NPPE Professional Liability 4 — Questions and Answers
Question 1: An architect discovers a design error after construction is complete that increases the client's maintenance costs but poses no safety risk. What is the architect's primary obligation?
- Deny responsibility since the building passed inspections
- Disclose the error to the client and discuss remedies (Correct answer)
- Wait to see if the client notices the increased costs
- Immediately contact the insurer before telling the client
Correct answer: Disclose the error to the client and discuss remedies
Professional ethics require disclosure of known errors to the client so remedies can be discussed, even when safety is not at issue.
Question 2: Under the doctrine of res ipsa loquitur, a professional may be found negligent when:
- The client signed a waiver of liability
- The harm would not ordinarily occur without negligence and the professional had control (Correct answer)
- A third party caused the injury independently
- The professional lacked the required license
Correct answer: The harm would not ordinarily occur without negligence and the professional had control
Res ipsa loquitur allows negligence to be inferred when the type of harm normally implies negligence and the defendant controlled the instrumentality.
Question 3: A professional liability policy with a $500,000 per-claim limit and a $1,000,000 aggregate limit faces three claims of $400,000 each in one policy year. What is the maximum the insurer will pay?
- $1,200,000
- $500,000
- $1,000,000 (Correct answer)
- $400,000
Correct answer: $1,000,000
The aggregate limit caps total payouts across all claims in the policy period; payments stop once $1,000,000 is reached regardless of individual claim amounts.
Question 4: Which contractual clause most directly limits the professional's total financial exposure to a client in a dispute?
- Indemnification clause
- Limitation of liability clause (Correct answer)
- Consequential damages waiver
- Force majeure clause
Correct answer: Limitation of liability clause
A limitation of liability clause caps the maximum amount the professional can owe the client, directly bounding financial exposure.
Question 5: When a third party (not a client) suffers harm due to a professional's negligent work, the third party may seek recovery under:
- Breach of contract only
- Negligence tort law, if foreseeable harm was caused (Correct answer)
- The professional's liability insurance directly
- Statutory warranty provisions only
Correct answer: Negligence tort law, if foreseeable harm was caused
Third parties lacking privity of contract may still sue in tort for negligence if the harm to them was reasonably foreseeable.
Question 6: A professional retains project records for only two years before destroying them. A claim is filed four years after project completion. This record destruction most likely:
- Has no legal significance since the warranty period passed
- Strengthens the professional's defense by reducing evidence
- May constitute spoliation of evidence and harm the professional's defense (Correct answer)
- Is protected by trade-secret law
Correct answer: May constitute spoliation of evidence and harm the professional's defense
Destroying records after a potential claim arises or before the statute of limitations expires can constitute spoliation, creating adverse inferences against the professional.
Question 7: In the context of professional liability, 'consequential damages' refers to:
- The cost to repair the professional's defective work directly
- Losses flowing indirectly from the breach, such as lost business profits (Correct answer)
- Punitive damages awarded for gross misconduct
- Statutory penalties for unlicensed practice
Correct answer: Losses flowing indirectly from the breach, such as lost business profits
Consequential damages are indirect losses caused by the breach, such as lost profits or business opportunities, rather than the direct cost of correction.
NPPE Professional Liability 4
An architect discovers a design error after construction is complete that increases the client's maintenance costs but poses no safety risk.
What is the architect's primary obligation?