When a professional consultant or design and build contractor enters into contract, its focus will be on establishing key terms central to any commercial arrangement, such as the scope of work and payment terms.
Along with these are terms which describe the required standard of care to which the relevant services are subject. It is against these terms that delivery will ultimately be assessed and, if a dispute arises, these will set the bar when establishing whether there has been a breach. However, despite the potentially significant implications which accompany these terms, they are often overlooked, until an issue arises.
This note explains the different standards of care which can apply and flags key points to look out for.
What is a standard of care?
The standard of care is the degree of care and caution which a professional consultant / design and build contractor must exercise when undertaking its services. It effectively sets a benchmark for the quality of services to be provided.
There are two types of standard of care which are explained below:
- Reasonable skill and care
- Fitness for purpose
Reasonable skill and care
In the UK construction industry, reasonable skill and care obligations are usual. To the extent a consultant / contractor can demonstrate that it acted with reasonable skill and care when undertaking its services, it will not be in breach of its obligations. What constitutes reasonable skill and care in a given situation will be assessed against how a reasonable consultant / contractor in the same professional field would have acted.
In the absence of express provision within the parties’ contract, a duty to act with reasonable skill and care will be implied (by virtue of s.13 Supply of Goods and Services Act 1982). It is, however, usual that the contract will address this expressly. By way of an example, the standard NEC3 Professional Services Contract provides that:
“The Consultant’s obligation is to use the skill and care normally used by professionals providing services similar to the services” (clause 21.1).
Similar wording is used in the JCT Design and Build standard form of contract. Such provisions reflect the common law test for negligence. A party will not be found to have been negligent if it has carried out its services to the same standard that another reasonably competent member of its profession would have met. This was confirmed in the case of Bolam -v- Friern Hospital Management Committee [1957] 1 WLR. With that in mind, independent expert evidence is required to support allegations of professional negligence.
Fitness for purpose
This requires that when the project has been completed it is fit for its intended use. Such an obligation is considerably more onerous than one requiring only reasonable skill and care. The consultant / contractor effectively guarantee that its design will be suitable for its intended use. It is rare for a contract or appointment to impose such an obligation.
Express wording will generally be required in order for a fitness for purpose obligation to be applied. Consultants / contractors should be careful, however, to ensure that no such obligation is implied into their contract. For example, where an employer makes clear that work is to be done to achieve a particular purpose, the work is of a kind that the relevant consultant / contractor holds itself out as performing, and it can be shown that the employer relied upon the skill and judgement of the consultant / contractor, there can be an implied warranty that the completed work would be fit for the notified required purpose.
In the case of Greaves & Co. -v- Baynham Meikle [1975] 1 WLR 1095 CA, structural engineers were appointed to design a warehouse floor which would be suitable for the use of stacker trucks. The floor failed, and the engineers were found liable for having breached an implied warranty that the floor would be reasonably fit for the purpose for which the engineers knew it was required.
Particular care should be taken when contracting under the NEC3 standard form. The core clauses require the contractor to provide its works in accordance with the Works Information. Whilst such an obligation does not expressly refer to fitness for purpose, it is acknowledged that this envisages the works will be designed so as to be suitable for their intended use. Consultants / contractors should be careful to select the relevant option requiring only the use of reasonable skill and care.
Particularly in cases where a fitness for purpose requirement is not expressed specifically in the contract, a consultant / contractor may be unaware that it is taking on extended obligations. The contract should be considered carefully as a whole.
Insurance implications
In addition to potentially extending a party’s obligations, and so its potential liabilities, the applicable standard of care can affect its ability to claim under its professional indemnity insurance policy, in the event an issue arises. It is common for policies to exclude from cover liabilities arising from onerous contractual provisions – i.e. a duty or obligation going beyond that which would otherwise be implied by common law or statute. The rationale behind this is that whilst an Insured can contract on whatever commercial terms it likes, Insurers should not be required to indemnify it for liabilities flowing from such consequent voluntary assumption of risk. A fitness for purpose obligation will fall squarely within this category.
