Have You Considered These Product Use Risks?

Originally published by the following source: SBC MagazineJanuary 29, 2019
by Sean Shields and Kirk Grundahl, P.E.

   

The extension of product use risk to the end user is something that is rarely, if ever, closely considered. This is often because there are the more pressing needs of daily business to tend to. Additionally, since the consequence of this risk has not presented itself in the past, it is common to feel there is less need to tend to it in the future.

However, there are a few questions to consider asking and addressing, knowing that some of the risk transfer that is made through contract is not easy to undo quickly:

  1. Have you reviewed all the contracts in your supply chain to assess if risk has been transferred to someone other than the responsible party?
  2. Would you be okay with risk being transferred to you by any of the following contractual provisions?
    1. The exclusive remedy shall be either ten times the fee paid, fifteen thousand dollars ($15,000 USD), whichever is less.
    2. The Customer shall guarantee, hold harmless and indemnify against all claims made by any third party.
    3. The Customer shall guarantee, hold harmless and indemnify against all claims for loss, damage or expense of whatsoever nature and howsoever arising relating to the performance, purported performance or non-performance of any services.
    4. The Customer shall guarantee, hold harmless and indemnify against any related costs of litigation and attorneys’ fees higher than _________ (e.g. $15,000 USD)
    5. Customer shall defend, indemnify and hold harmless from and against all claims, suits and liabilities (including but not limited to cost of litigation and attorneys fees) arising from:
      1. actions by any governmental authority or others for any actual or asserted failure.
      2. information supplied by the Customer and relied upon,
      3. personal injuries, loss of or damage to property, economic loss, and loss of or damage to intellectual property incurred by or occurring to any person or entity.
    6. Customer shall defend, indemnify and hold harmless from and against all claims, suits and liabilities (including but not limited to cost of litigation and attorneys fees) arising from or related to the unauthorized use or misuse of testing, research reports, technical evaluations, third party inspection reports, engineered designs, etc.
    7. Liability is expressly disclaimed with respect to any guarantees regarding the quality of any goods or as an insurer against loss or damage and disclaims all liability in any such capacity.
    8. Customers seeking a guarantee against loss or damage should obtain appropriate all risk insurance and, if such insurance is procured, Customer agrees to obtain a waiver of subrogation.
    9. Customer shall discharge all liability for all claims for loss, damage or expense and such claims shall be extinguished unless a written claim is made within ninety (90) calendar days of the date at which the loss, damage, defect or alleged non- performance became apparent, or ought to have become apparent to the Customer, and suit is brought no later than two (2) years from the date of the services rendered.

These statements come from actual contract language being signed and agreed to by many companies, potentially without their explicit knowledge.

Given this, here are some best practices to consider:

  1. Have one of your staff review all of your contracts for indemnity language from all your:
    1. product suppliers,
    2. product evaluators,
    3. third party inspectors,
    4. engineering service providers, and
    5. anyone who provides you a product or service and is likely to have contractual or warranty language on their website.
  2. The review goal is to ensure full understanding of the following items:
    1. Scope of work of each party.
    2. Scope of responsibility of each party
    3. Do they sign and seal their work if they have engineers on staff?
    4. Do they sign and seal their work if they are third party inspection firms?
    5. Do they have profession liability insurance?
    6. Value of services in the context of risk assumed or expected to be taken by each party.
    7. Value of service in the context of risk shifted to another party.

Given what you find, another best practice may be to find suppliers that take contractual responsibility for their specific scope work. A simple approach is to evaluate suppliers by their willingness to stand behind their work by “signing off” on it. The contrast to this is to ask each supplier to tell you what their indemnity and hold harmless provisions are with respect to the products or services provided.

The following are external links that were available at the time this article was published. Please see the PDF files attached below for the 2019 contractual language referenced above and publicly published. The best practice is always to ask for current indemnification and hold harmless provisions from all of your suppliers.

  1. Intertek General Terms & Conditions of Service
  2. UL Environment Service Agreement
  3. IAPMO Uniform Evaluation Service Packet
  4. ICC-ES Evaluation Report Application and ICC-ES Application for Building Product Listing Report

For additional information about this topic, please see:

  1. For an 'ICC Report,' What Value Does Sealed Engineering Have?
  2. Does Your Teammate Sign and Seal Their Testing and Engineering Work?
  3. Confidence Through Sealed Engineering, No Seal=No Teammate
  4. What Does the Code Say 'Accepted Engineering Practice' Means?
  5. Design Value Concepts by APA’s Dr. Yeh; SBCA Agrees
  6. Building Code Adoption of Innovative & Engineered Products
  7. Building Code Adoption Where Intellectual Property (IP) is Involved
  8. Building Code & Adopted Law Definitions -- Building Official
  9. What is a Building Official’s Scope of Work?
  10. Does Your 'ICC Report' Creator, Who is Also Your 3rd Party Inspector, Have a Conflict of Interest?
  11. Have You Considered These Product Use Risks?
  12. Do You Indemnify & Hold Harmless Your 'ICC Report' Author?
  13. 'Hold Harmless' Article Garners Valuable Reader Response