Noting Contractors in Default: What Pro-Demnity’s Latest Guidance Means for Consultants in Ontario

On February 5, 2026, Pro-Demnity Insurance Company (the mandatory professional liability insurer for Ontario architects) published an article titled “Who Decides that a Contractor is in Default? A Guide for Architects”.[1] The message to architects administering construction contracts is unequivocal: under no circumstances should an architect make a determination that a contractor is in default or issue a Notice of Default. This is because a finding of default is, in substance, a legal opinion as to whether a contractor is in breach of contract—and architects are not in the business of giving legal opinions.

Pro-Demnity’s guidance is directed at architects insured under its mandatory program, but the implications reach much further. Engineers, contract administrators, and other design professionals working in Ontario should all take note.

Pro-Demnity’s Position

Pro-Demnity says it has “received a number of calls where the architect was instructed by the owner to issue the Notice of Default”.  In Pro-Demnity’s view, that determination should be made by the owner. The reason for this is that the owner, unlike the architect, is actually a party to the construction contract.

The architect’s role in a potential default situation is more limited. It consists of providing the owner with “sufficient factual information and supporting documentation regarding any possible breaches of contract” and then stepping back to let the owner and its lawyer decide whether those breaches warrant a Notice of Default. From a risk management and insurance standpoint, the architect’s documentation should steer clear of language that implies legal judgment (words like “default” or “breach”). Rather, the architect’s documentation should stick to objective observations, use factual descriptors such as “the deficiencies remain unresolved as of [date]”, and be consistent and contemporaneous.

In an earlier article, “Is Your Site Review as Good as You Think?”, Pro-Demnity warned architects in similar terms: “Do not confuse your role as a contract administrator with that of a lawyer. For example, when asked whether a delinquent contractor is in ‘default’ of its contract, this may constitute legal advice, which you are not qualified to provide”. [2]

The recommended approach was to “restrict your advice to supplying your client with factual information on the performance (or lack of) of the contractor and request that it consult with its legal counsel to make a determination of whether the level of performance or non-performance of a contract, as indicated by you, constitutes sufficient basis to determine whether a contractor has defaulted on its contract”.[3]

The Tension with CCDC 2–2020

Pro-Demnity’s guidance does not exist in a vacuum. It has to be read alongside the CCDC 2–2020 standard form construction contract, which is widely used in Ontario and across Canada. The relevant provision is GC 7.1.2:

If the Contractor neglects to perform the Work properly or otherwise fails to comply with the requirements of the Contract to a substantial degree and if the Consultant has given a written statement to the Owner and Contractor which provides the detail of such neglect to perform the Work properly or such failure to comply with the requirements of the Contract to a substantial degree, the Owner may, without prejudice to any other right or remedy the Owner may have, give the Contractor Notice in Writing, containing particulars of the default including references to applicable provisions of the Contract, that the Contractor is in default of the Contractor’s contractual obligations and instruct the Contractor to correct the default in the 5 Working Days immediately following the receipt of such Notice in Writing.

Read on its face, GC 7.1.2 does not expressly require the consultant, who may be an architect, to make a formal finding of “default”. What it does require is a “written statement” to the owner and contractor setting out “the detail of such neglect to perform the Work properly or such failure to comply with the requirements of the Contract to a substantial degree”. The formal Notice of Default itself is issued by the owner, not the consultant.

However, when considering the language of GC 7.1.2, it is reasonable for a consultant to have concerns about how to practically carry out its obligations. The consultant’s written statement must describe the contractor’s “neglect” and characterize the contractor’s failures as being “to a substantial degree”. Those are not purely neutral, factual terms. “Neglect” suggests fault. Further, “to a substantial degree” requires a qualitative judgment about the seriousness of the contractor’s failures. Taken together, a statement that a contractor has “neglect[ed] to perform the Work properly” or has failed “to a substantial degree” reads like a finding of default—even if the formal Notice of Default is left to the owner. On a construction project, this tension often translates into uncomfortable conversations about how far the consultant is expected to go in characterizing performance issues.

