally or individually liable to theOwner in excess of the proceeds of the available professionalliability insurance coverage required under this Agreement.

Sample ClauseOther Sample LanguageThere are a variety of risks which potentially affect theArchitect by virtue of entering into an Agreement to performprofessional services on Owner’s behalf. In order for theOwner to obtain the benefit of a fee which does not need toaccount for unlimited risks, Owner agrees to limit theArchitect’s liability to the Owner. To the fullest extentpermitted by law, the total liability of the Architect with regardto the Project under any and all theories of liability shall belimited to the Architect’s fee under this Agreement.

Sample ClauseOther Sample LanguageLimitations on liability provided in the Agreement are businessunderstandings between the parties and shall apply toall theories of liability, including breach of contract or warranty,tort including negligence, strict or statutory liability, orany other cause of actions. The limits of liability may benegotiated with appropriate compensation to the Architect.

Documentation for Your DefenseLegality and EnforceabilityIt DependsGenerally, well written clauseshave been upheld. However, it is astate by state issue and analysis ofthe law applicable to the designcontract is essential.

Enforceability of LOL ClausesThings to consider 1Licensing laws2Anti-indemnity statutes3Public policy

VA Licensing LawPre-2010 Virginia Statute. No such organization shall limit the liability of any licenseeor certificate holder for damages arising from his acts orlimit such corporation, partnership, sole proprietorship,limited liability company, or other entity from liability foracts of its employees or agents.

VA Licensing Law2010 Virginia Statute No such corporation, partnership, sole proprietorship,limited liability company, or other entity, or any affiliatethereof, shall on its behalf or on behalf of any such licenseeor certificate holder, nor any licensee or certificate holder,be prohibited from (iv) limiting liability through contract.

AK Anti-Indemnity StatuteAlaska Anti-Indemnity StatuteA provision, clause, covenant, or agreement affecting aconstruction contract that purports to indemnify thepromisee against liability for damages or expense arising from the sole negligence or willful misconduct of thepromisee or the promisee’s agents, servants or independentcontractors who are directly responsible to the promisee isagainst public policy and is void and unenforceable.

Freedom to Contract/Public Policy“The fundamental tenet of modern contract law isfreedom of contract; parties are free to mutually agreeto terms governing their private conduct so long asthose terms do no conflict with public laws To permit the avoidance of a written contractbecause the terms of the contract now appearburdensome or unreasonable would defeat the verypurpose of placing a contract into writing.”Zirkelbach Construction, Inc. v. DOWL, LLC, 389 Mont. 8 (Montana 2017).

Public Policy Exception“[Public law] is not violated when business entitiescontractually limit liabilitybut do not eliminate liability entirely.”Zirkelbach Construction, Inc. v. DOWL, LLC, 389 Mont. 8 (Montana 2017).