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Updated June 13, 2006

Client Alert: Anti-Design Professional Legislation Passes in Connecticut

As you may be aware, the Connecticut General Assembly has passed new legislation (Public Act No. 06-158) that will significantly impact design professionals in Connecticut who provide services in connection with a school building project. The legislation becomes effective on July 1, 2006, and provides, in part, as follows:

Sec. 10. (a) Any town or regional school district that enters into a services agreement with a consultant to render independent architectural services for a project receiving state assistance pursuant to chapter 173 of the general statutes, may, where necessary or desired, provide the consultant with instructions, guidance and directions in connections with the consultant’s performance of such services. The consultant shall provide all labor, materials, supplies, tools, equipment and other facilities and necessary appurtenances or property for or incidental to such services requested by the town or regional school district to complete the school building project. As part of the services agreement, the consultant shall agree to perform such services as an independent contractor and in a good and workmanlike manner, consistent with: (1) Instructions, guidance and directions provided by the town or regional school district to the consultant; (2) the terms and conditions of the services agreement; (3) the highest prevailing applicable professional or industry standards; (4) sound architectural practices; and (5) any applicable laws, rules, regulations, ordinances, codes, orders and permits of all federal, state and local governmental bodies, agencies, authorities and courts having jurisdiction. Such services agreement shall not limit the liability of the consultant for errors and omissions related to the performance of the services.

With respect to Sec. 8(d)(3) of the bill, project costs increased through change orders or other change directives are often attributable to many factors, most of which have no relationship to the adequacy of the design professional’s performance or responsibility. Examples of such factors are increased or changed scope, differing site or concealed conditions, and/or owner initiated changes or directives.

As to design omissions, the effect of subparagraph (d) is to virtually eliminate the value added or betterment defense. More specifically, in circumstances in which scope is inadvertently omitted in the design and contract documents, a standard legal defense for the design professional consultant (grounded in common sense and equity) is that the increased but previously omitted scope results in added value, benefit or betterment to the project owner. Therefore, the cost of that increased scope should be borne by the project owner, except for premium costs attributable to the lack of opportunity for competitive bidding in the pricing of the increased scope, rework or reordering of materials. The project owner could argue that the value added/betterment defenses do not apply if overall value of change orders/change directives exceeds 5% of the authorized project cost, because a project owner lost 50% of the otherwise available grant assistance. In effect, the 50% loss of grant assistance represents actual damage that could be recoverable in a claim against the design professional consultant.

No one genuinely disputes the proposition that design professional consultants are providing design services as independent contractors of the owner, given their expertise and control over their service performance. It is inconsistent, however, to acknowledge that independent contractor status and the underlying rationale, while simultaneously holding the design professional consultant accountable for damages resulting from compliance with owner instructions and directives. Basically, under the statutory language in Section 10(a), the owner wants to reserve the ability to instruct and direct the design professional consultant while holding the design professional consultant as an independent contractor. This is inherently contradictory.

In Section 10(a)(3), the “highest prevailing applicable professional and industry standards,” as the standard of performance for design professional consultants, results in a standard of performance that exceeds the negligence-based professional standard of care. As a result, claims based on violation of that heightened standard would not be covered under professional liability insurance, in which coverage is triggered by actual or alleged negligence. The ensuing coverage problems resulting from this heightened standard certainly operate to the detriment of the design professional consultant but, as importantly, to the project owner. The project owner is typically most interested in having an effective remedy (i.e., professional liability insurance) available to compensate for damage or loss attributable to deficient design professional consultant performance. Furthermore, language such as “highest” is somewhat ambiguous and hard to quantify in determining if the design professional consultant met the standard of care.

If you have any questions concerning the new legislation, please feel free to contact David J. Hatem, PC at 617 406 4800 or dhatem@donovanhatem.com, or Deborah Russo at 617 406 4612 or drusso@donovanhatem.com.

Because sound legal advice must necessarily take into account all relevant facts and developments in the law, the information you will find in this Client Alert is not intended to constitute legal advice or a legal opinion as to any particular matter.

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