The Claims-Free Architect

What Happens When An Unreasonable Client Demolishes Completed Work?

• Season 3 • Episode 9

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If an Architect provides better quality cladding materials than those the client requested, can the Client order those materials to be replaced at the Architect’s expense? 

You’ll learn that unreasonable clients and guilt-ridden architects can make strange bedfellows and their relationship dynamics may lead to unnecessarily expensive lawsuits.


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We’re often told that, in life, “You can’t always get what you want.” This is true in architecture as well.


A developer-client, had given the architect precise instructions regarding the design of her new apartment building. In particular, she wanted a specific colour of brick, and a distinct style of windows, to match her previously completed building on an adjacent property. Having passed this information along to the Architect, she went off on an extended vacation.


On her return, she discovered, to her delight, that the building was almost complete. But to her extreme dissatisfaction, the wrong brick and the wrong windows had been used.


This story is called: “I WANT WHAT I WANT.”


 

Ava Boxer was a successful self-made developer of the old school. She had recently built a condominium tower as part of a larger development in the St. Catharines area, and was now preparing to build a second, matching tower on an adjacent site. But she wanted a new architect for the job.


To her way of thinking, the Architect of the first tower had tried to exercise too much creative independence. What Boxer wanted was an architect with some experience doing developer buildings, and with the ability to follow simple instructions. Farley Wilton seemed a good fit. He had the experience and he wasn’t known as a design trend-setter. The new building, after all, would be, basically, a duplication of the first one. No design ingenuity was needed or appreciated.


Once the drawings were completed, and construction was about to begin, Boxer left for her usual extended winter vacation, leaving her Construction Manager Irwin Fehler in charge. Fehler had done most of the project coordination up to this point, and from here on, it was just a matter of seeing things through.


When Boxer returned from her vacation, she found the building completely enclosed, which was good news; but with the wrong materials, which was very bad news. Somewhere along the way, miscommunication had occurred, with the result that some of the instructions got lost or misinterpreted. It was a devastating shock. Not only was the brick the wrong colour, but the windows didn’t match those in the first building.


This was not at all what she wanted.


Without delay, she ordered that construction be halted. She then instructed Fehler’s crew to first demolish the outside walls, then replace the bricks with something that matched those in the first tower, and then to alter the windows, to “make them look right.” Finally, she sent a bill to Wilton, demanding payment of more than one million dollars.


When Wilton notified Pro-Demnity that an insurance claim was on the way, he was understandably shaken. He had no idea how the materials mix-up had happened. Since the project required no design input, he had handed it, along with his notes, to Gretchen Dunst, the technologist in his office. Somehow, Dunst had missed the instructions about the building envelope—or had failed to understand their importance—and had chosen a contrasting brick and different windows—in both cases, of a higher quality than the originals—but contrary to Boxer’s explicit instructions and desires.


Wilton was as shocked as Boxer at the way things had gone off the rails. He had already apologized to his Client, had admitted his mistake, and assured Boxer that his Professional Liability Insurer would cover the costs. The matter would be promptly taken care of. After all, if not to sort out architectural errors and protect an architect’s livelihood by appeasing his best clients, what was an insurer for?


Wilton was about to receive another shock—this one, from the Claims Specialist—which was even more devastating than the first. Liability Insurance, it was gently pointed out, is paid out when there is a legitimate, legal obligation to do so—or at least a reasonable expectation that a court would order damages to be paid. Pro-Demnity reserves are not intended as a compensation fund, available to buy the goodwill of clients—or anyone else—whether or not a legal proceeding decides that money must be paid.


But before we considered our defence position, there were some important questions that needed to be answered. First, was there any justification for replacing a façade that was perfectly appropriate for its purpose of keeping out the weather—and was demonstrably better than the one Boxer had used to replace it? To all appearances, barring any provable losses, the whole thing was entirely a matter of taste.


Second, since Boxer was a builder, why hadn’t she, or her proxy Irwin Fehler, been paying more careful attention to the drawings, the specifications, the construction, and the ordering of building materials? 


