pronetworknews201305This issue of ProNetwork News is meant to serve as a basic reference guide to the liability insurance coverages typically purchased by design firms.

Let’s start with a key definition.

CLAIMS-MADE vs. OCCURRENCE

Most liability policies are written on an Occurrence policy form. Coverage is triggered on the date of the “occurrence” (defined as an accident, including continuous or repeated exposure to substantially the same general harmful conditions, causing damage). A claim asserted against the insured may be brought well after the occurrence.

In contrast, professional liability claims are often brought many years after an alleged act, error or omission. Insurance companies had to evaluate their exposures and better determine the premium necessary to cover such risk, so the Claims-Made policy form was created. The coverage trigger is the date the claim is made, and coverage applies only to alleged wrongful acts that happened after the retroactive date of your policy. Once the policy is canceled or not renewed, all coverage will cease.

Today, virtually all professional liability policies are provided on Claims-Made forms. In order to establish coverage, three conditions must be met:

  1. a policy must be in place at the time a claim is made
  2. the “retroactive” or “prior acts” date on the policy must be dated at least as far back as the services giving rise to the claim were provided
  3. notice must be provided to the insurer within the policy term or during a specified grace period

The advice of your insurance advisor is essential when reviewing Claims-Made policies with respect to mergers, acquisitions, splits and retirement.

This has been an excerpt of the May 2013 issue of ProNetwork News. The newsletter goes on to deal with all types of liability coverage, including Professional Liability Insurance, Commercial General Liability Insurance, Owners and Contractors Protective Liability Insurance, Workers’ Compensation and Employers Liability Insurance, Umbrella Liability Insurance, Employment Practices Liability Insurance, Directors and Officers Liability Insurance, and many more! Download the full PDF version of the newsletter here. Continue reading “Insurance 101: The Things You Always Wanted to Know About Liability Coverage But Were Afraid to Ask”

insurance_policyMost architects and engineers are required to have General Liability and Business Property insurance coverage. The former shows up in most design contracts, while the latter is an essential part of a design firm’s office lease agreement.

Needless to say, we get several common questions regarding these coverages:

What is General Liability coverage? What is Business Property coverage? What’s the difference between these coverages/policies and a Business Owners Package (BOP) Policy?

In an effort to demystify some of the concepts and to provide a quick reference a/e ProNet gathered some of its finest insurance minds and put together this basic manual: Insurance 101 for Design Professionals. This is not intended to be an exhaustive source of information but rather a primer designed to answer basic questions and to put the reader on the right track if more information is needed. a/e ProNet strongly recommends that the reader seek advice from an agent or broker specialist who is best equipped to understand the exposures to loss of each individual design firm.

The following is an excerpt from our Insurance 101 page, specifically defining General Liability, Business Property, and Business Owners Package (BOP). Access the full set of policy and coverage terms on our website.

COMMERCIAL PACKAGE AND BUSINESS OWNER PACKAGE POLICIES   

Insurance companies will combine frequently requested coverages under one economical package known as Commercial Package Policies or Business Owners Policies (BOP). One policy is designed to include among other coverages:

  • General Liability
  • Commercial Property
  • Non-Owned/Hired Automobile
  • Valuable Papers and Records
  • Business Interruption/Business Income Equipment Breakdown
  • Accounts Receivable

BOPs tend to be prepackaged policies available to smaller firms with little flexibility (other than limits) on available coverages. Commercial Package policies are offered to larger firms and provide a wide range of coverage options. Insurance companies that offer these policies to design professionals may require the insured to maintain professional liability insurance as a prerequisite to obtaining a package policy. Continue reading “Insurance 101: General Liability, Commercial Property & the Business Owners Package Policy”

beazleypro_summerissueOne of the several excellent insurance companies a/e ProNet works with has a new risk management resource for their professional clients: Beazley Pro.

We think our readers will be most interested in the Claims Corner; three scenarios, three discussions, three lessons learned. An example of a claim outlined in the Summer 2013 issue…

Engineer granted rare summary judgement

Facts:  After sustaining serious injuries in a fall in a sports facility parking lot, the plaintiff sued the property owner, who in turn filed a third-party action against our insured, an engineer. This suit against the engineer alleged that deficiencies and code violations in his design of the facility’s parking lot (specifically its handicap access ramp and lighting) were to blame for the fall. A site visit revealed that the lighting and lighting tower location in the parking lot were not as the engineer had specified. During deposition, the paving contractor affirmed that he used the engineer’s plan for pricing only, not for construction. Hence, there was no causal connection between any design deficiencies in the engineer’s plans and the plaintiff’s serious fall and injuries. Counsel moved for summary judgment, which was granted in full. Continue reading “A New A&E Resource: Beazley Pro Inaugural Issue”

Looking for a convenient way to fulfilll your AIA Continuing Education credit requirements? a/e ProNet can help.

In the past few years, a/e ProNet has published two risk management guides for the design industry: Risk Management & Contract Guide for Design Professionals and Risk Management for Design Professionals in a World of Change. Both include courses at the back of the book, which have just been renewed with the AIA for credit for an additional 3 years.

Our books and access to the courses are available for purchase on our website, but you can receive a discount for both by requesting copies from your a/e ProNet broker. (And if your broker isn’t an a/e ProNet member, call your local a/e ProNet broker today!)

