2022 Conferences

Join us for our fall conference.

Fall | September 27-29

AC Hotel – Marriott

Nashville

Forging Ahead in a Post-Pandemic World

By Sandip R. Chandarana, Director, Professional Underwriters Agency

As we continue to navigate the most extensive shift in the economic landscape that many of us will ever experience, the industries we work in and interact with on a regular basis will continue to change. Architecture and engineering firms have been particularly impacted with designers, contractors and owners having to adapt and create new approaches and protocols to manage communication, safety obligations and even “virtual site visits.” In fact, six in 10 developers globally report delaying projects in the wake of the coronavirus pandemic, and many builders have also been forced to rethink their future projects.

As a result, there have been many significant impacts and implications when it comes to insurance coverage for this space that brokers will need to stay abreast of and help direct their insureds through to effectively prepare for what is likely to be more uncertainty ahead.

Setting expectations for insurance premiums
Over the past few decades, we have seen several recessionary events that have caused economic downturns, such as the dot.com bubble burst of the early 2000s, September 11 attacks and the subprime mortgage crisis of 2009. While COVID-19 is different in that the economy was booming when this recession started, it will still have a similar economic impact. Historically, such economic downturns have resulted in construction delays and project funding problems, which in turn has resulted in declining revenues for A&E firms coupled with an uptick in claims.

As construction projects become delayed and the true financial impact of such delays become evident, the finger pointing often begins. In an effort to deflect blame and avoid liquidated damages, the general contractor will often allege that slow responses to requests for information, change orders or other negligent acts by the architect necessitated the delays. We see a true ripple effect that starts with the owner and flows down to the general contractor, down to the architect and then down to various engineers working on the project. All of this leads to an uptick in professional liability claims against design professionals. This has held true in prior economic downturns and will unfortunately hold true now.

Where this becomes even more challenging is in managing the expectations of design professionals who are seeing a deep decline in billings in 2020 and beyond. While their expectation is for a similar reduction in their professional liability premium — the reality of the situation is that exposures are actually up for professional liability carriers. Because the economy was flourishing pre-pandemic, a large majority of A&E firms’ revenues spiked, some as high as 15 – 30 percent annually over the previous years. Conversely, the true exposure for professional liability carriers lies with the tail or prior acts of their insureds. In other words, professional liability carriers see claims today on work that firms performed several years ago. The true exposure lies with the past higher billings and not with the lower billings anticipated for the present or future years.

The industry is truly at a crossroads due to this divide between the insured’s expectations vs. the reality facing today’s professional liability carriers. We will likely see a “survival of the fittest situation” where irresponsible carriers will fall by the wayside while responsible carriers who have navigated through similar situations before — and who understand today’s challenges — will not only survive, but will also flourish.

Closely evaluating new carrier partners
Based on current market conditions and the challenges facing our industry, placing business with the right carrier is more important than ever. Some carriers are offering lower rates — but only as a temporary measure. While it may seem attractive to select them initially, they may not be the best long-term partner as they will likely increase rates dramatically in coming years or even worst, exit the marketplace.

Along the same lines, it is equally imperative that A&E firms choose a qualified insurance broker to represent their interests. When it comes to an A&E firm’s search for a new carrier, relying on their trusted and knowledgeable broker is key. The insurance agents and brokers of a/e ProNet, who represent more than 16,000 A&E firms nationwide, bring unparalleled expertise to the table and can assist in navigating A&E firms through this challenging business climate. It is important for brokers to be informed enough to tell A&E firms this is coming and, equally, for the broker to have a carrier partner that will tell them the same thing. When it comes to the carrier, both brokers and firms should ask themselves:

  • How many years has the carrier been writing professional liability insurance in this space and have they been consistent with their underwriting approach? What is their A.M. Best rating? Are they financially stable?
  • Do they offer broad coverage and all the bells and whistles available in today’s marketplace?
  • What does their claims department look like? Are they knowledgeable and responsive? Which defense firms are on their panel counsel?
  • What type of risk management services do they offer? Do they offer pre-claims assistance? Contract reviews?

