Liability as addressed herein relates to professional liability. Liability occurs when the negligent act(s) of an individual or company results in damage or injury to someone else. Two essential elements necessary for liability to exist are:
Both elements must be present for liability to exist.
Damages”, in the context of professional liability, is the actual additional cost to the Client resulting from a negligent error or omission. Of the two required elements of liability, “damages” and negligence, “damages” is most likely the more objective. However, arriving at a precise amount of “damages” is frequently accomplished by negotiations between the parties.
The following are some considerations regarding damages:
- Rework – if previously completed construction is found to be incorrect due to a negligent error or omission and has to be removed and replaced, the cost of this process will almost always fall into the category of damages.
- Work delays and inefficiencies – when tied to the damages, these costs are generally accepted as part of the overall damages cost.
- “Betterment” – Damages does not include a “betterment”, which is construction not included in design or contract amount. If the Client has not previously been contractually obligated to pay for an omission that is later found to be needed, that cost should become the obligation of the Client. An example would be a driveway turnout from a street that was being constructed that was requested by a property owner after the design was completed.
- Premium Costs – an amount that is normally determined by taking the difference between what is estimated to be the cost of adding an omission by change order and what is estimated to be what would have been the cost of the omitted item had it been included in the original bid. This cost is normally added to other elements of damages.