Professional liability insurance for architects and engineers.

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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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Why Design Professionals and Construction Contractors Should be Aware of Florida’s 2016 Revised Public Records Act

Posted on September 1, 2016

By Bo Sutton, Of Counsel, GrayRobinson, P.A. and Natalie Bunnell, Summer Associate, GrayRobinson, P.A. Florida’s Public Records Act (“Act”) was recently revised to make prior amendments to the Act easier to comply with for Public Agencies, as well as those acting on their behalf. Its other purpose was to curb litigation and liability for attorneys’ fees from public information requests. For these reasons, those that may be subject to the Act should be aware of the recent amendment. To better understand the recent amendment, a brief discussion of the Act is helpful. Florida’s Constitution and the Act require records made or received in connection with the transaction of official business be made available by a Public Agency for personal inspection and copying by any person. Historically, it has been the responsibility of each Public Agency to house and provide ongoing access to its public records. However, this could change a bit with the recent amendment. There are several important questions to address with regard to the recent amendment: first is there a Public Agency involved in the contractual chain; second, is a private entity acting on behalf of the Public Agency; and third, what does the contract say about ongoing responsibility for maintaining the public records? First things first, what is a Public Agency? Florida considers a “Public Agency” to include a state, county, district, authority, municipal officer, department, division, board, bureau, commission, or other separate unit of government. However, because Public Agencies are permitted to hire “contractors” to provide services or to act on behalf of the Public Agency, contractors may also be required to comply with the Act. A “contractor” includes “an individual, partnership, corporation, or business entity that enters into a contract for services with a public agency and is acting on behalf of the public agency.” (emphasis added) Who is or is not a “contractor” in the eyes of the Act is the critical piece of the puzzle. In the design and construction world, this could include the architect, engineer, general contractor, or whomever had a direct contract with the Public Agency for a construction project if they are determined to be “acting on behalf of a public agency”. To be clear, though, providing services to or for a Public Agency does not, by default, constitute “acting on behalf of a public agency”. More is required. What constitutes “acting on behalf of the public agency”? Unfortunately, the Act does not address this. This has been left up to case law. Since 1992, Florida’s courts have applied a “totality of the factors” analysis, codified in the case News and Sun-Sentinel Co. v. Schwab, Twitty & Hanser Architectural Group, Inc., 596 So. 2d 1029 (Fla. 1992) to determine whether a private entity is acting on behalf of a Public Agency and falls within the purview of the Act. These factors include, but are not limited to, (1) the level of public funding; (2) commingling of funds; (3) whether the activity was conducted on a publicly owned property; (4) whether the services contracted for are an integral part of the Public Agency’s chosen decision-making process; (5) whether the private entity is performing a governmental function or a function which the Public Agency would otherwise perform; (6) the extent of the Public Agency’s involvement with, regulation of, or control...

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