Read on for details about both contract review guides… Continue reading “Need CE Credits? a/e ProNet’s Contract Review Guides Can Help”

ProNetworkNews_2013AprilIn•dem•ni•fy Verb.

• Compensate (someone) for harm or loss.
• Secure (someone) against legal responsibility for their actions.

Imagine a case where an engineering firm was found to have had an expensive duty to defend claims asserted against a developer, even after the engineer’s performance was judged not to have violated the professional standard of care. That was the decision three years ago, in the California Court of Appeals in UDC – Universal Development L.P. v. CH2M Hill. In fact, that case extended another one, decided two years earlier in the California State Supreme Court. (Crawford v. Weather Shield Mfg., Inc.). That decision held that the duty to defend was incurred the moment that the indemnitee (the party that the design firm was contractually bound to indemnify) tendered its defense to the design firm.

Candidly, the indemnity provision underlying the UDC v. CH2M Hill decision was long and rambling, repetitive, and ambiguous. That’s what opened the door to the expansive (and expensive) legal interpretation. The clear message to design professionals was: if you do not want to take on the extensive defense and indemnity obligations implied or required by statute and case law, you must be clear. Further, the longer and more confusing an indemnity provision is, the more likely it is to receive an expansive reading.

The point of this article is to provide design professionals with a simple, three-step evaluation and corresponding “scoring” model to evaluate and improve the indemnity obligations it receives. Continue reading “Making the Grade: Testing Design Professional Indemnity Obligations”

gavelCalifornia architects can breathe a little easier. Filed June 3, 2013, the Court of Appeals decision in Brisbane Lodging, LP v. Webcor Builders, Inc. held that the section 13.7.1.1 of the 1997 AIA Standard Form of Agreement between Owner and Contractor is enforceable.

This is good news for Design Professionals, as section 13.7.1.1 shortens the statute of limitations period to four years and effectively abrogates the delayed discovery rule in California.

Per an announcement email recently received from Jacqueline Pons-Bunney, a partner at law firm Weil & Drage:

The case involves a contract between an owner and a contractor for the construction of a hotel. The clause at issue reads:

“any applicable statute of limitations shall commence to run and any alleged cause of action shall be deemed to have accrued in any and all events not later than such date of Substantial Completion.”

Substantial completion at the subject project was July 31, 2000. In early 2005, the owner discovered a break in the sewer line which caused waste to flow under the hotel. It was determined that the plumbing problem was a latent defect. Both the contractor and its plumbing subcontractor investigated the problem and attempted repairs. It was ultimately discovered that the plumbing subcontractor had installed ABS pipe rather than cast iron pipe for the sewer line, in violation of the Uniform Plumbing Code. The owner filed a lawsuit in May 2008. Continue reading “California Court Upholds Contractual Statute of Limitations Provision in AIA Standard Form”

structuralUsing a real-life claims scenario from “a structural engineer and senior partner in a small A/E firm that specialized in multi-family and commercial condominium projects”, William F. Dexter offers his view on the Top 3 Liabilities Facing Design Professionals in today’s increasingly litigious marketplace:

“Long after the construction documents have been published and permits issued, the architect or engineer flies into the Bermuda Triangle of construction phase services, which include review of shop drawings, payment certification and construction observation.   Let’s take a look at establishing solid guidelines to reduce the risks of these frequent situations by transferring liability back to the client and others who are always quite eager to let the design professional be responsible.”

Continue reading at the JDI Data website.

pronet_rmcrgAt its most basic level, risk management for design firms includes selecting and signing sound contracts. a/e ProNet’s  Risk Management & Contract Guide for Design Professionals (2005) can assist with the specifics of this process.

An excerpt from Chapter 7, Some Do’s and Don’ts of Contract Language:

7.2 Words to Avoid

Certain words create the impression that the design firm has a greater duty or responsibility than required by the generally accepted standard of care and scope of services stated elsewhere in the contract. Some words that risk managers often advise the design firm to avoid using in their contracts to the greatest extent possible include the following:

  • “supervise contractor’s work”
  • “control contractor’s work”
  • “direct contractor’s work”
  • “guarantee or warrant either your services or the contractor’s work”
  • “certify that contractor’s work meets the plans and specifications”
  • “inspect contractor’s work to assure it meets the plans and specifications”

This risk management guide was previously out of print, but has since been re-released in electronic format. The book includes three updated optional AIA-approved continuing education courses! Visit the a/e ProNet Web Store to purchase and download your copy today! Also available is our most recent guide, Risk Management for Design Professionals in a World of Change (2009). If you have any questions about these resources, find your local a/e ProNet broker or Contact Us.

ooh_moon

Now that we have grabbed your undivided attention, the purpose of this article is to alert Design Professionals to an alarming trend. This trend involves the inclusion of contract provisions in agreements prepared by Owners/Developers and their attorneys that force a Design Professional to work for free in the event that the Owner/Developer unilaterally determines that there is a “dispute.”

Overview

It goes without saying that every contract, especially in the design field, must be read thoroughly before it is signed, or the signer will be stuck with the ramifications. Generally speaking, the clauses in question here state that in the event of any dispute between the Owner/Developer and Design Professional, the Owner/Developer may withhold payment until the dispute is resolved, but the Design Professional must continue to perform services. This upsets the historical balance of power between the Owner/Developer and the Design Professional and creates a situation where the Design Professional may very well end up working for free or else be faced with being sued if they stop work or suspend services. Continue reading “How to Get a Design Professional to Work For Free!”