THE WALKIE TALKIE AND PII-RELATED ISSUES
THE WALKIE TALKIE HIT THE HEADLINES IN SEPTEMBER WHEN GLARE FROM ITS
FAÇADE DAMAGED A CAR AND SHOP FRONTS IN A STREET BELOW. IN THE FIRST OF
TWO ARTICLES ON THE POTENTIAL PROFESSIONAL INDEMNITY INSURANCE (PII)
ISSUES, LES PICKFORD TALKS TO PETER LONDON AND MATT FARMAN OF HOWDEN
INSURANCE BROKERS ABOUT THE POSSIBLE IMPACT OF DESIGN ISSUES ON LIABILITY
AND HOW PROBLEMS CAN BE AVOIDED.
20 Fenchurch Street originally caused a stir because
of its distinctive shape and was quickly dubbed the
‘Walkie Talkie’. The 37-storey skyscraper in the City of
London had been progressing towards its 2014
completion when, in September, the sun started to
shine… and its south-facing concave façade acted like
a mirror and concentrated the sun's rays onto a street
where it melted parts of a Jaguar car and caused
minor damage to nearby shops.
Cue talk of ‘solar death rays’ and the building being
renamed the ‘Walkie Scorchie’. Not great PR for the
joint developers Land Securities and Canary Wharf
Group.
Aside from the initial media frenzy – involving repeated
interviews with the Jaguar’s owner and journalists with
frying pans cooking eggs in the street – the
developers’ immediate actions aimed to prevent any
further damage and included suspending car parking
bays and erecting street-level screens. They also paid
for repairs to the car, estimated at around £1000.
Similar issues have happened before. For example, in
2003 with the Frank Gehry-designed Walt Disney
Concert Hall in Los Angeles where its stainless steel
panels had to be sanded to prevent an intense glare.
The Walkie Talkie’s architect, Rafael Viñoly, also had a
problem at his Vdara hotel in Las Vegas in 2010 when
its concave form focused sunlight onto a swimming
pool terrace and was reported to be hot enough to melt
loungers; the solution was to cover the glass in
non-reflective film.
THE IMPACT ON PII
HOW MIGHT ISSUES WITH THESE HIGH-PROFILE
PROJECTS IMPACT ON PII AND ANY LIABILITY
FOR THE CONSULTANTS INVOLVED?
“If an underwriter was made aware that a client was
engaging in a highprofile/large/complex project, and
the underwriter knew of problems that had previously
arisen on a similar project, it would be prudent for them
to ask what steps had been taken to reduce the
likelihood of similar issues arising,” says Peter London,
Senior Account Executive at Howden. “They might ask
specific questions about the project and the risk
management procedures employed, particularly if its
size or complexity was unusual to the consultant
involved. Underwriting presentations will usually ask
for details of the largest contracts in which the
consultants are engaged.
“With larger jobs, the potential consequential losses
could be significantly greater so they will attract an
underwriter’s attention,” London adds. “Further, a firm
that has experienced a succession of claims or
notifications all arising from a similar root cause, and
who can’t evidence any changes in their risk
management procedures, is likely to see a rise in their
PII premium or, in extreme circumstances, insurance
becoming unavailable.”
THE WALKIE TALKIE AND PII-RELATED ISSUES
So what are the project characteristics that insurers
will consider to be a higher risk? London suggests
these include:
a. Contract sizes – the larger/more complex a project,
the greater the potential exposure
b. Innovative or complex designs involving
cutting-edge procedures as opposed to standard
techniques
c. Designs for specialist use, e.g. hospital clean-rooms
d. Overseas exposures and contracts subject to
overseas jurisdictions, particularly those in the USA
e. Underwriters might deem contracts involving
bridges, harbours, dams, mines, oil
installations/refineries, railways, or those involving
extensive ground work, etc. more risky
f. Different locations present different risks, e.g.
London projects might entail higher potential
consequential losses
g. Designs involving large expanses of glass or
cladding.
KEY ISSUES
While some of these items appear to apply to the
Walkie Talkie, it’s likely that one of the key causes of
the glare problem was a change to the design
specification to reduce cost. Indeed, this was also
suggested by Viñoly who, when asked by the Guardian
about the problem, said his original design included
horizontal sun louvres on the south-facing façade but
thought these were removed during cost-cutting as the
project developed.