Some professional indemnity insurance policies will exclude all cover on a project where a fitness for purpose obligation is imposed. Alternatively, cover might be limited to such losses as would have been suffered had the usual reasonable skill and care obligation applied, with the Insured liable to meet any additional exposure itself.
Parties should therefore be wary of taking on any fitness for purpose obligations in respect of their works or services.
In order to protect themselves as far as possible, professional consultants / design and build contractors should take reasonable steps including the following when entering into contracts:
- Ensure the contract expressly identifies the required standard of care, to avoid uncertainty and / or to avoid a potential situation in which a fitness for purpose obligation is implied.
- Be careful to avoid any contractual provisions which might be taken to impose – whether expressly or impliedl – any fitness for purpose obligation
- Require that the applicable standard of care is limited to reasonable skill and care (including by ensuring the correct option is selected when contracting under NEC3). If the employer pushes for fitness for purpose, endeavour to understand why that is required. Given the associated risk and the potential implications in terms of insurance cover, consider ultimately whether such an obligation imposes too great a risk and so would be a deal breaker.
- Establish the insurance position, by seeking to understand whether, and if so how, the policy would respond should a fitness for purpose obligation be accepted.
- If relevant design work is to be undertaken by a sub-consultant / sub-contractor, consider whether a collateral warranty should be obtained in favour of the employer. By then giving the employer a separate direct contractual right of recourse that may serve to deflect any claim (either in part or entirely).
Parties should be sure not to overlook standard of care requirements in favour of what might appear to be commercially more important contractual provisions. From a liability perspective, these should be at the very top of the contractual checklist.
Our market leading Construction offering includes
- sections for Professional Indemnity, General Liability and Contractors All Risks
- Management Liability policies
- cover in respect of liabilities arising from collateral warranties, without limitation on the number of assignments
- A collateral review service
- Lines up to £10m
- No risk of claims falling between Professional Indemnity and Liability policies
- Notification of claims to one Insurer, reducing the risk of late notification issues
Credit:
Stephen McLellan – Associate
DAC Beachcroft LLP
Fork Lift Truck – Common Defects
The Thurra team of Engineer Surveyors are out in the field, in all sorts of workplaces, inspecting plant and equipment day-in day-out, so we asked them for their thoughts on the most common faults they find with forklift trucks and what you, as users can do to help avoid life threatening accidents and costly insurance claims from arising.
Thurra’s Engineers’ top 5 defects are as follows:
1. Ineffective parking brakes – this defect should be picked up on daily checks. As with the parking brake on a car, if this is defective, it should be reported as a serious defect, however, our surveyor can risk-assess the client, the site and use of the truck, before deciding on an appropriate course of action.
2. Inoperative / disconnected seat safety switches – again, should be picked up on a daily check, however, we often find these disconnected and it is apparent that the operators have carried this out. The seat switch should do one of three things, cut the operation of the mast/fork controls, bring the truck to a stop, or just sound a warning alarm/provide a warning on the truck dash.
3. Worn / distorted forks – the allowance for fork wear at the heels is 10% material loss. For deflection (the fork tip), this is calculated as 3% of the length of the fork. Check frequently against the original measurement.
4. Seized load chain links – proper maintenance should prevent this, however, in harsh environments, cold store use, timber yards, the chain links can seize easily, so extra vigilance needed here.
5. Ineffective / inoperative seat belts – again, should be picked up on a daily check. Quite often driver’s do not bother wearing them, but they should work in the correct manner. Common faults are the seat belt not locking, or the retaining clip not locking the belt in position.
If you require advice or help on any of the above, please speak to us on 01772 555585. We will be happy to arrange a call to Thurra for technical advice, or a visit by an experienced engineer, who will be happy to advise.
Driving in the EEA after Brexit
Following the uncertainty of the impact on UK policyholders driving in the European Economic Area (EEA) after Brexit, the ABI has issued guidance for policyholders.
