January 22, 2007

Liability

Architects still want solution to liability issues

Architects in B.C. are not allowed to limit their professional liability through limited corporations.

Jean Sorensen

correspondent

VANCOUVER

The professional liability insurance (PLI) issue that posed a crisis for British Columbia architects only a few years ago has eased but it is far from over, says Barry Weih, chairman of the Architectural Institute of British Columbia’s (AIBC) insurance committee. Architects are still facing the dilemma of assuming a disproportionate amount of the financial risk on a failed building that involves a joint and several liability claims.

The B.C. government, aware of the situation, has been looking at ways to mitigate the problem through its Modernization Strategy, which is a comprehensive overview of construction industry issues as they relate to housing today.

However, Kristina Stevens, director of safety policy and liaison branch and spearheading the liability and risk portion of the strategy, confirmed that the government would not be changing the joint and several liability requirements in any pertaining statutes.

“Joint and several liability is definitely not on the table,” agrees Weih who recently attended a Vancouver seminar on the new liability and risk being discussed by government. The program and its associated projects (liability and risk is one) are led by the Office of Housing and Construction Standards.

The joint and several liability aspect of PLI is especially onerous to architects because any claim by the building owners for damages must be born by the remaining development companies still in business when the judgement comes down.

If only the architect remains in business when the claim is settled, then the architectural firm is left to pay the complete cost, although his contribution to the building’s development may only have been a small percentage. It has been an issue in the leaky condo crisis that hit B.C. as some development and construction companies simply stripped their companies of assets and formed new companies.

"We are looking for industry participation in finding a solution which is creating a level playing field for everyone in the industry."

Barry Weih

Chairman, AIBC

Professionals in B.C., such as architects, are not permitted under their professional acts – with some exception for lawyers – to limit their professional liability through limited corporations.

The leaky condo crisis in 2005 caused insurers to back away from architects – leaving only two major firms in the B.C. market. Under PLI policies issued, the complete body of work by an architect is insured with the statute of limitations on buildings up to 30 years.

The risk facing many insurance companies was huge. At that time, AIBC President Stuart Howard (now past president) raised the concern that many architects that would come forward to work on Olympic 2010 projects would not be able to find professional liability insurance.

Municipalities wanted architects to provide proof of PLI before issuing a building permit. At the time, the two insuring companies issuing PLI to architects were not taking on new clients, says Howard, who is today serving as the AIBC’s past president. “So, this meant if you were starting a new company (either as a new architect in the market or leaving a firm to begin a new firm), you couldn’t get coverage,” he said.

Today, the situation has eased, both Weih and Howard agree, as four new companies have come into the market providing new options and competition. However, architects are facing PLI exclusions today for such items as water ingress and mould or placing restrictions on buildings built before a set period.

Stevens said other options were being looked at to spread the risk more fairly amongst those who constructed a new building.

But, one solution that has been debated at the recent seminar on the modernization strategy has been to look at reducing the statute of limitations on buildings from the 30-year period. It is a move that is finding favour with the architects. “We think that reducing the statute of limitations is key,” Weih said. The reduction should impact on the scope of buildings that an insurer undertakes when providing PLI, thus reducing the risk.

But, said Weih, “we are looking for industry participation in finding a solution which is creating a level playing field for everyone in the industry.” Otherwise, as well as reducing the time frame, the architects also want to see regulations or some changes which would tie onus of the building’s developers, contractors, and professional people to the structure. One solution might be ensuring bonding was in place.

Stevens says there has been discussion on the statute of limitations and such changes would go through the ministry of the attorney general. Changes regarding the Limitations Act will be posted on the attorney-general’s website page by the end of the month.

Weih says the architects feel the reduction of the statute of limitation “could be a good tool” that will create a better environment but it is only the first step in creating an environment that is more equitable in spreading the risk. “It’s a step in the right direction,” he says.

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