Managing Professional Fees

There are two things certain in life, death and taxes. However, for the design
professional, there is an additional certainty: If the firm files a lawsuit for fees,
it can often anticipate receiving a countersuit for professional malpractice.
Approximately 40 percent of all claims - two out of every five claims or circumstances
reported - originate from fee disputes. If the client doesn’t pay the fee
for design services, there is most likely a cause for it and the grounds behind it
may vary. A client may be dissatisfied with the service received, or a project’s
price tag may be higher than the client had expected. Maybe there are more
change orders on a project than the client is prepared to pay for, or the client
merely may have run out of funds and is looking to the design professional to
recover some of the expense.
When a client fails or refuses to make a payment, there are several options
design professionals can exercise to obtain payment. A statement of caution,
though: How a design professional responds can set the manner for how the
client responds.
Cease Work Option
A number of professionals make threats to abandon the project if they don’t
collect their fees. If you select this course of action, look ahead to the client to
appoint a replacement designer to complete the project. In all probability, the
design professional can also look forward to being served with a lawsuit or
claim asserting professional negligence. The client may well seek reimbursement
for the replacement design firm’s fees, as well as expenses related to delays,
change orders and other related damages. Issues and claims might also develop
from the use of the original design professional’s plans.
File a Lien or Lawsuit Option
Several design professionals elect to file a lawsuit or place a lien on the client’s property to recover fees. Design
professionals who opt for this course of action can expect the client to file a lawsuit or claim for professional misconduct,
alleging numerous errors or omissions on the project and seeking compensation that often surpass the fees that are due.
Allow the Client to Remedy the Alleged Breach of Contract Option
When design professionals have written contracts with their clients, they may contact the clients, make them aware
that they are in breach of contract and request the clients to work with them to resolve the situation. In these
instances, practical design professionals should discuss with their clients that they are dedicated to the project and
will work with them to work out the options for fee payment, perhaps a payment plan. Pursuing this line of action
will reveal that the design professional is willing to work with the client to put an end to the issue, which could give
way to a better outcome and keep the problem out of court.
What to do Before You Sue
In advance of suing for fees, design professionals must consider the hidden costs in pursuing a fee claim, including
litigation expenses and the time and energy it would take to defend a suit. And given the fact that a design
professional’s fee suit will generally result in a counterclaim for professional negligence, other expenditures may
be involved.
If a professional negligence claim is alleged, it is essential that the design professional alert their professional liability
carrier and place them on notice to defend the claim. The design professional will need to pay any deductible applicable
to the policy to defend or settle the claim, and spend time and legal expenses to defend the claim. This in the future
could affect insurance premiums, as well as take necessary and important time away from business, an indirect cost
that only the design professional themselves can determine.
We hope this information has been helpful for you in understanding a little bit more about professional liability insurance. Feel free to consult our website at www.hallandcompany.com for more resources and information about our capabilities. As brokers specializing in serving A/E firms we are readily available to help you further. We can be reached at 1-800-597-2612.

Hall & Company provides Professional Liability Insurance

Hall & Company provides Professional Liability Insurance to Architects, Engineers and Environmental Consultants. We specialize in the placement of Errors and Omissions Insurance (E&O Insurance) and serve as insurance brokers to several thousand design firms nationwide. In addition to Professional Liability Insurance, we also provide all of the Property Casualty Insurance coverages that Architects and Engineers need.
Our customers are design professionals of all types and sizes; including Land Surveyors, Construction Managers and Design/Build Firms. We insure firms that range in size from one person to firms listed in the ENR 500. We work with a wide variety of insurance companies but also offer a number of professional liability insurance programs that are exclusive to Hall & Company and are not available though any other broker.
Our approach is to meet the insurance needs of design professionals by offering experienced and knowledgeable staff, high-quality and competitively-priced products, and thoughtful, attentive service.

Feel free to consult our website at www.hallandcompany.com for more resources and information about our capabilities. As brokers specializing in serving A/E firms we are readily available to help you further. We can be reached at 1-800-597-2612.
19660 10th Avenue NE
Poulsbo, WA 98370
[P] 360.598.3700 [F] 360.598.3703
www.hallandcompany.com
HALL & COMPANY