Claims Archives - Page 5 of 8

Project Insurance: Benefits and Cautions – Part 1 of 2

By Lynda

The February 2013 issue of ProNetwork News is the first installment of a two-part article; the author, Tim Corbett of SmartRisk explains the origins and principles of project coverage and introduces the reader to two of the four main types of Project Insurance.

Project insurance for design professionals was initially established to provide higher, dedicated limits for larger and more complex projects. The other main driving force behind the development of project coverage was to provide owners the security of having project specific limits both during and after the project was complete. Project insurance has evolved and continues to change based on market needs and conditions, as well as insurance company underwriting standards and “appetite,” or the desire to write certain kinds of risks.

More recently, the collaborative project delivery method sometimes referred to as the integrated delivery (ID) or integrated project delivery (IPD) process has impacted project insurance. In IPD, design professionals are no longer the sole authors of the project design: greater contributions are provided by other entities, including the general contractor and the major trade subcontractors. A few select insurance companies have begun to offer project specific policies tailored to the methods and exposures of IPD.

The key to selecting the correct coverage is theoretically simple: match the benefits of the insurance with the entity or entities requiring the protection. Will one option meet that goal? That’s a very good question: you may need a combination of alternatives to accomplish your insurance and risk management objectives. You should also be aware that even obtaining project insurance has been a challenge in the past, and continues to be so today. Continue reading “Project Insurance: Benefits and Cautions – Part 1 of 2”

Florida: Design Professionals Receive Limited Statutory Immunity

By Lynda

Where does professional liability end and personal liability begin? For design professionals, the line can sometimes be fuzzy, especially with regard to personal injury claims.

Now, Florida’s lawmakers have taken steps to limit liability in for design professionals in these cases.

According to a recent announcement by the legal firm of Smith, Currie & Hancock LLP:

“On April 24, 2013 Governor Scott signed Senate Bill 286 into law creating section 558.0035, Florida Statutes. This new law grants individual design professionals employed by a business entity or an agent of the entity immunity from liability for economic damages resulting from negligence occurring within the course and scope of a professional services contract under the following conditions: (a) the contract is made between the business entity and a claimant or another entity for the provision of services to the claimant; (b) the contract does not name an individual employee or agent as a party to the contract; (c) the contract prominently states that an individual employee or agent may not be held individually liable for negligence; (d) the business entity maintains any professional liability insurance required under the contract; and (e) any damages are solely economic in nature and do not extend to persons or property not subject to the contract. The law takes effect on July 1, 2013 and does not state that it is retroactive…

This new law erodes Florida’s common law which has allowed professional negligence claims against an individual design professional based on the professional’s violation of her duty of care to those who may be foreseeably injured. Florida’s common-law imposes a duty of care on all individual professionals that exceeds the duty of care of the general public. Professionals, such as doctors, lawyers, accountants, and design professionals, have always been held to a higher standard of care and associated individual liability for professional negligence. This new law will afford design professionals protections that other professionals do not enjoy.”

For the full, detailed announcement, visit the Smith, Currie & Hancock website.

Shout-Out Credit:

Meade Collinsworth
Collinsworth, Alter, Fowler & French, LLC of Miami Lakes , FL
Email: mcollinsworth@caffllc.com / Phone: 305-822-7800

Could Texting While Driving Lead to Professional Liability Claims?

By Lynda

Tom Cochrane’s Life is a Highway has got you head-dancing in the fast-lane. Your hands are at a perfect ten-and-two. Your seat belt is secured. The signs say you’re two miles from the exit which will take you to your next appointment. It’s a good day.

Then your cell phone buzzes in the cup holder. The screen is obscured by the parking break. It buzzes again. Information is coming in and you’re missing it! Granted, it’s probably just a photo of your cat, Honey Booboo, wearing a Christmas sweater. But in case it’s your boss, you reach for the phone… even though it’s illegal to operate a cell phone in your vehicle in most states.

“According to a National Highway Traffic Safety Administration study, distracted driving led to motor vehicle accidents that killed almost 5,500 people and injured close to 450,000 more during 2009. The 2010 study attributed about one-fifth of the accidents directly to cell phone use.” But did you know that, if the call/texts coming into your phone at this moment turn out to be work-related, any subsequent accident could leave you and your firm vulnerable to a Professional Liability claim? Continue reading “Could Texting While Driving Lead to Professional Liability Claims?”

A Good Time to be An Architect

By Lynda

Is it finally a good time to be an architect? We saw this question posed recently by ChicagoBusiness.com and, like many of you, we were excited to know the answer.

“I think there’s optimism—a very guarded optimism, given where we’ve been over the past four or five years,” says Scott Sarver, principal at Chicago-based SMDP LLC, which hopes to latch on to the better economy here, boosting its billings from domestic projects to 50 percent this year from 25 percent in 2012.

