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Planning for your retirement can be daunting when you’re also looking to wind down your professional design practice. Preparing now to better manage your liability can help you make a seamless transition.

If you’re planning to retire and close your practice at the same time, you can take plenty of steps to lower the probability that you’ll be dealing with claims long after you’ve stopped working. We recommend you heed the following advice no matter where you are in your career, but particularly as you approach retirement. It’s never too early to think about and manage your long-term liability exposure.

Engage your broker
It’s an unfortunate reality that the end of your practice does not eliminate the possibility of a claim. Your professional liability insurance coverage is provided on a claims-made-and-reported basis, meaning only claims made against you and reported to your insurer during your policy’s effective dates are covered. You do not want to find yourself in a situation where a claim is made years down the road, after your policy has expired and you’re no longer covered.

To that end, it’s essential to ask your broker about an extended reporting period (ERP), which may help protect you against claims after you’ve ceased providing design services.

Leading up to retirement, be careful to report all circumstances that may turn into claims because the failure to report a claim can result in a gap in coverage.

Ending your practice does not eliminate the possibility of a claim.

Get legal advice
When considering winding down your business, you should enlist the services of a knowledgeable and competent lawyer. Your lawyer can help you understand the applicable statutes of limitations and repose, as well as complex contractual obligations affecting liability. Engaging legal counsel early can also help you negotiate favorable contracts and review your standard terms and conditions.

Your lawyer can also assist in protecting your and your spouse’s personal assets, such as your primary residence.

Your lawyer and insurance broker can work with you simultaneously if you need to restructure in advance of retirement. This helps identify the appropriate entities as additional insureds on your policy and confirms the proper retroactive dates to cover ongoing risk from past services.

Consider project types and jurisdictions
Certain projects carry long exposures and present a higher risk of litigation years after project completion. Condo and residential projects represent the highest exposure, especially in jurisdictions with a long statute of repose like California, where a claim may be filed up to 10 years from the date of substantial project completion. In Canada, some provinces have limitation periods even longer than 10 years. For example, in British Columbia and Ontario, the ultimate limitation period is 15 years. We recommend having a discussion with your lawyer about the statutes of repose and limitations in your jurisdiction and in any other jurisdictions where you have provided services or plan to provide them. Strengthening your contracts and risk management practices 10 or 15 years in advance of retirement can help you avoid claims involving long-exposure projects.

色多多视频Design Professional also advises against taking on new project types or geographic areas while you’re winding down your practice. Stick to projects and locations that match your experience.

Stress client selection
Choose clients with whom you already have a positive working relationship and who have experience in the type of project being considered. Additionally, try to work on projects with contractors you know. With an established client, you may be able to recommend a contractor with whom you’re more comfortable and who will prioritize quality over price.

Even when working with long-time clients, stay informed about any management transitions your clients may be planning. If your contact within a client’s organization plans to retire soon, begin to develop a relationship with the potential successor so you can be prepared when your friendly contact leaves.

If your design services will require you to hire consultants, avoid engaging firms you do not know, and always confirm adequate consultant professional liability limits by requiring a current certificate of insurance. It’s also helpful to ask about other claims that may have eroded a consultant’s policy limit.

Focus on contracts
A well-drafted contract lays the foundation for a successful project; it’s even more important when planning to close your doors. Make sure that the contractual requirements in your agreements are insurable under your 色多多视频professional liability policy. When considering retirement, be aware that your risk appetite will decrease. What would have been acceptable earlier in your career may be too risky now.

When considering contract terms, avoid the following:

• Onerous defense and indemnity provisions
• Elevated standard of care and guarantees, warranties, and certifications for things outside of your knowledge or control
• The waiver of statutory lien rights or the right to a jury trial without first discussing with legal counsel
• Contractual requirements that extend the statute of repose or limitations
• “Red flag” words that can work against you, like “maximize,” “optimize,” “total,” “ensure,” “complete,” “best,” and “guarantee”
• Onerous document retention requirements

Focus on limitations of liability and waivers of consequential damages. Make sure there is a mediation provision that applies to all project participants and that any waivers of subrogation apply to all. We also recommend including a contract clause designating no personal liability for principals, as explained in the “Corporate Protection” chapter in AXA XL’s .

Perhaps most significantly, knowing when to walk away from difficult contract negotiations or terms can be crucial to preventing unnecessary losses as your practice winds down.

Double down on communication and documentation
Communication with clients plays a critical role in mitigating risks. Our Risk Drivers data consistently shows that poor communication practices, such as failing to document a verbal decision from a client, represent one of the top non-technical areas driving claims. When preparing to wrap up your practice, clearly communicate project concerns to the client in writing and strive to address any unresolved issues, especially things that impact health and safety, scheduling, budgeting, and quality management.

A well-written (and followed!) project document retention policy will serve you well if claims arise after you cease operations. In the years leading up to retirement, focus on project close-outs and gather feedback from clients. This will provide you with an opportunity to document positive results and help you identify potential issues.

We can’t guarantee you a stress-free retirement, but if you invest the time now in these and other practices, you’ll most likely spend less time worrying and more time golfing...or fishing...or traveling...or....


NOTE: Additional information about each of the topics covered in this article can be found in the relevant chapters of AXA XL’s Contract Guide for Design Professionals, available on the .