Assessing claims adjusters
With a superior claims adjuster, you have an expert to help prepare, estimate, negotiate and settle your insurance claims. But, how do you know you are working with a best-in-class claims department? Whether you are assessing your current relationship or considering a switch, examine the following:

  • How many adjusters does the entire claims department have?
  • What is the makeup of their professional experience or background? Are they attorneys?
  • How long have they been handling claims like this?
  • Do you have a choice of counsel for any claim for which you are seeking coverage?
  • How many years have they been with that specific carrier, and how many years has that carrier been in the space?

At the end of the day, especially during these turbulent times, it is essential to have an experienced claims department on your side. Professional liability claims are not exclusively about financial impact, but also emotional impact, which may come with a reputational component. No firm wants to be accused of having a faulty design, poor communication or anything of that nature. This is where a good, seasoned claims adjuster can be relied on to hold the insured’s hand throughout the claims process and guide them through the intricacies of the claim.

Elevating your industry knowledge
With so much happening in the global labor market amidst this pandemic, it is crucial for brokers to search for ways to enhance their knowledge and enable an even stronger industry post-pandemic. One simple but effective way to do so is through online training and webinars. Our program, PUA, is proud to offer this type of ongoing opportunity to A&E brokers, as well as all licensed architects and engineers who can earn continuing education credits.

The pandemic has certainly had a major impact on many industries, and the construction and insurance industries are no exception. During these turbulent times, it is essential that A&E firms do not cut corners and remain steadfast in their loss control and risk management protocols. A&E firms must have a plan in place to deal with potential pitfalls resulting from COVID-19, such as construction delays, site safety, supply chain and price escalation issues — and all of this must be addressed contractually with their clients. Equally, it is imperative that A&E firms select the seasoned insurance agent/broker and sustainable professional liability carrier to continue to help them navigate these challenging and ever-changing times.

Malpractice Statute of Limitations Applied to Breach of Contract Claims Asserting Negligent Supervision but Indemnification Obligations Extend Time for Filing Suit

By J. Kent Holland, Jr., ConstructionRisk, LLC

Statute of Limitations for causes of action for negligent supervision and breach of engineering contract are both deemed professional malpractice claims subject to a three-year statute of limitations for negligence actions, and began to run when firm completed its services.  A separate cause of action on a contractual indemnification claim, however, was governed by the six-year statute of limitations that didn’t begin to run until the plaintiff had made payment to third parties to which it was entitled to recover from the engineer under the indemnification clause.  WSA Group, P.E. v. DKI Engineering & Consulting, USA PC, 178 A.D. 3d 1320 (NY 2019).

This case demonstrates several problems arising out of indemnification clauses including, extending the time for filing suit beyond what would otherwise exist; creating broad indemnity that applies to first party claims as well as third party claims; and incurring an obligation to defend or pay defense costs that would not otherwise exist. It also explains that, at least in New York, where the underlying allegations concern malpractice, the statute of limitations for malpractice will be applied regardless of whether a breach of contract claim can also be asserted.

An engineering firm (WAS Group, P.E., P.C., the plaintiff) on a Department of Transportation project subcontracted certain inspection services to a subconsultant inspection firm (DKI). An employee of the inspection firm was convicted of falsifying an inspection report of one of the bridges covered by the subcontract. As a result, the plaintiff incurred various costs including the cost of reimbursement to DOT for sums paid to the inspection firm. DKI declined the plaintiff’s demand for indemnification of these costs, and this litigation ensued.

Plaintiff’s action against the inspection firm stated causes of action for negligent supervision and breach of contract, and seeking to recover damages pursuant to the indemnification clause of the contract. Summary judgment was granted for the inspection firm dismissing the negligent supervision claim because it was filed more than three years after the three-year malpractice statute of limitations began to run. That part of the summary judgment was affirmed on appeal.

The trial judge, however, also dismissed the indemnification claim based on the same malpractice statutes. That aspect of the summary judgment was reversed on appeal, with the court holding that the indemnification article created a separate contractual obligation completely distinct from any duty owed with regard to the quality of professional services.

When does Malpractice Statue of Limitations Apply?

“A three-year statute of limitations governs action[s] to recover damages for malpractice, other than medical, dental or podiatric malpractice, regardless of whether the underlying theory is based in contract or tort…. In determining whether a cause of action denominated in tort or contract should be so construed, “[t]he pertinent inquiry is thus whether the claim is essentially a malpractice claim.”

