Rather than further derailing the "Professional Services Contract?" thread, I'm starting another to go into more detail about contract clauses to watch out for. The one that can be especially harmful to a surveyor is the indemnification clause. Below is some language taken from a contract that I was asked to sign a few years ago (I was the Subconsultant, my client was the Consultant):
"Subconsultant agrees to indemnify, protect, defend and hold Consultant harmless from and against any claim, lien, action, cause of action, loss, cost or expense, including reasonable attorneys’ fees and costs actually incurred, whether or not suit is filed, arising or resulting
from any damage, including, without limitation, property damage and/or bodily injury or death, to the extent such damage is caused by the negligence or willful misconduct of Subconsultant, its employees or agents in connection with or arising out of Subconsultant’s activities related to the Project."
In California, at least, agreeing to this is like signing a blank check. At first read it sort of sounds okay because of the "any damage...caused by...Subconsultant" limitation. But California courts have held that a design professional who agrees to indemnify under this language is responsible for providing immediate defense -- i.e. all legal expenses -- to the Consultant while the action wends its way through the legal process, which can take years. In the mean time, the surveyor has to pony up his client's legal fees, which can easily run into the millions of dollars, and is only eligible to recover them after a conclusive finding is made that he is not, in fact, liable for damages. Your E&O carrier will not help you out in this circumstance, so bankruptcy is a very real possibility.
My insurer suggested that I substitute the following language:
"Subconsultant shall, to the fullest extent permitted by law, indemnify and hold harmless Consultant against all third-party tort liability for bodily injury and property damage, including reasonable attorneys' fees and litigation costs, to the extent caused by the Subconsultant's negligent performance of professional services, as determined by judicial or arbitration proceedings, excepting only those claims, damages, liabilities or costs caused by the negligent acts or negligent failure to act by the Consultant. Neither the Subconsultant nor the Consultant shall be obligated to defend or indemnify the other party in any manner whatsoever for the other party's own concurrent or sole negligence or alleged concurrent or sole negligence. Nothing herein is intended to create a duty to immediately defend the other party until and unless negligence is established by judicial proceedings or arbitration on the part of the party charged with a defense tender hereunder."
Unfortunately, after many back-and-forth efforts, the client's risk management people declined to change the language, so I walked away from about $29k worth of work, and slept better for it.
Some years ago, when I worked for a different company, our liability insurer would present a seminar every year on such risky contract language and other liability issues. The "indemnification" seminar was a real eye-opener for us. A blank check, indeed. The advice given was not to sign any contracts with such clauses, because the company's insurance policy excluded coverage under such contract obligations.
You can often make more money by turning down work than taking it. Imagine you're working as a surveyor on that tilting building in NYC with that language in the signed contract. It's always best to understand what you're actually taking on.
Kudo's to Jim for checking in with his insurer, keeping them in the loop is good practice, not to be a cynic but it makes it difficult for them to back off if there is a claim.