Adding the standard of care to contracts gained traction in the late 20th century as projects grew more complex. While it has become common practice, when it is included in a contract it elevates the standard of care to a warranty, creating unintended consequences.
Courts enforce standard of care clauses in contracts, but professional liability insurance policies deny coverage for warranties. Insurers have built coverage around this concept by stating that coverage exists only when the warranty is no different than the standard at law.
Today, the standard of care remains a cornerstone of professional consultant contracts, but only when applied correctly. When the contract language departs from the professional standard of care that exists at law, problems can start. Add “elevated,” “highest,” “best” and other superlatives to your contracts and the result could be disastrous for all involved.
It’s common to see airport or agency contracts that modify the standard of care clause to include words like “highest,” “best,” “guarantee,” “ensure” or “assure.” On the surface, that might seem like a good strategy to motivate a consultant. In reality, this change can create a major insurance coverage gap that undermines owner security.
Even the most experienced and educated professionals can make mistakes. Expecting professionals to be perfect is unrealistic. Owners and airport executives have always understood this. That is a key reason they require consultants to obtain professional liability insurance. Consultants often lack the financial means to pay for construction mistakes. The ratio of construction cost to engineering profit is often 100:1. If a mistake occurs, owners want the security that a professional liability policy is available to pay for losses the consultants can’t afford on their own.
Professional liability insurance covers the ordinary standard of care but it does not cover promises of perfection or express warranties. When the contract raises the standard to the highest level of performance, the consultant is no longer working under the same insurable standard.
If a proposed contract sets an unreasonably high standard of care, the very provisions intended to safeguard parties involved may instead expose them to greater risk:
- Insurance carriers may deny coverage because the consultant agreed to an uninsurable promise.
- Consultants may face personal financial risk and have to withdraw or decline the project altogether.
- Airports may lose the protection of the consultant’s professional liability insurance, which was the safety net for both sides.
A good analogy: If every NBA player’s contract required them to be “the best,” every player who wasn’t Michael Jordan could fall short and possibly be in breach. There can only be one “greatest,” and it is a virtually impossible standard to maintain.
Deciding to avoid elevated standard of care language is not about supporting mediocrity; it’s about aligning expectations and preserving the security offered by professional liability insurance.