The plaintiff argued that its malpractice claims were timely because they couldn’t be pleaded until the damages resulting from the falsified report were in fact incurred. In rejecting that argument, the court reiterated the rule that “a claim for professional malpractice against an engineer or architect accrues upon the completion of performance under the contract and the consequent termination of the parties’ professional relationship.”

When does the Statute of Limitation for the Indemnification Accrue?

“Turning to plaintiff’s contractual indemnification claim, the subcontract required defendant to “indemnify and save harmless and defend [DOT and plaintiff] … from and against any claim, demand or cause of action of every name or nature arising out of the error, omission or negligent act of [defendant]” or its employees. Plaintiff alleged that defendant breached this provision by refusing to reimburse and indemnify plaintiff for the costs it incurred as a result of Ahmad’s misconduct. With regard to plaintiff’s claim for the reimbursement it paid to DOT for Ahmad’s work, Supreme Court determined that defendant’s voluntary contractual agreement to indemnify plaintiff was not an “ordinary professional obligation” of an engineer (citations omitted) and that this claim was thus governed by a six-year limitations period that accrued upon that payment and was not time-barred (citations omitted). We agree. The cause of action for indemnification is not “a disguised professional malpractice claim subject to a three-year statute of limitations, as it does not allege that [defendant’s] professional services were negligently performed, but instead alleges a breach of the [subcontract]” consisting of defendant’s separate failure to comply with its indemnification obligation.”

Indemnification was for First Party Claims and not only for Damages from Third Party Claims

The court stated that the indemnification article in the contract was written so broadly that it applied not only to damages from third party claims but also to first party damages. In other words, the plaintiff could recover under the indemnification clause for its own damages even it those damages didn’t result from a third-party claim against the plaintiff. The court explained that, “It is a familiar principle that a cause of action for common-law indemnification must be based upon a defendant’s breach of duty to a third party,” but that the instant matter didn’t involve common-law indemnification. “Instead, the scope of

defendant’s obligation is governed by the parties’ intent as revealed by the plain language of the indemnification provision that they agreed upon.”

No Claims Excluded from the Indemnification Obligations

The court stated:

“Nothing in the provision’s broad language, which requires defendant to indemnify plaintiff “against any claim, demand or cause of action of every name or nature,” reveals that the parties intended to exclude claims such as this from its coverage or to limit its scope to breaches of duty to third parties. Instead, the parties “chose to use highly inclusive language in their indemnification provision, which they chose not to limit by listing the types of proceedings for which indemnification would be required.”

Indemnification clause also Covered Plaintiff’s Attorneys Fees

The court found that nothing in the indemnification provision expressly excluded counsel fees or other direct expenditures on plaintiff’s part.

“On the contrary, the provision requires defendant to “indemnify and save harmless and defend” plaintiff (emphasis added), revealing that the parties contemplated legal costs arising from defendant’s errors, omissions or negligence as part of the provision’s scope.1 Accordingly, this aspect of plaintiff’s indemnification claim should not have been dismissed.”

Comment: Several lessons are learned from this decision. Note the importance of carefully drafting the indemnification clause of a design professional contract to apply only to damages from third party tort claims. The indemnity should not be so broad as to cover first party damages in the absence of third-party claims. The second point is that an indemnity clause can extend the statute of limitations for filing suit against the Indemnitor (in this case a design subconsultant). When negotiating the terms of a contract, the parties should carefully consider the consequences of extending time periods for filing suit. This could even potentially extend the time for filing suit beyond the periods otherwise set in stone by state statutes of repose.

I am pleased to announce that the Board of Directors of a/e ProNet has selected Lynda Colucci as our next executive director.  She will be assuming the position effective December 1 after her retirement from current employment.  On behalf of the board and members of the Association, I am pleased that Lynda has agreed to be our executive director and utilize the strong foundation left by our current director to build an even better Association for years to come.

Lynda has more than 40 years of experience in professional liability insurance for the design profession.  She is retiring from her position of Assistant Vice President & Regional Underwriting Manager, Professional Liability of the Starr Companies and she previously was with Diamond State Group and Lexington Insurance (AIG) as a professional liability underwriter.  Lynda also has extensive experience serving as an officer and board member of various non-profit boards and professional associations.

