Risk exposure of architects, engineers and professional services firms in Spain

In Spain, the liability for architects and engineers under a building project can be contractual (breach of contract), tortious, or statutory (such as the Spanish Building Contract Act).

Construction professional services may be provided by the professional individual or by professional services firms (“Firm(s)”). Where services are provided by Firms, their activity and liability is regulated under the Professional Services Firms Act (“Ley de Sociedades Profesionales”, LSP, Law 2/2007).

The Act and its liability regime applies to a very wide range of professionals (doctors, lawyers, economists, etc.) working through or for Firms and not just architects and engineers.

Under these regulations it should be noted that:

  1. Firms can only provide services through registered members of the corresponding professional association (Colegio Profesional).
  2. The Firm has its own rights and obligations when providing professional services. Company assets respond to company liabilities.
  3. In the event of a claim, there is joint and several liability for corporate liabilities arising from professional acts between the Firm and the professional involved.
  4. Contract law and/or tort apply in general terms. For architects and engineers providing services on a building project, the Spanish Building Contract Act regulations also apply.
  5. Due to their exposure to liability when providing professional services, Firms are required to obtain insurance coverage.

Therefore, on this basis, Firms have their own specific liability regime in relation to claims.

If, for example, a housing developer enters into a contract with a Firm for designing and directing works, in the event of defective performance of works, the claimant may choose to claim: (i) against the Firm, (ii) against the individual architect who has performed the work, (iii) against both. If both are to be sued, it will be frequently based on contractual liability and cumulatively on statutory liability arising from the Building Contract Act.

The two liability regimes have substantial differences. In a claim for construction material damages arising from statute:

  • Compensation to be claimed is only in relation to material defective design of the building or the administration of the works
  • A two year limitation period is provided for claimants for filing the claim
  • Liability is stated for non-performance or defective performance of professional tasks by architects or engineers as defined in the Building Contract Act.


On the other hand, for claims based on breach of contract:

  • Compensation that may be claimed is all related to the possible consequences of the breach of contract, such as material defective design of the building, but also moral damages, alternative housing expenses, and damages in general terms that arise from the breach of contract
  • A five year limitation period is provided for claimants to file the claim
  • Liability attaches upon breach of contractual duties and/or terms, even if there are no material damages to be claimed. Simply, the fact of not having delivered the service as agreed, may give rise to contractual liability.


Consequently, in the example provided, the Firm will be sued for contractual liability, and the architect for statutory liability under the Building Construction Act. The Firm will have a wider exposure under the contractual liability regime than under the construction liability regime for individual architects and/or engineers.

Comment

Considering all the above, it may be concluded that in general terms, Firms in Spain are subject to specific regulation and a specific liability regime. Moreover, where architecture and engineering professional firms are involved in Spanish building projects, this specific regime should be considered together with the different liability regimes that apply on a contractual, tort or statutory basis, namely the Building Contract Act.

Consequently, different liability regimes apply that are often the cause of confusion and grey areas. This will require clarification by professional indemnity (PI) insurers for assessing the risk exposure for their insured architects and engineers.

In conclusion, we recommend underwriters with PI risks in Spain to take into account whether they are insuring the Firm or the individuals, because the exposure is different and wider for the firms.

Read others items in Construction and Engineering Brief - November 2020