The practical difficulty is obvious. Pro-Demnity says consultants should confine themselves to objective, factual observations. But the CCDC 2 language asks for something more than that—it asks the consultant to characterize facts using evaluative terms that inherently involve professional judgment bordering on legal characterization. Whether a consultant can thread this needle and satisfy GC 7.1.2 while staying within the bounds of Pro-Demnity’s guidance is an open question.

Implications for Contract Drafting and Negotiation

For those of us who assist with contract drafting and negotiation, Pro-Demnity’s published position is a welcome development. Consultants negotiating engagement terms with owners can now point to this guidance when seeking to carve out or limit their obligations around default determinations. If an owner’s contract or RFP requires a consultant to make findings related to contractor default, the consultant now has a credible, insurer-backed reason to push back.

This fits within a broader pattern that Pro-Demnity has flagged before: client-authored contracts that try to impose obligations on architects beyond the scope of their professional competence. As Pro-Demnity has cautioned, “[m]any client authored indemnity or warranty provisions expose the architect to obligations and liabilities that will exceed what are already the architect’s at law”—and such provisions may fall outside the scope of professional liability insurance coverage.[4] The same logic applies to default-determination obligations: a consultant who agrees to make legal characterizations about whether a contractor is in breach may be taking on a risk that is simply uninsurable.

Pro-Demnity has also stressed the importance of making sure the client-architect agreement properly reflects the consultant’s role under the construction contract, recommending standard form agreements like OAA Document 600, OAA Document 800, or OAA Document 900. These forms are designed to keep the consultant’s obligations aligned with the construction contract and to guard against uninsured liabilities.[5]

Implications for Dispute Resolution

On the dispute resolution side, the practical consequences are real. If you are advising an owner who wants its consultant to make a finding of default before issuing a Notice of Default under CCDC 2, expect pushback. Some consultants will simply decline. They will point to Pro-Demnity’s published guidance, and given that Pro-Demnity is the mandatory insurer for Ontario architects, that position carries real weight. A consultant who acts contrary to its insurer’s guidance risks jeopardizing its own coverage—and no reasonable consultant will do that lightly.

For owners, this means the process of noting a contractor in default may demand a more hands-on approach, rather than leaning on the consultant to provide what is effectively a legal determination dressed up as a factual statement. As Pro-Demnity puts it, declaring default under a construction contract “may give rise to legal action and carries significant risk”, and “defaulting a contractor improperly can lead to litigation”. That responsibility, in Pro-Demnity’s view, "should remain with the owner, under the advisement of a lawyer”.

Practical Guidance for Consultants

With all of this in mind, here are some practical takeaways for consultants working in Ontario.

When negotiating engagement agreements, make sure your scope of services does not include making determinations of default. Under a CCDC 2, the consultant’s obligation under GC 7.1.2 is to provide a factual written statement—not to issue a Notice of Default. Your engagement agreement should make that distinction explicit.

When administering construction contracts, document contractor performance issues in objective, factual language. Avoid terms like “default”, “breach”, or “neglect” in your own correspondence. If the owner requests a written statement under GC 7.1.2, confine yourself to describing what was observed and documented—for example, “the deficiencies identified in the site review of [date] remain unresolved as of [date]”—and leave any characterization of fault or materiality to the owner’s legal counsel.

Be mindful, however, that the CCDC 2 language itself, with its references to “neglect” and failure “to a substantial degree”, pushes you toward evaluative judgments. Get legal advice on how to comply with GC 7.1.2 while staying within the boundaries of factual reporting.

Finally, if you are a lawyer advising an owner, anticipate that consultants may be reluctant or unwilling to provide statements couched in the evaluative language of GC 7.1.2. Be prepared to work with the consultant to separate out the factual component of the written statement from the legal characterization that the owner must ultimately make. Get involved early—do not wait until the default situation is fully developed to bring legal counsel into the process. 22p0.474