Third, what were Wilton’s obligations to his Client? At the very least, he would probably have to accept some liability.


This is not what the Architect wanted to hear. He had expected that we would promptly issue a cheque to placate his client. Instead, it looked like Wilton was headed for court. 


Boxer had hired Romeo Fitz-Gillick, a super-sized, red faced, “thump on the table” sort of lawyer, utterly lacking in subtlety. Fitz-Gillick lost no time in sending Wilton a thundering demand letter, stating that an expensive mistake had been made, for which Wilton had already admitted responsibility. The error had led to extensive demolition, at a cost of $240,000 and the replacement of the non-conforming enclosure, at a further cost of $500,000. To this, he added damages for the “grievous embarrassment” that the error had caused his client within the development community. Then of course, there were delay damages and “consequential” damages in the form of lost sales. The total came to $1.15 million. Fitz-Gillick ended his letter by saying that he saw no possible defence, but his client was generously prepared to drop the punitive damages and consequential loss claim for a quick $500,000 settlement. A reply was expected within five days.


Now in panic mode, Wilton forwarded the letter to Pro-Demnity, demanding that we act immediately. 


Presented with this new development, the Claims Specialist once again pointed out to Wilton that however overwhelming the claim might be, and however urgent the Client’s lawyer’s demands, we have to adhere to our mandate, and the promise we make to each of our policyholders, which requires that a good legal case and vigorous defense must be made before any money is paid out. In this case, we were not without defences, despite Fitz-Gillick’s allegations. We engaged our own legal counsel and arranged a meeting, with a view to a better settlement.


The meeting took place at the offices of Fitz-Gillick & Cartier, a mid-sized Niagara Falls firm that prospered from casino clients. Their elegant boardroom offered a sweeping view of the peaceful Niagara parkland, which was in stark contrast with the contentious nature of the meeting itself. Wilton did not attend, but was represented by Pro-Demnity-appointed counsel and the Claims Specialist.


Fitz-Gillick started things off in an aggressive mood. Standing at the head of his boardroom table, he announced that we had no case at all. According to him, once Wilton was called to the stand in a courtroom, he would have to admit his error, and the verdict would not be in our favour.


We countered by suggesting that we had a fairly strong defence and that, in the very worst-case, liability would be shared fifty-fifty. This enraged Fitz-Gillick, who simply reinforced his claims by gesticulating, pounding on the table and shaking his finger at the Claims Specialist, who being no stranger to this kind of behaviour, coolly requested that Fitz-Gilick show better manners. This seemed to calm him down a little.


When Fitz-Gillick at last slumped into his chair, the Claims Specialist presented a more reasoned view of things. He pointed out that the building as originally designed and constructed was, by any normal criteria, “suitable for the purpose intended,” and was entirely faithful to the drawings. Furthermore, Boxer’s staff had reviewed and approved the permit drawings, and constructed the building accordingly, using the bricks and windows that they themselves had ordered, fully aware that the selections were not identical to the neighbouring tower.


Case law existed to support the argument that under similar conditions, damages may be awarded, but we seriously doubted that these circumstances rose to the level demanded, or that they justified the replacement of a perfectly good wall. Furthermore, we had no duty to protect the Owner from the actions of her own staff.


The meeting ended with no spirit of goodwill, and no agreement. Ava Boxer, who had been uncomfortable in the law office environment to start with, was now visibly irritated by Fitz-Gillick’s inability to impose his will on the proceedings. She had expected that her lawyer would “wipe the floor” with the opposition. 


The matter escalated towards litigation. Statements of claim and defences were exchanged and discoveries scheduled, prior to which both sides produced the documents that they would be relying on. We had very little to add . . .


. . . With the exception of some particularly useful drawings and specifications, all initialed by the Construction Manager Fehler, along with his own minutes-of-meetings that recorded discussions of the masonry and the windows, in place… with no indication that anything was amiss.


