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Nearly two years after the project was completed, though, the insured was served with a lawsuit related to the project. The neighboring apartment building was showing signs of severe cracking, and an engineer retained by the owner determined the cracking was caused by the adjacent excavation. The insured did the right thing and immediately contacted his professional practice carrier, who retained counsel to assist him in defending the claim.

Defense counsel met with the insured and reviewed the project documentation, which revealed the insured was only responsible for the structural design of the building. Nowhere in the documents that the insured showed the attorney was there any mention that the structural engineer was required to provide a shoring plan. Confident the insured was incorrectly named as a defendant in this lawsuit, the attorney prepared a response to the complaint, indicating that the insured had nothing to do with the shoring. In response to the insured’s assertion, the plaintiff produced a shoring recommendation, which showed the insured did, in fact, participate in the shoring design. With egg on his face, the defense attorney had no choice but to re-file the response to the lawsuit with the court, admitting to the insured’s expanded role in the project. While this may seem minor, this mishap weakened the insured’s credibility with both the Court and the plaintiff. And rather than being able to get out of the case right away, the litigation costs increased because the insured’s defense attorney had to re-draft previously-submitted discovery responses.

So, how could the attorney miss such a thing as the insured’s own shoring recommendation? It was not the attorney’s fault, and in fact, it was not a misstep by the attorney at all. When the defense attorney questioned the insured about the missing documents that showed the insured’s role in the structural design, the insured said the documents had been filed incorrectly – perhaps during the office move. As you can well imagine, an excuse like this would not play well with the court or opposing party.

When I request copies of design professional’s file documents in a pending claim, insureds frequently tell me they cannot find certain documents. Interestingly, the document that is most frequently missing is the one setting forth the insured’s scope of services on the project – the owner-designer agreement. Many firms tend to place their contracts in a contract folder or accounting file. Yet one insured told me he never retains any documents. At the end of the project he ships the documents off to the client. Obviously, this is a risky practice and one that will eventually lead to real problems. After all, how can a design professional defend a claim or lawsuit if they do not have any documents showing what they did or did not do on a project?

The bottom line is good documentation is useless if you cannot locate the documents when you need them. If you cannot readily retrieve project documents when needed, there is good chance these documents, when found, will be under a cloud of suspicion – along with your credibility. And you could find yourself defending a claim or lawsuit that you may have been able to get out of early on by simply producing a copy of your contract showing your scope of services, or perhaps a letter showing you advised the owner of a problem.

Another problem I have encountered is when an insured removes documents from a project file and fails to put them back. I once handled a claim for damages in the $150,000 range. The day before the mediation, the insured discovered that several inches of documents were missing from the project correspondence file. He could not account for where the files were. The missing documents came to light after the plaintiff filed a motion with the court to require the insured to produce original documents due to the lack of clarity of photocopies. The photocopies included the documents that were now missing. Defense counsel said that because the insured’s documents were removed from the file and were not able to located, this would be frowned upon by the court and thus greatly increase the defense costs and exposure to other damages, such as punitive damages related to a potential concealment-of-evidence claim. And punitive damages would not have been covered by insurance, as they were excluded pursuant to the insured’s professional liability policy.

As a result of the insured’s misplacement of documents, rather than face the potential for even greater damages and greater litigation costs, and the potential for a verdict against the insured – who would have suffered lost credibility as a professional at trial due to the removal of documents from the file – we ended up settling the claim for more than twice the value that we previously believed to be the insured’s exposure.

There are some steps that design professionals can take to ensure that their project file documents are available when needed. These steps are:

File documents in project files as soon as possible after they are produced to your attorney or opposing parties in litigation. Filing guidelines should be a part of the firm’s procedural manual.

Keep a copy of the contract in the project file for reference by all team members.


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