Professional liability insurance for architects and engineers.


Electronic Communication – A Blessing or a Curse?

Posted on February 9, 2017

Co-authored By Mark Jackson and Erin Johnson, JCJ Insurance Agency With advances in technology, methods of communication for design firms are quickly evolving. What would have been detailed in a formal letter, transmittal or submittal in the past is now frequently conveyed in an informal, hastily written email. Today, the overwhelming majority of our business is conducted by electronic communication. Electronic communication occurs in many forms, including emails, text messages, and voicemails. Email has become the most common way of exchanging information for design firms. It is not unreasonable to think that text messaging will soon be equally prevalent. While emails and texts are convenient, firms need to treat them like other formal means of communication. Emails and texts are fast and effective, which is a benefit in today’s face-paced environment. Not only are you able to communicate quickly but you can also include numerous individuals in the messages. With the use of mobile devices, correspondence is often casual and, if you respond while waiting for an appointment or at a jobsite, can be carelessly written. It is crucial that everyone on your team understands that in a court of law, electronic communications are legal, permanent, and discoverable. A disclaimer that “this was sent from my iPhone” does not make the document less valid. One poorly drafted email or text can have a very negative effect on the defense of a firm should a dispute arise on a project. Email When drafting an email, take time to consider what you want to communicate. An email should be no different than a formal letter in regards to the content. Before sending an email, ask yourself if you would put these exact words on the firm’s letterhead with your signature. If you hesitate, reconsider what you write. Your emails need to be prepared and suitable for presentation in any forum. An offensively written email or admission of fault can pose significant risk to the firm in the event of a dispute. A firm’s ability to defend itself for a professional liability claim is weakened when, during discovery, there are emails that are unprofessional, disrespectful, insulting, or contain an admission of fault. Emails should never include negative comments about the owner, contractor, or other members of the design team. Any email that disparages other members of the design team can be used to build a case that your firm was not acting within a reasonable Standard of Care. Again, the question that should be asked before hitting the send button… “Would I be willing to put this content on the firm letterhead with my signature?” This applies to both emails that are sent internally to members of your team and emails sent to other parties. You should never write anything in an email that you would not want forwarded to your boss, spouse, parent, or read in front of a jury. Text Message A text message carries the same weight as any other type of written communication. They can be just as damaging if they are unprofessional or contain an admission of fault. Likewise, they can help firms in the defense of a claim if they provide proof of a client’s instruction or opinion. Since text messaging is a relatively new way for firms to communicate and it is not as recoverable as...

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Benefit from Selecting the Right Professional Liability Broker

Posted on January 25, 2017

By Audrey Camp Reprinted by permission of the National Society of Professional Engineers, 2016. Original article appeared in the March 2015 issue of PE Magazine. Carefully selected and advantageously used, your broker can be as important to the management of your practice as your accountant or your attorney. Poorly selected and ill-equipped to advise you on the risks of professional practice, your broker may add little more of value to what you do than the cost of a few postage stamps at renewal time. The choice is yours. — Dave Lakamp, founding member of a/e ProNet For design professionals, finding the right insurance broker can present a challenge. You need someone with ample experience handling the professional liability needs of architects and engineers, and who offers a wealth of value-added services. Only if your broker has a comprehensive understanding of what you and your firm are all about can he or she be of real use to you. Lacking this knowledge can leave your firm vulnerable in a shifting insurance marketplace. A good specialist broker is committed to investing the necessary time and resources to your account. They find you the best coverage for the best price, and they save you the considerable time it would take for you to do so on your own. What is professional liability insurance and why is it important? A professional liability (errors and omissions) insurance policy provides coverage to defend and indemnify a professional firm against claims alleging negligent acts, errors, or omissions in the performance of professional services. Any project can give rise to a claim. Even if your firm employs an excellent risk management strategy, it is vulnerable to being named in a lawsuit. The cost of that defense can mount fast, even if your firm wasn’t in the wrong. A professional liability policy covers the cost of defense. In the event that your firm is found negligent, and that the firm’s negligence gave rise to the claim in question, your professional liability policy will cover your firm for the damages you’re legally obligated to pay, up to the policy limit. (Note: In most cases, defense costs erode the policy limit. Having adequate limits to cover both defense and indemnity is important.) Why do I need a specialist insurance broker? Shouldn’t I be able to purchase my professional liability policy directly from an insurance company? For architects and engineers, maintaining an active and adequate professional liability insurance policy is very often a legal requirement. And while a basic professional liability policy is straightforward enough for anyone to acquire, the insurance needs of design professionals are more complex than that. The insurance industry is full of companies who want your business, but no two professional liability insurance carriers are exactly alike. Among the major differences are: the size of policy limits offered; whether multiyear policies are available; underwriting appetites for types of engineering services; and claims service. Some companies require a 10-year loss history from design professionals, while others only require a five-year loss run. A specialist broker knows what the markets are doing, who the underwriters are, and how to present your firm in the best possible light. The cost of your insurance depends on this knowledge and attention to detail used on your behalf. Here it should be noted...

