Getting Paid Without Starting a Claim: Fee Disputes, Suspension and Your E&O

Short answer

Yes, an architect unpaid fees counterclaim can follow a collection demand. A client who won’t pay may respond by alleging your design was negligent, and that claim can exceed the invoice. You can still collect. It helps to check your contract, notify your insurer early and speak with your attorney before sending a formal demand.

Why does an architect unpaid fees counterclaim happen?

Your client is 120 days late on a $40,000 invoice. You have been patient, and now you are ready to send a demand.

A client who doesn’t want to pay often looks for a reason. Your design is the obvious target. A collection demand may lead to a counterclaim for alleged errors, and that counterclaim may be larger than what you are owed.

This doesn’t mean you should avoid collecting. It means you should collect with a plan.

What contract rights may protect your firm?

Many standard agreements give design firms options before a dispute reaches a lawsuit:

Suspension for nonpayment. Many standard forms let a firm suspend services after notice if payment doesn’t arrive.
Costs of suspension and restart. The AIA B503-2017 guide offers model wording that lists costs a firm incurs when a project is suspended or terminated, from demobilizing staff to getting reacquainted when work restarts.
A termination fee. The same guide describes agreeing on a termination fee up front, so lost profit doesn’t become a fight later.

Your contract may say something different. Read it closely and ask your attorney how the suspension and termination language applies to your situation.

Should you call your insurer before suing for fees?

Many professional liability policies ask you to report circumstances that could lead to a claim. A client who threatens to “look at your work” when you ask for payment may be one of those circumstances. Telling your insurer early may protect your coverage, and some insurers offer pre-claim guidance.

Reporting requirements differ by policy, so check your policy wording or ask your agent how yours works.

Example: a hypothetical late invoice

An architecture firm completes schematic design and design development for a client. The client falls 120 days behind on a $40,000 invoice. When the firm mentions a demand letter, the client says the drawings had coordination problems and the firm may owe a credit.

In this hypothetical, the firm reviews its suspension clause, documents what it delivered and tells its insurer about the client’s comments. It then talks to its attorney before sending anything formal. Whether the policy responds to a later counterclaim depends on the policy terms, exclusions, reporting conditions and underwriting.

A calmer sequence for collecting fees

Many firms find it helpful to work through these steps in order:

Document what is owed and what you delivered.
Check your contract for suspension and termination rights.
Talk to your insurer if the client hints at problems with your work.
Talk to your attorney before sending a formal demand or filing.
Consider whether the amount justifies the risk of a counterclaim.

What to check

Does your contract include suspension and termination provisions, and what notice do they require?
Does it list costs or a termination fee if the project stops?
Has the client said anything about your work, even informally?
What does your policy say about reporting circumstances that could become a claim?
Does the unpaid amount justify the risk of a larger counterclaim?

Our Insurance Requirements Check can also help you review what your agreements ask of your firm. For more on professional practice, the NSPE professional practice resources may help.

Does my professional liability policy cover me if I sue for fees?

Your policy covers claims made against you, not your suit to collect fees. A counterclaim against you may be covered, depending on the policy.

Should I just write off the invoice?

Sometimes that is the right business call. Make it with your attorney and your insurer rather than alone.

Can an architect unpaid fees counterclaim affect my premium?

A claim may affect renewal underwriting. How much depends on the carrier, the claim and your firm’s overall profile.