Our impossible case was getting stronger. Only the Architect, with his belief in his own guilt, remained a problem.


Before taking the case to court, we felt it might be useful to try and mediate a settlement. The plaintiff, possibly suspecting that her solid case was starting to melt around the edges, accepted our suggestion. We met on neutral ground, in the offices of a retired judge who presided as mediator.


Both sides exchanged briefs and supplied copies to the mediator. Case law was listed, in support of both arguments.


The plaintiff’s brief noted that in a recent Manitoba case, which also concerned brick colour, the verdict had gone against the defendant. The court had held that if a prospective home buyer had stipulated brown bark-textured brick, they did not have to close on a house built with a similar but not-identical brick. A purchaser has the right to receive what they bargained for.


We argued that in the matter at hand, we were not dealing with a home designed for a specific client, but a speculative building for a commercial developer, who had no grounds to invoke the same “emotional” arguments as a homeowner. The circumstances were very different.


We cited several cases in which similar variations had been allowed by the court, and money had changed hands between the builderRR and the owner, based on actual savings or additional costs resulting from the variations, including long-term effects. In our case, since the substitutions actually provided a higher quality, no compensation could be justified. In addition, hadn’t the Developer’s staff failed to mitigate any so-called “loss” by allowing the building to proceed?


The mediation before Justice Marsh was very different from our previous meeting. Gone were the table pounding and expletives, replaced by a polite and collegial atmosphere.


And, by a stroke of luck, Ava Boxer was out of the country for an extended period. She was represented by none other than Fehler, her Construction Manager—and the very person who had failed to observe the substitutions—and by her accountant whose only focus was on avoiding the costs of litigation.


After plaintiff and defendant had each presented their case, the mediator installed them in separate rooms and engaged in “shuttle diplomacy.” In this way, he convinced both sides that they had, at best, a 50% case.


We continued the negotiations by getting down to details, and dealing with hard costs. Boxer’s accountant presented her records showing actual expenses, which were substantially lower than the claim numbers. Meanwhile, Pro-Demnity had engaged a cost expert and had consulted RSMeans Construction Cost Data. Both sources indicated that the plaintiff’s claims were grossly inflated.


Given that Wilton’s technologist was complicit in the foul-up, and that Wilton himself had virtually accepted responsibility by apologizing to his client for “his mistake,” there was no way we could avoid contributing to a settlement. 


The consensus was that the actual hard costs could not have exceeded $300,000. We settled on a 75–25 split, where we would pay the smaller portion. A $75,000 contribution was a lot less than the $500,000 “quick settlement” that Fitz-Gillick had proposed, and well within the insurance limit available. Both sides agreed to pay their own legal costs.


Our attempts to reach Boxer for her agreement were unsuccessful. Apparently, she had made a pilgrimage to her childhood home, somewhere in mountain country, beyond the reach of cell service. In her place, the accountant, as a vice president of Boxer’s corporation, signed the minutes of agreement, and everyone was relatively happy. . . . at least, one presumes, until Ava Boxer’s return.


This had been a valuable, long-overdue learning experience for Wilton and his Client, which may be summed up in three simple lessons.


Lesson No. 1: To what extent is an owner entitled to get what they have requested? This is an important and not uncommon question. What we have learned from this case and others like it is that legal precedents may go off in all directions, but suggest that reasonableness will govern. The main criterion is this: Is this particular matter “essential” to the purchaser or client?


Lesson No. 2: We are reminded that Liability Insurance is paid out when there is a legal obligation to do so, or a reasonable expectation that a court would order damages to be paid. Pro-Demnity is not a compensation fund.


Lesson No. 3: Avoid admission of liability. Feeling guilty doesn’t mean that you are guilty. In this claim, the Architect admitted guilt to make the problem go away, without considering other relevant factors and possible consequences. An admission of liability may sink your defence and provide grounds for a denial of coverage. Before admitting to anything, notify Pro-Demnity or your professional liability insurer first.