What’s the impact on policyholders when the UK leaves the EU?
If the UK leaves the EU on 29 March 2019 without a withdrawal agreement in place, and in the absence of a specific agreement to the contrary, your policyholders need to ensure they carry a physical Green Card while driving their vehicles in the EEA and some other countries (Andorra, Serbia and Switzerland).
Drivers with a UK driving licence travelling in the EU and EEA Countries may also need to obtain an IDP (International Driving Permit).
From 28 March 2019, all commercial trailers weighing over 750kg and non-commercial trailers weighing over 3,500kg must be registered with the DVLA before travel to or through most EU and EEA countries and a separate Green Card will be required for these.
What are Green Cards?
Green Cards are an international certificate of insurance issued by insurance providers in the UK, guaranteeing that the motorist has the necessary minimum motor insurance cover for travel in the country they are visiting.
Preston North End 1986/87
The walls of the Sir Tom Finney concourse at Preston North End Football Club now have 12 illustrations of iconic moments from the Club’s history.
Garratts Insurance were shirt sponsors in the 1986/87 season when promotion was achieved and the image shows the celebrations after a 2-1 victory at Orient.
Spitfire Flight
Happy to have arranged the insurance cover to ensure that Andrew could enjoy his day in the skies above London!
Property Insurance Brokers website now live!
We are delighted to confirm our new website focussing on the needs and requirements for property owners of all types is now live.
Whether you are a residential or commercial landlord, full or part time, managing agent or private individual, we welcome your enquiry.
www.propertyinsurancebrokers.co.uk
UK subsidence claims see 350% increase in last six weeks
Sedgwick anticipates a possible surge in subsidence due to the prolonged spell of hot and dry weather across the UK.
Based on the company’s weekly update on current subsidence volumes, there has been a rise of more than 350 per cent over the past six weeks and it is likely to rise further as the heat and abnormally dry weather continue to affect already dangerously dry soil conditions.
Subsidence is a very serious issue, particularly for properties built on clay soil near trees, when the loss of moisture in the soil causes it to dry and shrink. Instability in the soil and the resulting ground movement will impact on the foundations of buildings. With shifting foundations comes the potential for property damage. The current weather trend and the increase in potential for subsidence is of great concern in places like London, where many of the city’s homes are constructed on clay-based soils.
Data from the UK’s Meteorological Office Rainfall and Evaporation Calculation System (MORECS) shows the biggest changes for several years, as the effect of the prolonged dry, sunny weather has started to show in monitoring readings. MORECS readings increased sharply from June through mid-August, rising from under 100, to 302.5, however dropping slightly to the current 298.5 last week, we anticipate that the maximum value of 308 will be reached within the next two weeks.
With warm weather patterns forecast to continue, especially in southern areas of the UK, Sedgwick estimates that claim volumes will also continue to rise through the remainder of August and into September and remains watchful of the situation.
“With live remote crack monitoring in place; feeding back data every eight hours, we are able to anticipate claim volumes before they occur, along with tracking soil conditions, level monitoring readings and long-term weather forecasts. We also have collated soil samples and weather information to help predict likely claims volumes for this year,” said Kevin Williams, Sedgwick head of subsidence.
Looking at the previous surge years of 2003 and 2006, the current position shows that the soil is drier than it was in 2003, but not quite as high as the surge of 2006. A surge event will be dependent on how long the MORECS remains at this maximum level: in 2003 there were maximum readings for seven consecutive weeks and 2006 for four weeks.
Whether or not 2018 becomes a subsidence surge year is dependent on warm weather continuing throughout August. For the high levels of subsidence to be repeated in 2018, the weather will need to remain dry and warm throughout August and into September.
Authored by Sedgwick
Chartered Insurance Broker Status Renewed
When we were awarded the Chartered status in 2012, there were less than 100 firms in the UK with the sought after accreditation. Whilst the numbers have risen it is still the benchmark of quality in our profession with under 200 firms currently awarded the title.