“I knew this was going to happen [but] didn't realise it
was going to be so hot,” said Viñoly, adding that “when
it was spotted on a second design iteration, we judged
the temperature was going to be about 36 degrees, but
it's turned out to be more like 72 degrees”.
Some of the key PII-related issues surrounding design
changes and budget cuts include:
a. Risks associated with working on unusual designs
It may be harder to employ tried and tested techniques
– unusual designs will inevitably present unusual
challenges and requirements. There might also be a
lack of precedents to refer to.
b. Importance of consultants keeping to their brief
It would be easy for the client to withhold fees in the
event that the consultant had gone beyond their remit
– particularly if the work was not to their satisfaction, or
costs were overrunning, etc. It’s important to have
clearly defined roles and expectations that should be
adhered to.
c. Audit trails of communications with clients
Matt Farman, a Director at Howden, adds that a crucial
issue on construction projects is whether changes to
the initial design brief, and related discussions, are
clearly documented. “There are often lots of
conversations surrounding changes proposed by the
client and often these aren’t documented. But if there's
a later problem in relation to one of these changes
arguments will ensue and the architect’s defence will
be that the requested change came from the client.
Without documentation then it’s one person’s word
against another. Audit trails of communications with
clients “A poor audit trail, incomplete file notes or
simply no notes at all, make any claim that might arise
very difficult to either investigate or defend,” Farman
says. “Furthermore, a lack of clarity about who is
responsible will often result in a claim being brought
against all parties.”
“A poor audit trail, incomplete file notes or simply no
notes at all, make any claim that might arise very
difficult to either investigate or defend”
Matt Farman, Director at Howden
d. Increased likelihood of claims when budgets are cut
or overrun
Escalating project costs can, of course, lead to
budgets being exceeded – which in turn can lead to
available budgets being cut to mitigate overall costs. If
final budgets are exceeded, the client will inevitably
look for another party to bear those costs. Fee
disputes can lead to counter claims being made. If
budgets need to be trimmed to limit the final costs,
then design changes may be necessitated. This can
mean cutting corners and creates the possibility of the
final building not meeting the client’s expectations.
Again, if this is the case, the client is likely to seek
redress from one or more of the parties involved, or
pursue rectification.
Design changes have contributed to major cost and
schedule issues on other high-profile projects. “The
Bath Spa project was four years late and £30m over
budget,” says Farman. “And the Scottish Parliament
project, with an initial estimated budget cost of £50m
that spiralled to around £430m, experienced many
THE WALKIE TALKIE AND PII-RELATED ISSUES
variations to the original brief and also suffered
extensive delays with an unrealistic timetable and a
lack of certainty about the final design.” At a later
inquiry Counsel said the scheme suffered a
management failure of “gigantic proportions”.
information on which the design is based, that too
much attention is focused on cost (meaning corners
are cut), or that designs do not comply with planning
permission, for example.”
THE COST OF RESPONSIBILITY
After a two-month investigation into how the Walkie
Talkie’s glare could be prevented in the future, the
developers announced that a solution was nearing
completion. Rob Noel, Chief Executive of Land
Securities, told Reuters that “the cost of the solution expected to be in the low, single-digit millions - would
be borne by the project's contingency fund and would
include solar shading being applied to the tower's
exterior”.
Who ultimately bears this cost is likely to depend on
responsibility suggests London. “In the absence of a
detailed understanding of the procurement strategy,
the contractual relationships in place and the cause of
the issue we can only theorise about whether insurers
(and indeed whose insurers) may end up bearing
some of the rectification costs. The multiple parties
involved will make it hard to allocate responsibility and
it will depend on the procurement strategy as
responsibility is passed from designers to contractors
at different stages.” As Viñoly has said, there are a
whole host of sub-consultants involved at all stages
that can dilute design responsibility.
