Communique Feb 2018
Graham Strez, NZACS Claims Committee, and Acanthus Chairman, offers the following thoughts:PI insurance claims typically involve breaches of a contractual or tortious duty of care. Damages awarded are generally in the form of monetary compensation.The Court process and its judgements are public and provide an outcome involving winners and losers. They identify the parties to the litigation and the nature of their commercial and legal relationship, the nature of work or opinions provided by the parties, the nature of the alleged defects and their remediation costs and finally, the legal culpability and cost-consequences awarded against the respective parties. The judgement may also comment upon the credibility of various witnesses, including defendants. Sometimes, the judicial comments may not be flattering to the architect or to the architectural profession.A commercial alternative to court action is a mediated settlement, wherein the various parties can present their evidence and express their opinions and arrive at a commercially acceptable outcome; one which is mutually agreed between the parties, rather than being bound to a court-imposed determination. And, importantly, is confidential and not available as a precedent.There is the opportunity to explore a mediated or negotiated outcome regardless of whether that is spelled out in the service contract, and despite another process (e.g. adjudication, arbitration, court action) already being underway.It is a fact of life that it costs time money and resources to prove innocence, along with attendant personal and commercial stress. A reality check of the costs of defence in relation to the litigation risk and the sums at issue is always undertaken. Court-imposed determinations have the potential to set an adverse legal precedent for future similar claims. Reputation is an architect’s highly valued goodwill asset which is at risk in an open court hearing. For all these reasons insurers will often seek a mediated or negotiated settlement.These settlement agreements record the bare facts of the dispute and always contain a statement of non-admission of liability, the amount each party contributed towards the settlement, when, how and to whom such monies will be paid, an agreement that all parties will observe confidentiality as to the nature of the settlement, and an acknowledgement that the original litigation will be withdrawn from the courts or other processes already in action or contemplation.Mediated settlement agreements are usually recorded in such a way as to establish a contract and with the intention that there is finality and confidentiality. If it is necessary to enforce the agreement, the terms should (usually) only require proving a breach of that contract. To simplify matters, the settlement agreement should provide an “if ….then” statement which sets out the consequences of such a breach.As insurers often respond to the architect’s legal liability, they have an interest in the settlement and they too are bound by the confidentiality agreement; as is the insurance broker (Aon) and the claims committee. It is for this reason that we, and our PI insurer, cannot comment upon the nature of a mediated or negotiated settlement.The processArchitects are frequently professionally and emotionally offended by the nature of allegations made against them. However, we often fail to appreciate that the claimant’s lawyer initially relies upon the one-sided views and facts presented by their client. The statement of claim identifies these in the proceedings. Since the legal process in NZ courts is an adversarial one, it is the role of the defendant’s (architect’s) lawyer to counter these allegations with the filing of a formal statement of defence. This statement of claim and statement of defence forms the stage-set within which the ensuing legal drama unfolds.There follows a discovery process where all documentary evidence which is intended to be relied upon is identified and subsequently made available to all parties upon request. It is the claimant’s lawyer’s duty to represent their client’s interest to the best of their ability within the Court Rules. It is the defendant’s lawyer’s role to challenge these assertions and, where necessary, the opinion evidence of the claimant’s expert witness. This can be a brutal process for the courtroom novice.The outcomeThe resolution of disputes can be lengthy, complicated, costly, emotionally demanding and risky for architects as defendants. The outcome may go against the architect’s confidence and optimism. In a “joint and several” liability environment, this can be expensive for the architect and their insurer. Mediation, with its certainty of outcome, is often a preferable and pragmatic outcome.So, don’t get upset about a claim settlement, when you are 100% certain of your innocence.