Among industry giants, San Francisco-based Gensler plans to add 50 professionals here through next year, to 273, says Nila Leiserowitz, a managing director in the Chicago office.

The pool of new architects is rising, too. Architecture schools awarded 10,252 degrees in the 2011-12 academic year, up 13 percent from 9,073 degrees in 2008-09, according to the National Architectural Accrediting Board.

Things a looking up. And if the “industry giants” are hiring to meet the increase in project opportunities, it’s also probable that seasoned professionals will take this chance to open their own shops. We hope so! Continue reading “A Good Time to be An Architect”

The Construction Contract: 3 Essential Rules

By Lynda

For design professionals, it’s good business to have a solid, fair contract in place before you begin work on a project. So, what are the three essential rules of putting together a construction contract? Our January 2013 ProNetwork News newsletter has the answer:

In the construction world, the contract rules the parties. It is the blueprint (pun intended) that says what you can be sued for, when you can sue the other party, and what your damages will be. If you do not have any written contract, the law presumes certain things that you may not want it to presume. Therefore, you must treat the contract seriously, and consider these three essential rules.

Put all agreements in writing
Negotiate or strike through unfair or one-sided terms
Deal with discrepancies between the Proposal for Services and the Contract

(1) Put all agreements in writing

Design professionals who rely on “handshake” or “gentlemen’s agreements” are playing a game of Russian roulette. One bad project, and you’ll wish that you had a well-written, reviewed and negotiated contract.

Written contracts are crucial to enforcing binding agreements once the dirt begins to turn. Memories fade, records are lost, and key employees leave. Having all the crucial terms in writing eliminates the need to argue over how changes are handled, how compensation issues are dealt with, and how disputes are decided.

(2) Negotiate or strike through unfair or one-sided terms

While a written contract is important, it is almost better to have no written contract than to have a poorly negotiated, unfair, or unclear written contract. Continue reading “The Construction Contract: 3 Essential Rules”

{ProNet Practice Note} The Collections-Claim Connection: Getting Paid Without Getting Sued

By Lynda

One of the many value added resources a/e ProNet brokers offer is access to our ProNet Practice Notes, in-depth white papers prepared by members of a wide variety of professions related to the design industry. They offer insight and advice on topics like risk management, practice management, and litigation issues for Architects, Engineers, and other Design Professionals.

Our most recent edition is titled The Collections-Claim Connection: Getting Paid Without Getting Sued, authored by attorney David A. Ericksen of Severson & Werson in San Francisco, CA. The full PDF version of this excellent paper, including several helpful attachments, is available for download at our website. The following is an excerpt for your review. We hope you find it helpful!

Introduction

While money isn’t everything, it is the measure and fuel of any business, including a design firm. Without payment for services firms suffer, starve, and even die. Payment issues are also often the single greatest warning sign of a project in trouble.

Perhaps there is no greater indicator of the correlation between unpaid fees and troubled projects and relationships than the remarkable frequency with which efforts of design professionals to collect unpaid fees through litigation result in even larger responsive counter-claims from clients alleging professional negligence. 2011 gave the entire industry the most dramatic and alarming example of this pattern. Having already received over $8.2M in fees, the engineering firm Carter & Burgess sued its client the City of Victorville in Southern California for the final $106,196 on a power plant project that the City had been forced to partially abandon mid-project due to cost overruns. The City responded with a counter-claim for professional negligence. When the verdict came in 2011, it was devastating financially and professionally as news, industry, and internet sources widely reported and publicized the award of $52.1M in damages against the engineering firm.

The results of such a counter-claim need not be as dramatic in terms of publicity or financial losses to be devastating to the firm. In addition to the unpaid fees, there are many other impacts of even a “defensive” counter-claim. They frequently include:

Deductible payments for legal fees and costs, which may even include the involvement of a second “defense” attorney.
Insurance impacts for rating, pricing, and loss history.
Lost internal time and resources for purposes of participation in defense.
Publicity and required disclosures in future responses to RFPs for claims history.
Potential uninsured exposure for prevailing party attorneys’ fees if negligence claims exceed fee claims.
Ultimate discounted or waived fees for expediency of resolving and closing claim.

Obviously, avoiding such collection challenges and the potential for responsive claims is critical to good business and project success.

In reality, a proper approach to collections closely resembles a proper regimen for personal health. Firms which get paid become and remain healthy and strong. Firms which do not get paid regularly and on time become malnourished and increasingly susceptible to disease. Just as health is a life-long process, financial success is a project-long process. The following discussion tracks the relevant phases and provides analyses and strategies for those various phases. Those phases are: Continue reading “{ProNet Practice Note} The Collections-Claim Connection: Getting Paid Without Getting Sued”

Shootout At The Copyright Corral

By Lynda

It is no secret that in the current economic environment, it can be difficult to find projects, and the problem may not end there. It can be even more difficult to secure prompt payment from your client. Sometimes, it is difficult to secure payment at all.