Lynda stated, “I know I am following in some awesome footsteps.  I was told once to take every chance you get in life because some things only come around once. We only regret those chances we didn’t take.  I am most grateful for this chance to be your Executive Director.  I am simply thrilled.  I look very forward to the challenges and the opportunity to utilize my experience, skills and network to assist the Board and Membership with the missions and goals of a/e ProNet.  As well, I cannot wait to meet all of you someday in person.  I look forward to talking with each of you soon.   It will be my pleasure to serve you.  Thank you so so much.”

Dave Johnston, current executive director, will continue with the Association through 2020 to provide a smooth transition to the new executive director.  Dave stated “I am so pleased that Lynda will be the third executive director; I am confident that she will be an effective leader of a/e ProNet and I will work with her to provide a smooth and easy transition into the position.”

Mark Jackson
President, a/e ProNet
August 13, 2020

David A. Erickseni
Severson & Wersonii
April 22, 2020

As we experience and emerge from “the great shutdown” of 2020, things have and will change in all aspects of life – including the design and construction process. Nowhere in the design and construction interface and transformation has the impact been greater than with respect to on-site design engagement during construction. Designers, contractors, and owners have all had to adapt and create new approaches and protocols to manage communication, satisfy obligations, and keep projects moving. While it was already present in many respects (i.e. site cameras and drones), “virtual” site visits, observation, and monitoring have hit all time new levels of use and reliance. So long as all parties are in agreement and have confirmed the corresponding roles and responsibilities, there is nothing wrong with that approach, and it likely carries added benefits of efficiency and frequency.

Despite those necessities and virtues, not all parts of the design and construction process are yet in step with that virtual reality. Nowhere is that dichotomy more apparent now than in the project closeout and “certification” process. Traditionally that process would call for the responsible design professional to “certify” to public officials and/or clients that they have reviewed the project under construction and as completed and professionally certify that the project has been built in compliance with the project plans and specifications and even applicable codes and regulations. Similar issues can and do arise with contractor pay applications, punch lists, and other “in process” construction reviews. Historically, those certifications have been based on in-person site observations and meetings. However, recent events have often precluded that or more “virtual” experiences may have been used in lieu of the “in-person” experience. Where any part of the construction observation or validation has taken place in a virtual context, that should be prominently and clearly stated and clarified in any resulting certification or report.

Such a representation may provide:

Consultant has observed and evaluated the site and construction progress by the following:

____ Physical Site Visits and Meetings (Applicable Dates or Frequency: )

____ Remote Video Sources (__ Drone) (__ Site Camera) (Monitored as follows: )

Project Certification and Closeout in a Virtual COVID World and After

____ Electronic Site Photographs as provided by: (Dates of photos may be listed.)

____ Virtual Site Tours as facilitated by: (Applicable Dates or Frequency: )

____ Other:  Where such information has been provided by others, Consultant has relied on such information as provided, including, but not limited to, its accuracy and completeness. Consultant’s representations, directions, approvals, or certifications as set forth herein are limited to its actual knowledge.

The last sentence above should be included in any report, certification, or approval!

i. David A. Ericksen is a principal shareholder in and past President of the law firm of Severson & Werson in San Francisco, California, and leads the firm’s Construction and Environmental Practices. For over twenty years, Mr. Ericksen has specialized in the representation of architects, engineers, construction managers, design-builders, and other construction professionals. Mr. Ericksen’s expertise covers all aspects of such professional practice as lead litigation and trial counsel, as well as being an active resource for risk management, strategic planning, and transactional matters. He is a trusted and valued resource to design and construction professionals and their insurance carriers across the United States and beyond. He has been repeatedly recognized as an industry leader, including being named a Construction “SuperLawyer” for the last fifteen years. He is a graduate of University of California, Berkeley, School of Law, a former law clerk to the Washington State Supreme Court, and a member of and resource to numerous construction and environmentally-related professional organizations. Mr. Ericksen is a frequent speaker before construction professional organizations such as the AIA, SEA, ACEC, CSI and others, as well as providing in-house training seminars for firms.

ii.  Severson & Werson has provided legal services throughout California and the country for more than fifty years. The firm provides counseling and litigation support to all members of the construction process, including design professionals, construction managers, environmental professionals, owners, contractors, and insurance carriers.

The Independent Insurance Agents of Indiana selected WalkerHughes Insurance as the recipient of their prestigious 2019 ‘Agency of the Year’ award.