We are delighted to confirm that our Chartered status has been renewed for the next 12 months and the Chartered Insurance Institute confirms “Chartered titles are jealously guarded by professional bodies and are not awarded lightly… The title Chartered Insurance Brokers is a public declaration that the advice given by your firm:
Why implementing GDPR could be a Positive Change
CNA Hardy’s Matt Sumpter offers an interesting perspective on GDPR:
There is no question that the forthcoming General Data Protection Regulation (GDPR) will bring with it big changes to organisations; enhancing existing data subject rights provided under the current EU Data Protection Directive as well as introducing new ones. But change is not necessarily a bad thing, and GDPR should be viewed as an opportunity rather than something to be feared.
Most organisations are already taking steps to prepare for the forthcoming legislation, however when examining the current commentary much of this preparation is seemingly focused only on the potential downsides rather than on leveraging the opportunity.
It is true that the focus on compliance around data collection and distribution that is at GDPR’s centre is being enforced by greater consequences than previously seen under the current Directive. However, the real intent of GDPR is not to generate fines but to create new behaviours around organisations approach to handling and processing personal data. In a world becoming more and more reliant on technology this should be viewed as a positive step forward.
An organisation’s ability to present evidence to regulators of its efforts to comply with GDPR will help reduce liability under Article 83 (General conditions for imposing administrative fines). Therefore it benefits an organisation to not just take measures to minimise potential consequences, but to embed an appropriate culture that embraces the principles of GDPR and enforce meaningful accompanying systems and controls.
There are six key principles governing the processing of personal data and implementing them should be a positive change for organisations. By better managing how data is used, organisations will be able to build greater trust and loyalty with their customers, which in turn should enhance their brand and the bottom line. Furthermore, this increase in trust and better management of the security of data will enable greater data sharing and better leveraging of Big Data, which will assist with product development and enhanced customer experience.
The six key principles are:
Lawfulness, fairness and transparency: the processing of personal data should follow regulation.
Purpose limitation: organisations should only collect personal data for specific, explicit and legitimate purposes.
Data minimisation: personal data should be adequate, relevant and limited to what is necessary for the purpose of processing.
Accuracy: personal data must be accurate and kept up-to-date, and corrected or deleted without delay when inaccurate.
Storage limitation: organisations must keep personal data in identifiable form only for as long as necessary to fulfil the purposes it was collected for.
Integrity and confidentiality: personal data must be secured by appropriate technical and organisational measures against unauthorised and unlawful processing, and against accidental loss, destruction or damage.
Organisations should think of GDPR in terms of the rights it grants their customers and the benefits that may flow from the trust that will build from it rather than just the potential threat it poses to them. By embracing GDPR’s principles, both organisations and customers alike have a lot to gain.
Credit:
Matt Sumpter, Underwriting Director for Technology and Cyber Risks
CNA Hardy
Click here for original link
Charity Bike Ride in aid of ‘CRY’
Well done to John Grindley & the rest of the Luke Moss team for completing a gruelling 43 miles (with an elevation of 4100 feet!!!) charity bike ride on the Isle of Man the 16th September.
Standard Of Care In Construction Contracts
When a professional consultant or design and build contractor enters into contract, its focus will be on establishing key terms central to any commercial arrangement, such as the scope of work and payment terms.
Along with these are terms which describe the required standard of care to which the relevant services are subject. It is against these terms that delivery will ultimately be assessed and, if a dispute arises, these will set the bar when establishing whether there has been a breach. However, despite the potentially significant implications which accompany these terms, they are often overlooked, until an issue arises.
This note explains the different standards of care which can apply and flags key points to look out for.
What is a standard of care?
The standard of care is the degree of care and caution which a professional consultant / design and build contractor must exercise when undertaking its services. It effectively sets a benchmark for the quality of services to be provided.
