June 18, 2014

Doing Design Work Adds Liability Risks for Subcontractors


Subcontractors typically submit shop drawings to the general contractor and architect that show how a portion of the work will be constructed. Ordinarily, the purpose of the shop drawing is to add detail to (or elaborate upon) the architect's drawings and specifications.

As so-called "fast track" construction has become more common, subcontractors are asked to provide more and more design information as part of the shop drawings. This is true in part because a subcontractor may understand its part of the work better than the design professional. It is also true because time demands are so great that design professionals often have little choice but to delegate design responsibility to project subcontractors.

Sometimes the language of the contract is clear when it imposes design responsibility on subcontractors. Some contracts expressly state that certain shop drawings must be stamped by a licensed design professional. In some contracts, the specifications may set forth only performance standards and expressly impose responsibility for all system design on the subcontractor, who must provide shop drawings that include all of the design components necessary to meet the performance requirements.

Quite often, however, the contract language is less than clear when it is shifting design responsibility to a subcontractor. For example, the written subcontract may simply include warranty provisions or code compliance obligations that have the effect of imposing performance standards on the subcontractor's work. Sometimes the prime contract has warranty provisions that are imposed on the subcontractor through a "flow down" clause that makes the subcontractor liable to the general contractor to the same extent the general contractor is liable to the owner.

Subcontractors should review their agreements carefully to determine whether design responsibilities are being imposed upon them. If design requirements are imposed, the subcontractor should have the design work prepared by qualified people and at least reviewed and stamped by a licensed design professional. Subcontractors typically do not have insurance that protects them in the event the design work causes injury to third parties and, under Oregon law, only a properly licensed design professional may perform architectural or engineering design services.

Subcontractors can avoid liability for design work with express language disclaiming responsibility for design in the subcontract, but general contractors may reject such contract language and the subcontractor typically will not have the bargaining power to avoid design responsibility, unless the subcontractor decides not to perform the work.

AIA form A201-1997 expressly allows for delegation of design work to subcontractors, so long as the work "is specifically required of the Contractor by the Contract Documents." If a specific, written delegation is made, the services must be provided by a licensed design professional whose signature appears on the drawings. If the contract does not expressly state which items of the work the contractor must design, the design work may only be imposed on the contractor through an additive change order that compensates the contractor for the extra work.

When contractors and subcontractors do accept responsibility for design work, they should take steps to assure they have design/build insurance coverage and that the commercial general liability policy does not exclude coverage for work performed by design professionals on their behalf.

For more information on this topic, please contact marketing@jordanramis.com or call (888) 598-7070.


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