Presented to a member agency that exemplifies leadership and innovation within the system and top-level customer service, both the nomination and selection speak volumes to the respective industry colleagues and competition have for an agency and their accomplishments. “We’re continually reinventing ourselves to prepare for the future. This honor is an affirmation we are moving in the right direction,” stated Ben Schoettmer, CEO.

To accurately describe the honor this award symbolizes, it is important to first explain how WalkerHughes Insurance came to fruition. Formerly Walker & Associates Insurance and Hughes Insurance Group, the two merged January 1, 2018 forming WalkerHughes Insurance. Walker & Associates was founded in 1960 by the late Douglas and Joanna Walker, their son Doug joined the agency in 1973 and later purchased the company from his parents. Benjamin Schoettmer purchased Everett Hughes Insurance formerly owned by Everett and Diane Hughes in 2008 and rebranded the organization to Hughes Insurance Group. Doug, Ben and their organization have been joined by agency owners throughout the state who identified the opportunity to join forces with like-minded professionals focused on keeping the customer first. WalkerHughes proudly operates 15 office locations throughout 14 counties in the state of Indiana.

Independent Insurance Agents of Indiana, commonly referred to as the “Big I,” presents several awards at their annual convention in downtown Indianapolis. The majority of the awards are primarily focused on outstanding individuals in the insurance industry and highlighting individual achievements, while the ‘Agency of the Year’ is an accomplishment recognized for the entire organization. “I believe this award highlights all of the outstanding people we have within our organization; individuals who are dedicated to being not only hardworking insurance professionals, but kind, honest, caring citizens as well. We are very fortunate to have attracted such talent and are proud to have people who believe there is equal importance between doing things right and doing the right thing in all interactions,” stated Doug Walker, President.

While the WalkerHughes name is new to some, the former agencies that it is comprised of have hundreds of years of history, service in the insurance industry and commitment to their clients and local communities. “I’m excited that this is the very beginning of our journey,” Ben Schoettmer.

Above:  Thomas G. Coghlan, a/e ProNet’s AIA Scholarship Chair and Michael Manfredi, FAIA, founder of WEISS MANFREDI ARCHITECTS presenting scholarship recipient Vardhan Mehta with a certificate recognizing his being awarded the a/e ProNet David W. Lakamp AIA Scholarship in New York on June 3, 2019.

 

At the end of May, the American Institute of Architects announced the winners of a/e ProNet’s David W. Lakamp AIA Scholarship for 2019-2020.  From the AIA website we read:

“The Architects Foundation is awarding the 2019-2020 a/e ProNet David W. Lakamp AIA Scholarship to Harvard Graduate School of Design (GSD) student Vardhan Mehta and Texas A&M University student Hassan Anifowose.

Mehta will be a master’s student at the Harvard GSD this fall, and Anifowose is a doctorate student at Texas A&M University. Each will receive $5,000 to be used towards tuition for demonstrating a strong interest in the practice and risk management.

“The Architects Foundation is honored to partner with a/e ProNet in supporting students on the path to being firm leaders of the future,” said The Architects Foundation Executive Director Marci Reed.”

For the full article on the AIA website, click here.

For more information regarding a/e ProNet Scholarships, click here.

Last August, Bruce Furukawa, Esq., of Furukawa Buccieri LLP, updated a newsletter originally written in 1996 by David W. Lakamp, a founding member of a/e ProNet.  Bruce’s update was titled “The Never-Ending Challenge of Jobsite Safety”, a topic that continues to be as relevant today as in 1996.

From that newsletter we read:

Let’s take an example of a typical situation.  You have an owner/prime design consultant agreement, which requires you to send a project architect or engineer to the site once a month to walk the job and observe the general progress of the work.  While doing your rounds, there is an open trench, which has no shoring and is more than 5’ deep. This failure to protect against the risk of injury or even death of the workers, should the trench collapse, clearly falls under the purview of the general contractor or the sub-contractor.  Still, a design professional may even be accused of  interfering with the contractor’s means and methods if they say something, so what does the project architect or engineer do in this situation?

Unfortunately, the answer may vary from state to state and county to county depending on how a judge or jury interprets design professionals’ responsibilities. We have often promoted the concept that where there is a situation that poses an imminent danger to the worker, the design professional has an obligation to warn the contractor. But, is this standard changing? 