There are certain statutory protections for architects in many states: design professionals’ liens for certain projects and mechanics’ liens for others. But like other legal remedies, statutory protections require timely legal action, and the legal fight can be both financially and personally arduous.

Most of the time, architects and other design professionals have one potential weapon in their arsenals that no one else on the project can bring to the unpaid fees fight: the ability to control the use of their work product through copyright protection. As long as the work product meets certain statutory requirements and their rights are not otherwise waived, design professionals own a copyright by authorship alone. Additionally, registering the copyright with the U.S. Copyright Office entitles the copyright owner to additional statutory damages and attorneys’ fees in any ensuing infringement action.

Copyright is an underutilized tactic in the fee collection “gun fight.” On a project where construction had been in full progress but is stalled because no one – design professionals, project manager, general, and subcontractors – has been paid by the owner, the standard litigation tactic is to sue for breach of contract and file an action for foreclosure on any lien rights. But what if the owner is also in default on its construction loan? Continue reading “Shootout At The Copyright Corral”

Calling a Ceasefire in the Certificate of Insurance Wars

By Lynda

The following is an excerpt of the February 2013 a/e ProNet Guest Essay, Calling a Cease Fire in the Certificate of Insurance Wars. You may download the full PDF version of the newsletter on our website.

In war, events of importance are the result of trivial causes. – Julius Caesar

Battles about certificates of insurance can sour relationships and sow the seeds of discord with clients at the very beginning of a project. And they are becoming more and more common.

Here is a short history of a typical certificate war: The design firm is awarded a new project. Corks pop. The team assembles. Spirits and expectations are high. The first sign of trouble is a call or an email from the project owner’s certificate checker: Your certificate of insurance is not in compliance with the insurance requirements set forth in our contract. Please reissue. The design firm calls its broker, confident that this little paperwork glitch will be simple to fix. But there is bad news. This is not a case of a misspelled name or a typo. The certificate checker is correct: The design firm’s insurance program does not, in fact, comply with the contract requirements.

This is never a good moment, but the design firm rallies and asks how much it will cost to purchase compliant coverage. But then comes an even worse moment, when the broker explains that the contract requirements are impossible to satisfy. The coverage the owner wants is no longer available, is not available from a stable and financially-sound carrier, or, all too often, never was available at all. The design firm tries to make the owner see reason, but sometimes this drama ends with calls and emails to the design firm, its broker, or both, threatening to award the job to another firm if a compliant certificate is not produced today.

Even if the problem is eventually resolved, the bad impression created by this conflict can tarnish a design firm’s relationship with the owner before it ever gets a chance to shine.

How did we get here? How did a one-page summary of insurance coverage that, by its very terms, does not “amend, extend or alter” any insurance policy become the source of so much trouble? And what can design professionals do to avoid certificate rejections and the problems they cause? Continue reading “Calling a Ceasefire in the Certificate of Insurance Wars”

Architects Step Into Contractors Liability, Size XXL

By Lynda

If you have ever gone car or shoe shopping with and for someone else (teenagers and significant others, in particular), you know the difficulty and frustration that usually follows efforts to fit and style those with strong opinions and feelings on the subject. Such shopping is more an effort in very personal comfort, feel and perception than utility. The same can be true for design professionals’ scope of services. The most recent economy has left design professionals to suffer earliest, longest and hardest, particularly those that rely on residential development. To keep busy, some A/Es are marketing a broader scope of services, including services historically reserved for construction contractors. The comfort, feel and perception of such expanded scopes of services are highly personal but come with distinct and practical liabilities and risks. Like finding the right shoe size or vehicle type, A/Es can manage expanded risks with properly fitting contracts, insurance and professional structure.

SUV v. Sedan and Dress Shoe v. Cleats

In annual magazine reviews, sedans are compared to sedans and SUVs are compared to SUVs. The same is true of legal standards by which different roles are judged. A/Es provide a professional service and are compared to other A/Es by a standard of care – what others in the same profession are doing or would have done for a similar project. A/E contracts typically take care to adhere to recitations of the baseline standard of care and avoid or disclaim responsibility for means and methods, safety, warranties and the contractor’s timely or proper performance.

Contractors provide a finished product which is judged by a good and workmanlike standard: a warranty of quality, timeliness and, usually, safe performance of the work. Contractor agreements therefore give the contractor control over and responsibility for means and methods, safety, warranties, schedule and performance.

Crossovers and Hybrids

There is a line between trucks and cars, but there are luxury SUVs and crossovers to blur the line and offer compromises of varying degree. The line between A/E services and contractor services has become equally fuzzy. Try to explain in words the difference between the scope of services of a Construction Manager/Advisor, a Program Manager and an Owner’s Representative. For example: The label is less important than the intended division of responsibility, control and money, and how that is expressed in a contract. Continue reading “Architects Step Into Contractors Liability, Size XXL”