“Many insureds forget that even if they don’t believe
there is any evidence of negligence on their behalf
insurers may start accumulating costs as soon as the
notification is made, if the matter needs investigating,”
says Farman. “If the matter progresses to a formal
letter of claim, these costs will quickly add up and it’s
not unreasonable to envisage legal costs incurred on
large claims relating to complex developments to
amount to hundreds of thousands of pounds before a
settlement is reached.”
PII-RELATED RISKS
PII exposures for architects and engineers (and others
involved in design, e.g. surveyors) tend to fall into
three main categories.
a. Design risk
“Evidently, this is inherent in the architect’s concept,”
says London. “It is possible that the design of a
building doesn’t meet the client’s needs, or it includes
a design fault. It’s plausible that a design is unsuitable
for the specific situation, there may be errors in the
b. Construction risk
“When architects are supervising on-site, problems
might relate to mismanagement of the project, delays,
cost overruns, construction errors or use of incorrect
materials,” London explains. “Delays and cost
overruns are often caused by unforeseen factors
leading to design changes, poor client communication
(perhaps giving the client unrealistic expectations or
failing to explain the complexities of difficult work to
them) or weak project management.”
Third-party risk “Architects are often brought into
disputes between the client and another party,”
London says. “A client might find it difficult to pin-point
blame, so puts all the parties involved on notice. A
THE WALKIE TALKIE AND PII-RELATED ISSUES
recommendation to use a third party firm could come
back to bite if that firm under-performs.”
“Clients will sometimes put whole project teams on
notice – often a client will sue all parties involved and
these may then try to point responsibility towards the
architect”
Peter London, Senior Account Executive at
Howden
INDICATIONS OF POTENTIAL CLAIMS
So what are the indicators of potential PII problems for
an insured? London suggests these might include:
a. Intimations of a problem from another party
b. Spiraling costs or delays
c. Main contractor experiencing financial difficulties (or
going bust)
d. An awareness of a failure in performance or
services that might result in a loss to a third party
e. A real doubt about the efficacy of the insured’s
performance or services, which might result in a loss to
a third party.
London says there are various standard risk
management controls that the insured should have in
place to mitigate risk. “There should always be a clear
design brief signed off by the client with all subsequent
changes being documented. It’s also important to use
a standard form of appointment and not to work under
a letter of intent as these do not safeguard the parties’
rights and are not an appropriate substitute for a
contract.”
He adds that other common controls include:
a. Clearly defining roles and responsibilities
b. Ensuring a clear design brief, with any subsequent
changes clearly documented
c. Submission of proposed design to your client for
approval
d. Try and limit your liability under contract – to a
reasonable level
f. Not operating outside core area of expertise
g. Carefully vetting contractors and consultants, and
ensuring they carry sufficient PII. Undertake due
diligence
h. Taking clear and comprehensive site notes and
minutes of meetings
i. If performing a project management/contract
administrator role, ensure that the contract is executed
by all parties.
Farman advises that it’s always important that
specialists don’t operate outside their core area of
expertise and that a firm’s culture should encourage
risk management not risk taking. “New commissions
should be signed-off at a senior level and firms should
ensure due diligence is performed on the client. And,
in addition to not agreeing to onerous contract terms,
firms should always monitor their credit control as
many complaints or claims will start with a fee dispute,
so make sure there is early sight of bills not being
paid.”
Part two of this article will look at how any
liability issues on the Walkie Talkie might be
resolved.
Les Pickford is a freelance writer
mailto:[email protected]
For further information or assistance with
Professional Indemnity Insurance, please
call the Howden Surveying and
Construction team on 0207 133 1574.
Postscript
In February 2014, the Walkie Talkie developers, Land
Securities and Canary Wharf Group, announced plans
to install a ‘brise soleil’ system on the Southern Side of
the building across levels 3-34. The system is
designed to diffuse sunlight to stop it reflecting from
the building and is expected to take 6 months to install.
It will replace the scaffold screen that’s been in place
for the last 5 months
e. Peer reviewing the design for suitability and
accuracy of calculations
The Howden Professional Indemnity division is one of the UK’s most respected and experienced Professional Indemnity insurance (PII)
broking teams. We have the expertise to look after businesses operating across a range of sectors and territories. We look after some of
the UK’s leading firms operating in the Legal, Accountancy, Financial, Property and Construction sectors.