Are You A Risk Terminator?
Several years ago, Utah Fabrication decided to switch insurance brokers. We didn't feel that we were getting great service from our previous broker. Year after year our rates went up even though we had zero claims. We received a proposal from American Insurance with several insurance companies. The savings was significant. Our previous agent had never sought competing bids on our behalf. Since then, we have received excellent service from American Insurance. They have gone above and beyond what most agencies are willing to do for their clients. I would highly recommend them to anyone.
-Kerstin Topham, Controller - Utah Fabrication, Tooele, UT
20 Questions to Test Your Liability IQ
So, how good of a risk manager are you? Are you a risk terminator or a risk inciter? Here are 20 true/false questions you can use to measure your Risk Management IQ:
including a mediation clause in your client contract, it is nearly always best
for you and your client to mutually agree upon a specific mediator before the
contract is signed.
specific-job-excess professional liability policy can be a good choice when
entering into a joint venture with another design firm where the client demands
your client as a named insured on your professional liability policy is an
inexpensive way to increase protection for your client.
light of the passage of the Frank-Dodd Act and the potential liability of being
sued for providing services as a municipal advisor, it's a good idea to
increase your limits on your professional liability policy.
PL insurance companies have changed their tune and now advise against including
"prevailing party" clauses (losing party pays both sides' legal fees)
in client contracts.
the first sign that a contractor is not complying with your design intent, you
should immediately ask him or her to stop work on the project and bring the
issue to the client's attention.
split-limits PL policy is an affordable way for two design firms to share the
same insurance policy limits.
indemnities in a client's contract should be avoided at all costs.
is currently illegal for architects and engineers to use drones (unmanned
aircraft) for commercial purposes.
10. Cyber liability
insurance not only covers damages to third parties due to compromised identity
or financial information, privacy leaks, and transmission of computer viruses,
it can help cover the costs for public relations work incurred to help restore
working overseas in countries like France and Egypt that impose decennial
liability, it is crucial to have a clause in your client contract that clearly
states you are not liable for this exposure.
communications is the #1 nontechnical cause of claims.
prime projects create a hornet's nest of liabilities and should be avoided at
your professional liability insurance policy lapsed in 2013, but you purchased
a new policy in 2015, a new claim against design services you provided in 2012
may not be covered by your new policy.
wait until a formal claim is filed against your firm before reporting a problem
to your insurance company. Otherwise, your premiums may go up.
16. Employee Practice Liability Insurance only covers claims against your
firm by current and former employees.
is advisable to have a contract clause stating you do not owe a fiduciary duty
to your client.
of the best ways to reduce the risk of a fast-track project is to get your
client to lower its expectations.
to sue a client for late payment of services is one of the most effective ways
to ensure you get paid on time in the future.
drafting your scope of services, you should only list those specific services
you have agreed to perform for a fee.
1.False. It is generally recommended
that the mediator be selected only after
a dispute arises. This allows you to select a mediator that has expertise in
the subject of the specific dispute at hand.
2.True. With specific-job excess coverage, each
party to the joint venture could maintain its current limits on their practice
PL policy while purchasing an endorsement that provides a separate higher limit
to cover the joint venture project.
3.False. If your client were added as an
additional insured on your PL policy it could jeopardize their coverage since,
in the event it filed a claim, it would be suing itself.
4.False. The 2013 ACEC
Survey of Carriers indicated nearly all PL carriers have no intention of
covering municipal advisory services as defined by Dodd-Frank under their
5. True. Since you would not normally be
liable for another party's legal expenses in absence of a prevailing party
contract clause, those costs might not be covered unless specifically
stipulated in your policy.
6.False. In no instance should a project representative demand acontractor to stop work unless it is an issue of imminent danger to the safety or lives of
people on the site.
A stop work order can be interpreted as takingcontrol of construction means and methods and greatly expand the design firm's
7.False. With a split-limits policy, a design firm has an annual policy limit for a single claim and a higher aggregate limit that covers all claims in the policy year. For instance you may have a $2 million annual limit per claim, but an annual aggregate limit of $5 million.
8.True. Broad-form indemnities can make a
design firm responsible for almost any problem that befalls its client during
the project, whether or not the designer was negligent.
9.False.As of the writing of this test, businesses are generally prohibited from
using drones for commercial purposes. However, under Section 333 of the FAA
Modernization and Reform Act of 2012, architects, engineers, and others can
file for an exemption from current federal regulations on a case-by-case basis
and, if granted the exemption, use drones for commercial purposes.
10.True. While cyber liability policies differ
from insurer to insurer, many do cover public relations expenses incurred to
mitigate negative publicity.
11. False. You can’t
eliminate decennial liability through contracts with either the owner or your
subconsultants. If you perform work in a country where decennial liability is
in effect, you are exposed to this form of strict, joint-and-several liability.
12. True. A study
of more than 17,000 closed claims published by insurer XL Catlin showed that communication failures were a contributing factor in
nearly a third of all claims, making it #1 on the list.
13. False. While it is
true that multi-prime projects can cause overlapping responsibilities and
liabilities if poorly managed, they can be a viable delivery method for complex
or multi-stage projects. This is especially true when the client has extensive
experience managing multiple primes and/or contractors or hires a professional
14.True. To keep your retroactive date in force
and have prior acts coverage,
you normally must maintain continuous coverage. If you go uninsured for a
period of time and then get a new PL policy, you could lose coverage for your
acts prior to the new policy’s inception date. Be aware, however, that you may
be able to purchase prior acts or "tail" coverage.
15. False. Most insurance companies do not consider an incident report as a claim
unless a formal demand for money or a service is made. Smart insurance carriers
understand it is in their best interest to encourage early reporting and don't
"ding" you for reporting an incident that never becomes a claim.
16. False. EPLI provides protection against claims made
by current employees, former employees, and potential employees. It covers claims based on discrimination,
wrongful termination, sexual harassment, and other employment-related
17. True. Have your attorney draft language in your contract that
confirms neither you nor any of your subconsultants have offered any fiduciary
service to the client and no fiduciary responsibility shall be owed to the
client as a consequence of entering into an agreement to provide design
18. True. Educate your clients on the risks of fast-tracking a project and bring expectations in line with reality. There should be an
understanding that some changes, delays, modifications, reconstructions and extra costs are the norm, not the exception, with
19. False. Sue a client for
fees and you'll likely face a countersuit from your client for errors or
omissions in your services, whether warranted or not. A better way to ensure timely payment for
your services is contract language that allows you to suspend your services after
a specified period of nonpayment for undisputed fees.
20. False. In addition to listing the services you will perform for an agreed to fee, it is generally recommended that you list additional services that you can perform for an additional fee, recommended services you will not perform per the client's refusal and required design services that will be performed by a third party, such as a subconsultant.
So, how did you do? If you missed three or fewer questions, consider yourself a risk terminator. If you missed more than five, you might need some refresher work on professional liability issues. Ask us about the in-person and online education opportunities available in the areas of risk and practice management.
Can We Be of Assistance?
We may be able to help you by providing referrals to consultants, and by providing guidance relative to insurance issues, and even to certain preventives, from construction observation through the development and application of sound human resources management policies and procedures. Please call on us for assistance. We’re a member of the Professional Liability Agents Network (PLAN). We’re here to help.