Climate Change: Legal, Insurance & Contracting Practices-Climate Change Legal, Insurance & Contracting Practices Slides 3

Climate Change Legal, Insurance & Contracting Practices Slides 3

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This presentation by Patricia B. Gary, Esquire of Donovan Hatem LLP addresses the evolving impact of climate change on contracting practices, particularly focusing on professional standards of care for architects and engineers, and related insurance considerations.<br /><br />The standard of care traditionally requires professionals to perform services with the skill and diligence typical in their locality and circumstances, as outlined in the AIA B101 (2017) and EJCDC E-500 agreements. However, climate change introduces new risks affecting design and construction, necessitating careful attention to contractual language to avoid elevating the standard of care beyond insurable limits.<br /><br />Key issues highlighted include avoiding contract clauses that demand unrealistic performance levels—such as “highest degree of skill,” “no defects,” or warranties guaranteeing project outcomes—since these can expand liability beyond negligence and render professional liability insurance (PLI) ineffective. PLI policies cover negligence and failure to meet accepted standards of care but generally exclude warranties or guarantees.<br /><br />The presentation advises that obligations to meet new environmental laws (e.g., New York City’s Local Law 97 on emissions) should be framed as efforts consistent with the standard of care, not strict guarantees of compliance or results, since construction and operating decisions outside the design professional’s control can affect outcomes.<br /><br />Regarding compliance with laws, language should tie obligations to compliance "consistent with the professional standard of care" rather than absolute guarantees to maintain insurability.<br /><br />Indemnification provisions require caution; clauses requiring defense obligations, indemnification beyond negligence, or coverage for owner’s losses without fault create uninsurable risks. Recommended indemnification language limits liability to damages caused by the design professional’s negligence within the scope of their services.<br /><br />In summary, adapting contracting practices to address climate-related risks involves carefully drafting service agreements to preserve the professional standard of care, avoid uninsurable warranties or elevated obligations, and ensure liability is manageable through insurance, balancing new environmental requirements with legal and insurance frameworks.

Keywords

climate change

contracting practices

professional standard of care

architects and engineers

insurance considerations

AIA B101

EJCDC E-500

professional liability insurance

indemnification provisions

environmental compliance