In the architectural and engineering (A/E) profession, vicarious liability refers to the legal principle under which a firm may be held responsible for the negligent acts, errors, or omissions of others performing services on its behalf, even if the firm did not directly commit the wrongful act. This concept is particularly significant in professional services contracts, where responsibility for design coordination, integration, and delivery is often centralized in a single entity. In most projects, that entity is the Prime consultant. 

Vicarious liability most commonly arises in the context of Prime consultant (Prime) to Subconsultant (Subconsultant) arrangements, in which the Prime contracts directly with the owner and retains Subconsultants to perform discrete portions of the professional services. Because the Prime is typically contractually responsible for the overall delivery of professional services, owners and third parties frequently seek to impose liability on the Prime for the negligence of Subconsultants under theories of agency, control, apparent authority, or contractual assumption of responsibility. As a result, vicarious liability is a central risk-management concern in A/E practice and directly informs how professional services agreements are structured. 

It is not uncommon to find a clause in a client’s agreement form that relates to responsibility for attorneys’ fees and litigation expenses.  It’s common to see this towards the end of a contract, perhaps in a section entitled “Miscellaneous Provisions”. Possibly it’s contained within the dispute resolution provisions. Wherever it is located, by the time one comes to what is commonly referred to as a “Prevailing Party” clause, one’s brain can be tired. A Prevailing Party clause is a clause that many design firms don’t spend a great deal of time or energy negotiating.  Many firms don’t see it as a critical clause, nothing worth fighting about. Isn’t a clause like this why firms buy insurance? Hopefully, you understand that in many instances, Prevailing Party clauses drafted by your clients are often totally uninsurable. Since litigation costs can be enormous, this is not a clause you want to ignore or pass over quickly. Cases arise regularly where one party agrees to an onerous Prevailing Party clause, only to find themselves paying a relatively small amount in damages, but a vast sum in legal fees. Very often, merely the threat of the massive expense of a legal squabble is enough to convince the architect or engineer to make a business decision to settle, even if they have little liability. 

The origin of the Prevailing Party clause goes back to merry old England. England is usually thought of as the Mother Country of the United States. As such, many of the laws in the early colonies were borrowed from Mother England. One legal concept that the United States left behind when it became a sovereign nation involved the rule over which party was responsible for legal fees incurred during civil litigation.  The longstanding “English Rule” held that the party who loses in the litigation pays the winning party their legal costs incurred in the lawsuit. The rationale behind the English Rule seems fair enough: if you sue me and I win, it’s only fair that you pay me for the legal fees I’ve incurred, because I won. If I sue you, and you win, fairness dictates that I pay your legal costs. Since most claims against design firms are resolved without any damages being paid out by the design firm, it might seem the English Rule would be preferable for the American design profession.