Creating a Culture of Professional Liability Issues Awareness – Code of Ethics
By John M. Lowe, Jr. PE – Lowe Consulting, LLC
Creating a Culture of Professional Liability Issues Awareness
Code of Ethics
Having a written Code of Ethics has long been considered to be a desirable document to have. It is intended to explain the expectations of a firms management regarding how all of its employees, including management, are to conduct business. It addresses things such as Conflict of Interest, Personal Integrity, Use of Company Resources, and Employee Performance. It lets all employees know what is expected of them and until recently, represented minimal or no potential business risk. However, in 2007, that changed when Federal Acquisition Regulations FAR 52-203-13 Contractor Code of Business Ethics and Conduct required that firms having certain professional services contracts with the government must have a Code of Ethics.
For the most part, a firms Code of Ethics is not problematical, except for the section that addresses standards of individual performance when executing a design. The problem is that this section of the Code of Ethics can be aspirational in nature, setting a very high standard toward which employees should diligently attempt to reach. The employee performance standard can be stated in a way that it exceeds the performance requirements specified in the contract Standard of Care provision. When the Code of Ethics is provided to the government, or other clients, the client may attempt to assert the contractual right to hold the consultant to those standards. If, in the opinion of the client, the Code of Ethics standard is not met, the client may assert that negligence has occurred. In this case, the protection afforded by a carefully crafted Standard of Care is lost and the professional liability policy will likely not cover losses resulting from this situation.
As with Statements of Qualifications, Codes of Ethics should not overstate performance standards that exceed those of the contract Standard of Care. Be sure to review your existing Code of Ethics before providing it to your client or prospective client.