GEORGIA HOUSE BILL 3URKLELWLQJWKH8VHRI%URDG)RUP,QGHPQLêFDWLRQ and Duty to Defend Clauses in Georgia Êa;bnnd;¼O|bV*(c;-VÏ-Ve;+V´Á±8Ob noObnÏb±O8 Ï THE GROWING PROBLEM For years, architects and engineers have had to contend with clients demanding that they sign contractual provisions in which the Yb´t±nb´´8Ybob´j±´Á±b´ j ¼|b Ob¼ n± ¼|±Y 8±¼Ê O8´¡ n¼bV ¼|b´b ¼|±Y 8±¼Ê YboO8¼ O8Á´b´ were coupled with verbiage that saddled the design professional with an additional duty to defend the client against any claims arising out of the project, even before the question of whose negligence caused the claim had been established. However, the professional liability insurance that engineers or architects are covered by does not insure these types of additional contractual liabilities. Engineers and architects who sign contracts with these Y´nO8Á´b´Á¼¼|b±o±´¼|bbFÊ taking on this uninsurable potential liability. As a result of this growing problem in Georgia, the American Council of Engineering Companies of Georgia (ACEC Georgia) O±b8¼bY 8 YboO8¼ ,8´
±Ob ¼ formulate a plan for tackling the issue. The YboO8¼ ,8´
±Ob È8´ O|8±bY by Emily Meador of Kimley-Horn, with the active participation of myself and a few other key players in the Georgia architecture and engineering (A&E) marketplace, including the American Institute of Architects (AIA b±t8¡Á´b s½ s½j8Y¼´ bÇb¼Á88´´8tbjÈ8´¼|bbY±b´Á¼¡ 8¼|b± È8ÊV F±8Y n± YboO8¼ ´ me asking you to indemnify me for everyone’s negligence, even my own, and even if you may not have been negligent at all. Broad n±YboO8¼8F±t8¼b´j±±bb8´ j¼|bO8È±Áb¼|8¼88±¼Ê´|ÁYFb held responsible for its own actions, but not the negligent acts of others.  O¼±8´¼V ¼bY n± YboO8¼ clauses seek to indemnify the indemnitee for damages, losses or expenses only to the extent they are caused by or result from the negligence, recklessness or intentional wrong conduct of the indemnitor. Limited form YboO8¼ O8Á´b´ 8±b 8±±8¼b  Yb´to±O¼±8O¼´¡ Even the most skilled transactional lawyer may not be an expert on the nuances of professional liability insurance for engineers and architects, especially regarding how PLI coverage would ±b´Y¼F±8Yn±YboO8¼O8Á´b´¡ -¼8¼bÊV¼|bÁ´bnF±8Yn±YboO8¼ clauses is largely a “cut and paste” problem; contract clauses that might make sense in one context (where the indemnitors can be insured by a CGL policy and the clause is insurable) don’t make sense in contracts for engineering or architectural services (where only PLI is available and the clause is not insurable). Lawyers simply F±±È F±8Y n± YboO8¼ 8tÁ8tb they come across in other contracts (including contracts they may have drafted for that client to use with contractors, for example) and use them in engineering and architectural contracts. Since PLI policies do not allow additional insureds on the policy and only pay for damages ¼|8¼8±´bÁ¼n¼|bYb´to±®´b±n±8Ob of professional services, when broad form YboO8¼±YÁ¼Ê¼YbnbYO8Á´b´8±b used in design contracts, there is actually no ´Á±8ObOÇb±8tbn±¼|bÏ?�d;o±¡ b bÊ point design professionals should remember is that the coverage provided by the PLI insurance company is not affected by the obligations ÁYb±¼8 bFÊ¼|bÏ?�d;o±Ç8O¼±8O¼¡¼´ bÉ¼±bbÊ ±¼8¼ n± ¼|b Ï?�d; o± ¼ ¼ agree to language outside of the coverage the PLI provides. The majority of clients/owners do not ÁYb±´¼8Y¼|8¼F±8Yn±YboO8¼ and duty to defend clauses in the A&E context are uninsurable. Clients want the Fbbo¼ n ¼|b Yb¼±®´ ´Á±8Ob OÊ and would likely not even ask for broad form YboO8¼n¼|bÊÁYb±´¼Y¼|8¼´ÁO| clauses were uninsurable. On the other hand, Ï?�d; o±´ n¼b 8t±bb ¼ ¼|b F±8Y n± language because they do not understand what they are agreeing to or sometimes fail to read the contract at all. BROAD FORM VERSUS LIMITED FORM YboO8¼ O8Á´b´ O8 Fb t±ÁbY into two general categories: broad form and limited form. Broad form clauses require the indemnitor to assume the liability of indemnifying the indemnitee for any damages, losses or expenses arising from the project. This duty arises without regard to which party is at fault and, in many cases, even if the party at fault is the indemnitee themselves or another third party. Phrased 10 ENGINEERING GEORGIA INDEMNIFICATION AND INSURANCE Many contract drafters do not understand how A&E professional liability insurance (PLI) is different from commercial general liability insurance (CGL). For example, PLI only insures the professional and only for professional (as opposed to contractual) liability; insuring the negligence of others is not allowed and adding other parties as an “additional insured” is not allowed. By contrast, CGL policies allow for coverage of contractual liability and also allow for a client or owner to be added to the policy as an additional insured party. Additional insured status allows owners to tender a defense for third party claims to the CGL policy. Unfortunately, engineers and architects cannot avail themselves of a GCL policy because CGL policies exclude coverage for damages related to professional services, like the services provided by an A&E o±¡´|±¼V¼|b�a; c;OÇb±8tb±ÇYb´ recourse for design professionals and A&E o±´Á´¼Á±O|8´b(c;´Á±8Ob¼±¼bO¼ against negligence in performance of their professional services.