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Risk Exposure

Posted By Mr. Ethics, Thursday, July 18, 2013
Updated: Wednesday, April 23, 2014

Dear Mr. Ethics,

There seems to be a growing trend in the construction industry whereby project owners are placing all risk on the design professional or contractor. Owners are assuming less and less risk exposure through contract provisions that assign risk away from them. Additionally, we are being asked to carry higher limits of liability on our insurance policies while also assuming an indemnification obligation that protects the owner from claims even if the owner is the cause of the claim. Lastly, owners are insisting on being listed as additional named insureds on policies. This isn’t ethical, is it?

Very truly yours, Ami

All parties to a project should assume the risk exposure that they can control

Dear Ami,

It is unethical for a party to assign risk exposure that it is in the best position to control. Construction parties should be assuming that risk exposure that they control through their performance of work, services and/or actions. Risk that is assigned to party who has no ability to control same is not reasonable or ethical. All parties to a project should assume the risk exposure that they can control. That is the way claims are controlled and in some cases prevented. Owners forget that even though they may slough risk onto another when a claim arises they will be brought into that claim. Claim filings increase when a party cannot control its risk exposure.

Regards, Mr. Ethics

Tags:  Liability  Mr. Ethics  Risk 

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