Managing Client Expectations to Reduce Professional Liability Risk

January 2008

Educational Advertising Section Provided by the Design Professional group of the XL Insurance companies

Loss Prevention Education: Antidote to the "Soft Causes" of Claims

The best A/E professionals and PMs take what they've learned - often, the hard way - and use it to gear the project process toward success.

Part of successfully mitigating risk and preventing loss, whether by managing client expectations, writing effective contracts, selecting the best clients, etc., is becoming an educated practitioner. By taking advantage of available education courses, books, and other resources, design professionals at all levels can sharpen their practice management skills. Several professional associations and institutes have deep resources, and some insurance firms place a high value on continuing education for professional liability.

According to Randy Lewis, an effective loss prevention course of study should include the following key topics:

• Liability knowledge. This should include an overview of the common causes of claims and the best ways to prevent them. Courses in contract review and revision provide a strong working knowledge of basic contract elements, terminology, and effective approaches to common clauses. Most critical is finding guidance in developing and negotiating professional services agreements to minimize liability exposure.

• Reviewing contracts. Key skills include reviewing contract clauses, addressing loss prevention issues, and negotiating with clients on contractual matters. Since contracts are much deeper and more complicated than ever, additional education might be important for more senior associates and principals of firms.

• Documentation. Experienced professionals should know how to review existing documents and develop new ones for recording and reporting project management procedures throughout all phases. Another key facet is tackling pre- and post-project evaluations.

• Identifying and allocating risk. Risk management, project management and practice management are highly intertwined, so understanding risk drivers and how to manage them - such as poor project evaluation and selection, scope of services problems, and breakdowns in contract protocols - is crucial to any A/E firm.

• Selecting the right client. It may seem difficult to learn, but most firm leaders get better at selecting the right clients with practice and study. "It's the first step in sound risk management," according to Lewis.

• Negotiating to succeed. To learn how to take client negotiations to another level, A/E firm leaders should learn more about the styles, skills, and strategies needed to negotiate the strongest professional services agreements.

• Building better teams. Every firm can benefit from acquiring this skill. Putting together just the right team for each project is important in mitigating risk, as a project team's capabilities can impact claims.

• Managing time and project starts. When schedule matters to clients most, tools and tactics for time management - and project initiation - impact client satisfaction, professional risk, and the A/E firm's profitability.

 

Now that you have a better handle on how to help your clients develop realistic expectations for a project and how to keep your work in line with those expectations throughout a project, you should develop your own set of metrics, in which project profit is just one measurement, for assessing project success. Following many of the suggested procedures and protocols described in this article will not only help avoid costly claims, it will also help you satisfy the toughest client of all: yourself.

 

The Design Professional group of the XL Insurance companies offers innovative professional liability insurance for architects and engineers with specialized programs that help minimize risk through loss prevention techniques and expert claims service. Design Professional is the recognized leader in loss prevention education. The XL Insurance Contract Guide for Design Professionals: A Risk Management Handbook for Architects and Engineers is provided exclusively to XL Insurance companies’ policyholders. To locate an XL Insurance agent in your area or for excerpts from the Contract Guide and other related loss prevention articles visit www.xldp.com

 

ENDNOTES:
1, 2, 3 Source: The XL Insurance Contract Guide for Design Professionals: A Risk Management Handbook for Architects and Engineers © 2007 X.L. America, Inc.
4 Source: XL Insurance “Client Selection” education program.

 

Originally published in the January 2008 issue of Architectural Record.