Professional liability insurance for architects and engineers.


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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Working Without A Contract

Posted on June 29, 2016

By Mark E. Jackson, JCJ Insurance Agency It is extremely important for design firms to have a signed contract before providing professional services. A written contract provides an opportunity to set expectations and allows the parties to align themselves for a successful project. Working without a contract is like building without a blueprint. Contracts are very important for all projects; whether big or small, and whether you are working with a new client, long-term client, or sub-consultant. There are numerous advantages to having a signed contract. With conditions such as scope of services, payment provisions, indemnity obligations, standard of care, and limitation of liability, a contract provides a guide for how the project will proceed and outlines the responsibilities of each party. In the event of a disagreement or dispute, the contract is the first source to determine what each party agreed to do. If there is no contract, it can become a matter of “he said/she said” if a dispute arises. Despite the advantages of having a contract, there are times when a design firm provides services without one. For instance, an existing client has a small project and needs a quick response and no one thinks to get a signed contract. Even a small project can have claims. Regardless of the size of the project, you should have a signed contract. Some firms do not use a contract because they have a long-term relationship with the owner or subconsultant. Their opinion is that they have worked with the party for many years and have never had a dispute and, therefore, they do not need a contract. It is great to have strong, long-term relationships, but that does not guarantee there will not be a dispute on the next project. Contracts are designed to protect both parties, not just the design firm. For long-terms relationships, a fair and well-balanced contract should be easy to negotiate. Sometimes, a firm may begin work on the design services while still negotiating the contract. It is important to not forget about the unsigned contract. Negotiations need to continue and be finalized before the construction documents phase of the project is completed. You do not want to have the project complete and final payment owed without a signed contract. Also, disputes are more likely to occur after the project is complete. If the contract is the only thing between you and your final payment, you do not want to be forced to agree to unfavorable terms in order to receive payment. There are some options that should be considered if work is going to begin without a signed contract. One option is to include contractual terms in the proposal. In the event there is no signed contract, the proposal can establish the terms of your agreement. It should address the scope of services (both what is included and what is not included), the payment terms, and the ownership of your work product. It should state that, until a final written contract is executed, the terms of the proposal shall constitute the contract between the parties. At the least, there should be a written statement for the scope of services and the fee schedule. These two items will help to avoid some of the more common ambiguities and misunderstandings that result in disputes with...

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