In a court decision on the east coast, a design professional was found to have no obligation to take affirmative steps to protect the worker in a trench collapse case, since it did not pose a risk of imminent harm.  However, in the mid-west, under very similar circumstances, the court took a different approach and found that because the engineering firm in question had prepared sewer construction requirements that referenced safety precautions for trench operations and also referenced OSHA standards regarding use of shoring in the same specifications, the court found that the engineer was obligated to take affirmative steps to warn the contractor.  Some of the more pertinent facts considered in that decision were that the engineer was on site on the day of the accident. Also, then on site, the engineer acknowledged seeing the trench, and it was decided that he knew it lacked proper shoring based on the depth of the trench and due to his understanding of OSHA standards.  The engineer was asked why he did not say anything to the supervisor being that he was aware of the OSHA requirements referenced in the specifications. The engineer responded that he was not responsible for how the contractor does his work and it was not his job to do site safety.

Read the FULL ARTICLE

Read  about CONTRACT CONCERNS

a/e ProNet is proud to sponsor the American Council of Engineering Companies (ACEC) Scholarship.  Each year this $5,000 scholarship is awarded to well-rounded engineering students.  The application deadline for 2019 submissions is March 15th, 2019.  Visit our Scholarships Page for more information and applications.

In the summer of 2018 the ACEC announced that Leah Bectel, studying for her B.S. in Environmental Engineering in her Senior year at Michigan Technological University, won the this scholarship.  Leah was kind enough to provide her ACEC National Scholarship Essay as a Guest Post, below.  This, the outlook of an engineering up-and-comer, serves both as an example of a winning scholarship essay and as a rare glance at the industry perspective of a successful engineering student building a foundation for her career.

ACEC National Scholarship Essay – 
By Leah Bectel

Consulting firms are the ultimate behind-the-scenes type of business. Most people do not think of them when they ride along a bike path, push their kids on a park swing, flush their toilet, or turn on the sink faucet. However, consultants design and implement these crucial services and so much more.

I used to imagine consulting firms as a very black and white profession. A client would call a consultant, request an engineering design, and the firm would create the design and help make it a reality.  Through working for a consulting firm, however, I have discovered this is hardly the case. Consultants are the greatest advocates for their client- in any given day a firm will become a financial adviser, helping a community stretch their limited budget to finish a project. They also become marketing specialists, gaining new clients to help the firm obtain more work. Consultants assist their clients in applying for grants, serving their best interests. Firms will then collaborate with many sub-contractors, obtain permits, and ensure they are staying within the project timeline. These tasks hardly scratch the surface of what consultants do for those around them. Each project is different and demands collaboration, new ideas, and innovative solutions.

I like to think of consulting firms as fulfilling a community’s Maslow’s Hierarchy of Needs: Infrastructure Edition. Townships and cities are some of the best clients consulting firms have, ensuring the community has adequate streetlights, roads are navigable, and water faucets are running, to name a few. Once these basic needs are met, communities can strive for amenities such as bike paths, parks. landscaping, or upgrades to existing community spaces. When families see community spaces are thriving, they notice and are attracted to the city or township. Established common spaces and  infrastructure means safer towns and a greater network of people feeding money into the local economy. Consultants advise their clients to treat their infrastructure as Maslow did for basic human needs, which in turn helps establish communities and strengthen the social fabric.

Applying Maslow’s thinking to my engineering decisions will help not only the clients I’m working for but myself as a practicing engineer. Being able to implement my engineering designs and educate the public has been my dream since high school; becoming a consulting engineer allows me to fulfill both of those missions. Last summer I worked for a consulting firm helping document Michigan communities’ water infrastructure issues through the Storm water, Asset Management, and Wastewater (SAW) Grant Program. Next summer I have committed to perform more consulting work, helping clean up contaminated soil and groundwater plagued from pollution that occurred decades ago. These experiences will serve me well in my future career in consulting.

For much of my life I have been faced with the dilemma of whether I will devote my career to helping better the environment or those around me. Through working for a consulting firm, I have discovered it is not an “‘either or” dilemma- both of my passions will be fulfilled. Once I complete my degree in environmental engineering with a minor in municipal engineering, I plan to move on to my master’s in civil engineering, becoming a well-rounded consulting engineer.