Werner Sabo is a partner at the construction law firm of Sabo & Zahn in Chicago. He is also a licensed architect, having practiced architecture for a number of years prior to establishing his law practice in 1981. He is a member of the AIA and CSI, has been an officer and director of the Chicago Chapter AIA, President of the Chicago Chapter, Construction Specifications Institute, and writes a monthly construction law column for The Construction Specifier. He is also a founding member of the Society of Illinois Construction Attorneys. In 1997, the AIA elected him to the College of Fellows. His book, Legal Guide to AIA Documents, published by Aspen Publishing, is in its fourth edition. Mr. Sabo is also a construction arbitrator and mediator for the American Arbitration Association and is admitted to the federal trial bar.
James K. Zahn is a licensed architect and attorney in the State of Illinois. He is a partner in the law firm of Sabo & Zahn, concentrating in construction law and representing owners, contractors, architects, developers, engineers and other parties in the construction process. He received a Bachelor of Architecture from the University of Illinois and his JD from Chicago-Kent College of Law. Mr. Zahn is a member of the American, Illinois and Chicago bar associations, American Institute of Architects, Association of Licensed Architects, Construction Specifications Institute and has NCARB Certification. He was a past president of the Illinois Council of the American Institute of Architects and is a Fellow of both the American Institute of Architects and the Association of Licensed Architects. He is currently a resource member of the AIA National Documents Committee.
Shawn E. Goodman is a partner with Sabo & Zahn. He concentrates in litigation of all types. A graduate of the Northwestern University School of Law, he was admitted to the bar 1993. Since that time, he has practiced before local and outlying circuit courts, U.S. District Court, and various administrative tribunals. He has acted on behalf of a variety of clients including small to mid-sized businesses and individuals. He has handled all facets of litigation from pleading to motion practice to discovery to trial. The cases with which he has been involved are varied and wide-ranging and include personal injury, breach of contract, criminal defense, commercial disputes, and consumer fraud. He has represented both plaintiffs and defendants and has practiced before juries as well as judges. Mr. Goodman has also worked on appeals and has assisted in the drafting of appellate briefs.
Limitation of Liability in new AIA Document
One of the new 2007 AIA documents is B103 -- Owner-Architect Agreement for a Large or Complex Project. This document differs from the flagship owner-architect agreement, B101, in that the owner is expected to hire cost and scheduling consultants, and it also anticipates that the project will be done as phased or fast-track construction in most cases. However, one of the more interesting provisions in this document that does not show up in the other new 2007 owner-architect agreements is a limitation of liability provision. Here it is:
§ 8.1.3 The Architect shall indemnify and hold the Owner and the Owner’s officers and employees harmless from and against damages, losses and judgments arising from claims by third parties, including reasonable attorneys’ fees and expenses recoverable under applicable law, but only to the extent they are caused by the negligent acts or omissions of the Architect, its employees and its consultants in the performance of professional services under this Agreement. The Architect’s duty to indemnify the Owner under this provision shall be limited to the available proceeds of insurance coverage.
Note that this paragraph starts out as an "indemnification" of the owner by the architect. This seems to be very pro-owner and is something that we would normally strike from any contract proposed by an owner. The indemnification, however, is limited to the negligent acts or omissions of those for whom the architect is responsible. This is not an expansion of the architect's liability as the architect would be responsible for such acts or omissions in the absence of such language.
The more interesting part of this paragraph is the last sentence wherein the architect's liability under this paragraph is limited to the available insurance proceeds. Owners should be aware that such a limit may be somewhat illusory, since most of the professional liability policies are of the "declining balance" variety, wherein the costs of defense, notably attorneys fees, reduce the available limits as a case progresses. Also, if another claim is made against the architect's policy in the same policy period, both matters would erode the available limits.
To offset this problem, B103 permits the owner to require the architect to carry additional insurance (at the owner's expense). See Section 11.8.1.8 of B103. If the owner invokes this option, the owner should require, and pay for, insurance that extends several years after completion of the project, otherwise the architect will revert to the prior policy limits at the conclusion of the project and latent defects not discovered until later will not be subject to the greater insurance limits expected by the owner.
A final interesting question is whether the architect may be liable to the owner for errors or omissions outside of this indemnification paragraph. If so, the limitation of liability will not protect the architect to the extent that it may appear on first reading this provision since the limitation covers only the architect's duty to indemnify the owner under "this provision." Presumably, the answer is that any claims by the owner for an error or omission by the architect, employees of the architect, or consultants to the architect are subject to this paragraph. If there is a claim by the owner that is not a "negligent act or omission," the limitation may not apply. We await a court's determination of this issue.