There are two types of standard of care which are explained below:
Reasonable skill and care
In the UK construction industry, reasonable skill and care obligations are usual. To the extent a consultant / contractor can demonstrate that it acted with reasonable skill and care when undertaking its services, it will not be in breach of its obligations. What constitutes reasonable skill and care in a given situation will be assessed against how a reasonable consultant / contractor in the same professional field would have acted.
In the absence of express provision within the parties’ contract, a duty to act with reasonable skill and care will be implied (by virtue of s.13 Supply of Goods and Services Act 1982). It is, however, usual that the contract will address this expressly. By way of an example, the standard NEC3 Professional Services Contract provides that:
“The Consultant’s obligation is to use the skill and care normally used by professionals providing services similar to the services” (clause 21.1).
Similar wording is used in the JCT Design and Build standard form of contract. Such provisions reflect the common law test for negligence. A party will not be found to have been negligent if it has carried out its services to the same standard that another reasonably competent member of its profession would have met. This was confirmed in the case of Bolam -v- Friern Hospital Management Committee [1957] 1 WLR. With that in mind, independent expert evidence is required to support allegations of professional negligence.
Fitness for purpose
This requires that when the project has been completed it is fit for its intended use. Such an obligation is considerably more onerous than one requiring only reasonable skill and care. The consultant / contractor effectively guarantee that its design will be suitable for its intended use. It is rare for a contract or appointment to impose such an obligation.
Express wording will generally be required in order for a fitness for purpose obligation to be applied. Consultants / contractors should be careful, however, to ensure that no such obligation is implied into their contract. For example, where an employer makes clear that work is to be done to achieve a particular purpose, the work is of a kind that the relevant consultant / contractor holds itself out as performing, and it can be shown that the employer relied upon the skill and judgement of the consultant / contractor, there can be an implied warranty that the completed work would be fit for the notified required purpose.
In the case of Greaves & Co. -v- Baynham Meikle [1975] 1 WLR 1095 CA, structural engineers were appointed to design a warehouse floor which would be suitable for the use of stacker trucks. The floor failed, and the engineers were found liable for having breached an implied warranty that the floor would be reasonably fit for the purpose for which the engineers knew it was required.
Particular care should be taken when contracting under the NEC3 standard form. The core clauses require the contractor to provide its works in accordance with the Works Information. Whilst such an obligation does not expressly refer to fitness for purpose, it is acknowledged that this envisages the works will be designed so as to be suitable for their intended use. Consultants / contractors should be careful to select the relevant option requiring only the use of reasonable skill and care.
Particularly in cases where a fitness for purpose requirement is not expressed specifically in the contract, a consultant / contractor may be unaware that it is taking on extended obligations. The contract should be considered carefully as a whole.
Insurance implications
In addition to potentially extending a party’s obligations, and so its potential liabilities, the applicable standard of care can affect its ability to claim under its professional indemnity insurance policy, in the event an issue arises. It is common for policies to exclude from cover liabilities arising from onerous contractual provisions – i.e. a duty or obligation going beyond that which would otherwise be implied by common law or statute. The rationale behind this is that whilst an Insured can contract on whatever commercial terms it likes, Insurers should not be required to indemnify it for liabilities flowing from such consequent voluntary assumption of risk. A fitness for purpose obligation will fall squarely within this category.
Some professional indemnity insurance policies will exclude all cover on a project where a fitness for purpose obligation is imposed. Alternatively, cover might be limited to such losses as would have been suffered had the usual reasonable skill and care obligation applied, with the Insured liable to meet any additional exposure itself.
Parties should therefore be wary of taking on any fitness for purpose obligations in respect of their works or services.
In order to protect themselves as far as possible, professional consultants / design and build contractors should take reasonable steps including the following when entering into contracts:
Parties should be sure not to overlook standard of care requirements in favour of what might appear to be commercially more important contractual provisions. From a liability perspective, these should be at the very top of the contractual checklist.
Our market leading Construction offering includes
Credit:
Stephen McLellan – Associate
DAC Beachcroft LLP