Unreasonable Limit of Liability – Contract Tip of the Week

Q: My client is insisting upon an unreasonable limit of liability in the insurance requirements of our contract. Can you help me negotiate this?

A: There are various factors for you both to consider, including the type of client, state laws, the size of the project, the scope of your services, and your fees. Also important is the fact that you may be able to pass along some or all of the additional costs required to increase your coverage. Keep in mind, though, that the full amount of the limits may not be available at the time a claim is settled or adjudicated, so it’s prudent to consider including a limitation of liability provision as well. And, if you have any subconsultants, be sure to include commensurate limits of liability in your agreements with them so that you are not the “deep pocket” to cover their obligations as well as your own.

The Risk Specialty Group and RLI Design Professionals are pleased to feature our Contract Tip of the Week series. Each week, we’ll review a question submitted by a design firm relating to the subject of contracts. Keep in mind, though, that these discussions are general in nature and in making specific business decisions, it’s important to review your options with a knowledgeable attorney.