Acme Engineers was hired by Perfect Paperz to provide a feasibility study and engineering report for the company’s wastewater treatment plant at its nearby paper recycling mill. After the study, but prior to the Acme Engineers completing their preliminary report.1
Perfect Paperz asked them to alter the design of the facility to be able to provide additional treatment capacity. Additionally, Perfect Paperz requested the aeration basin size be reduced. The request was made to reduce costs. Acme Engineers made the changes requested and provided the preliminary report. Perfect Paperz selected another engineering firm to provide the design services. This firm specified a circular aeration basin as opposed to the rectangular design called for in Acme Engineers’ report. The other firm incorrectly selected and placed aerators within the basin. These changes were so substantial that there could not have been any reliance on the preliminary report during the design phase.
When the wastewater facility opened, it had problems handling peak loads. Perfect Paperz sued Acme Engineers claiming that they requested an increased capacity in the revised preliminary report, which was not provided. Acme Engineers maintained the position that their original design was modified by another firm due to cost concerns by the owner.2
Acme Engineers’ hired an expert who was able to visit the facility, review the preliminary design, and compare it to the built drawings. The expert came to the conclusion that the design provided by Acme Engineers was not what was built. As a result of the expert’s findings, Acme Engineers’ defense counsel filed a third party complaint against the second engineering firm. The case went to trial. $150,000 was spent on Acme Engineers’ defense and no indemnity was paid due to the strong limitations of liability wording used in their contract with Perfect Paperz.
Risk Factor #1
A professional’s risk, in many situations, may be mitigated by the ability to bring documentation in favor of their services. Creating memos and storing documents can be vital to any professional’s defense.
Risk Factor #2
When providing services for only a portion of a project, limitations of liability wording should be included in the contract.