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Happy New Year!

Posted on December 29, 2016

Wishing you a Happy New Year with the hope that you will have many blessings in the year to come! From all of us at ...

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Are Your Liability Limits Adequate?

Posted on December 6, 2016

By Barbara Sable, RLI Insurance THE BACKGROUND It’s an age-old question that defies an answer. The best answer—but not one that makes anyone feel better—is that you’ll know if your professional liability insurance limits are adequate when the worst case scenario claim happens. At first blush, many design firms find this answer extremely frustrating. Professional liability insurance has been available for 60 years. Why has no one been able to create a formula to determine appropriate limits? The answer is that settling or adjudicating claims is as much art as science. We could probably determine an average claim payment for many project types as a percentage of construction values. However, there’s significant fallacy in that analysis for the following reasons: Like many averages, it falls within a very large range of possibilities. If your claim ultimately turns out to be on the high end of that range, the average is now meaningless to you. The breadth of the range is caused by a wide array of factors, the most significant of which include: The state in which the claim occurs. State laws and their interpretation vary widely and substantially impact liability; The type of damages. A claim that involves loss of life or a catastrophic collapse can drive up the indemnity costs, even for a design firm that is only peripherally involved; The chosen dispute resolution mechanism. Mediation, arbitration, and litigation are the most common methods to resolve disputes. Mediation often, although not always, reduces costs. The outcome of arbitration and litigation can be far more risky and far less predictable; The tenacity of the claimant pursuing the claim. A claimant with a vendetta or an unlimited litigation budget can materially increase your exposure; and How much insurance is available through other sources. If your firm turns out to be the only one with available insurance proceeds, you may pay more. Some firms look at that last fact and conclude that they don’t want to be the “deep pocket” or the “lightning rod.” Principals of those firms may not be aware that some claims settle above policy limits, so writing your own check once insurance has been exhausted is well within the realm of possibilities. SO, ARE MY LIMITS ADEQUATE? The adequacy of limits is determined by many factors. In this section, we’ll explore some of those factors. Contractual requirements One of the primary reasons that firms look to increase their liability insurance limits is to meet contractual requirements. The good news is that it’s generally relatively easy to find underwriters who are willing to help you comply. The bad news is that it requires analysis to determine whether or not you want to or should comply. Here’s an example: a civil/survey firm with roughly $10 million in annual revenues is providing an ALTA survey for a new mixed use project. Their fee? Less than $15,000. The limit required by the developer? $5 million. What the surveyor needs to think about is what happens if these services actually generate a $5 million claim? Will they be able to get insurance after that? The answer is maybe not. Is it worth it to put the future viability of your firm at risk for a $15,000 fee? That said, once you make a commitment to maintain a certain limit in your...

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