NPPE Risk Management and Liability 5 — Questions and Answers
Question 1: Which contract clause is most effective at allocating the risk of unforeseen subsurface conditions to the owner rather than the contractor?
- Force majeure clause
- Differing site conditions clause (Correct answer)
- Liquidated damages clause
- No-damage-for-delay clause
Correct answer: Differing site conditions clause
A differing site conditions clause shifts the risk of subsurface surprises to the owner, allowing contractors to bid without including contingency for unknown underground conditions.
Question 2: A professional engineer stamps drawings prepared by a junior engineer without thoroughly reviewing them. If the drawings contain an error that causes injury, the PE is most likely liable under which theory?
- Vicarious liability only
- Strict liability
- Professional negligence for negligent supervision (Correct answer)
- Respondeat superior only
Correct answer: Professional negligence for negligent supervision
A licensed professional who stamps drawings without adequate review breaches the duty of professional care and can be held liable for professional negligence based on that failure to supervise.
Question 3: An owner terminates an architect for convenience mid-project. Under AIA B101, the architect is entitled to compensation for:
- Only services rendered up to the termination date
- Services rendered plus reasonable termination expenses (Correct answer)
- Full contract fee as if the project were completed
- Services rendered minus a 20% penalty for early termination
Correct answer: Services rendered plus reasonable termination expenses
AIA B101 entitles the architect to compensation for all services performed to date plus reasonable costs directly attributable to the termination.
Question 4: What is the primary purpose of a 'project-specific' professional liability policy, compared to a firm's annual practice policy?
- It covers construction defects instead of design errors
- It provides coverage tied to a single project that remains in force for the statute of repose period (Correct answer)
- It eliminates the need for a deductible
- It covers the general contractor's liability as well
Correct answer: It provides coverage tied to a single project that remains in force for the statute of repose period
A project-specific policy is purchased for one project and can be kept in force for the duration of the applicable statute of repose, preventing future claims from eroding the firm's annual aggregate.
Question 5: A contractor submits a shop drawing with a significant design change. The architect reviews and approves it without noting the deviation. A defect results. Liability most likely falls on:
- The contractor alone because shop drawings are the contractor's responsibility
- The architect alone because approval transferred responsibility
- Both the contractor and architect under shared negligence principles (Correct answer)
- The owner because the owner accepted the finished work
Correct answer: Both the contractor and architect under shared negligence principles
When an architect approves a deviant shop drawing without flagging the departure from contract documents, both the contractor (for the deviation) and the architect (for the failure to catch it) may share liability.
Question 6: Which risk management strategy is represented when an architect uses AIA standard contract documents rather than owner-drafted agreements?
- Risk retention
- Risk transfer
- Risk avoidance
- Risk reduction (Correct answer)
Correct answer: Risk reduction
Using proven, balanced standard contracts reduces risk by incorporating well-tested liability allocations, limitation-of-liability clauses, and dispute resolution provisions that have been refined over decades.
Question 7: Under the 'design-build' delivery method, which party bears the greatest professional liability exposure for design errors?
- The owner, as project initiator
- The design-builder, who holds both design and construction responsibility (Correct answer)
- The subcontractors performing the work
- The independent construction manager
Correct answer: The design-builder, who holds both design and construction responsibility
In design-build, the design-builder assumes unified responsibility for both design and construction, concentrating professional and contractor liability for design errors in a single entity.
NPPE Risk Management and Liability 5
Which contract clause is most effective at allocating the risk of unforeseen subsurface conditions to the owner rather than the contractor?