national society of professional engineers july 18, 2013 · kristine a. kubes . kubes law office,...

Kristine A. Kubes

Kubes Law Office, PLLC Serving Design and Construction Professionals

■ 275 Market Street, Suite 566, Minneapolis, MN 55405 ■ 612.333.3262 ■ [email protected]

1 © Kubes Law Office, PLLC 2013

National Society of Professional Engineers July 18, 2013

§ Protecting your business

AND § Protecting your competitive edge


§ Proactive risk management § Communication § Contracts § Ethics


§ Word association = Insurance

§ Insurance = Necessity § Program is firm-specific


Potential Claims/Exposure for Engineers/Firm: § Professional negligence/malpractice § Associated claims: § Wrongful death § Property damage § Personal injury


Professional risk*: § Engineer liability: Stamp/ sign plans § Firm/employer is vicariously liable § Expert affidavit required in some states

* Under MN law; state laws/rules differ


§ Evaluating Cost of the Risk § Monetary § Non-monetary


§ Scope of Professional Liability Coverage: § Critical for any design firm § Covers errors and omissions § Tailored to scope


§ Limits on scope of liability insurance:

§ work outside practice area § random good works/volunteerism § “warranties” § intentional bad acts


Engineer Liability Outside of Coverage? § It’s possible! § Outside scope § Volunteer projects § Emergency response § Moonlighting § Catastrophic loss


Managing uninsured risks: § Management concerns § Engineer concerns


§ An ongoing conversation § Evaluative process § “Lessons learned” § Mistakes à Improvements


Risk Management § Evaluate your business risks: ó Loss of clients ó Loss of competitive edge and/or reputation ó Loss of A/R – clients who do not pay ó Loss of talent/staff/human resources ó Loss of money – project overage eats profit


§ Consider Kristine’s Three P’s to evaluate risk: § People § Paper § Process

Requires on-going critical analysis, open dialogue


Case in point re Process: § Small projects may lead to big problems § Treat every client formally – and the same § Develop method § Keep it for all clients


Case in point re Process: § Adherence to rules on sign/stamp/seal: § Applicable codes/standards § Under direct supervision and control § Within areas of competence

§ See NSPE Code of Ethics II.1, II.2, III.2, etc.


§ Ethical issues à liability/discipline § Carelessness as habit of being? § Carryover to practice § Billing errors could lead to disgorgement of fees


§ Failure of Standard of Care Perform duties owed under contract with “such care, skill, and diligence as an engineer in that profession would ordinarily exercise under like circumstances” The standard is not “perfection.”


§ Negligence: i.e. § Design § Shop Drawing Review § Site Observation § Contract Administration § Failure to Comply with Applicable Codes (HSW)


§ Misrepresentation: i.e. § Holding out § Plan stamping § Inaccurate work/billing statements

§Possible outcome: Disgorgement of fees


§ Unexpected Claim Starters: § Disgruntled client § Breakdowns in communication § “Mis-matched expectations”© § Collection efforts § “Deep pockets” from potential insurance coverage


§ Proactive risk management

§ Communication § Contracts § Ethics


§ Speaking § Listening § Writing


The Human Condition § The “running commentary” § Is anyone really listening? § Hearing what we think we hear § How to turn off the racket


Ego Impacts ability to: § Hear and value another’s ideas § Yield to another’s ideas § Communicate effectively one’s own ideas


“Mis-matched expectations”© § Result of poor communication § Conflict starter

§ Critical to understand: § Wants, needs, expectations § Clients and business partners


The Need to be Right

§ Unable to admit mistake/apologize § At what cost? § Avoid it in yourself § Learn to recognize it in others


Listening :

§ As/more important than speaking § Key to resolution


§ Provides confirmation § Meeting notes/minutes § Written recap of decisions

§ Establishes facts § Evidence of understanding between parties § Terms of the deal


§ Beware: RISKS of electronic mail § Source of problems within team or with client § Impulsive/too easy to hit “send” § Observe cooling-off period


§ Record retention § Store in safe place § Organize documents for easy access § Paper trail, if needed


34

Communication Challenge:

An intrinsic conflict exists between tending relationships vs. addressing problems

© Kubes Law Office, PLLC 2013

Communication Challenge: With Client: § Feels like choice btw client or business § Challenge in down economy § Corporate Bullying § Fear outweighs practicality § Consider: If no respect, no relationship.


Communication Challenge: Within Firm: § Fear/shame inhibits communication § Fear outweighs practicality § Time critical to problem-solving § Perceived threat to job § Larger stakes require communication


§ Rates/Fees § Overdue payment § Conflict of interest § Withdrawal from project/client § Internal firm/employee disciplinary issues


§ Establish Firm culture § Openness, regardless of topic § Mentor emerging professionals § Management sets example § Pattern good behavior for crisis management


The NSPE Code of Ethics addresses Communication?


§ Canon 3. Engineers shall “issue public statements only in an objective and truthful manner.” § Rule II.5. Avoid deceptive acts. § Rule III.4. “Engineers shall not disclose, without consent, confidential information concerning the business affairs or technical processes of any present or former client or employer, or public body on which they serve.”


Communication about credentials: § Rule II.5: Shall not falsify qualifications § Practical implications: § “Offering to practice” may be prohibited without P.E. § Know licensure requirements of jurisdiction § Include office address, where P.E. licensed on cards

§ Rules exist to protect public from confusion


§ Proactive risk management § Communication

§ Contracts § Ethics


§ Protect you § Protect your client § Reduce “mis-matched expectations”© § Cover key terms to relationship § Written contract is preferred


Contracts: Written document § Trumps all prior data § Signatures §Modifications § Retain original !


§ Standard form contract § General Conditions § Supplemental Conditions § Specifications § Plans § Contract Addenda § Change Orders


Key Terms: § Parties § Project § Scope of work § Contract Price


Optional Terms: § Method for payment § Time for performance § IP rights to I.O.S. § Limitations of liability

Limitation of liability clauses § Limit action to company only, not individual employees/professionals § Negotiate a cap on damages – i.e. party agrees that the limit of insurance coverage is the limit of damages.


§ Uniformity of agreement § Carrier will require/appreciate it § Limit the power of the pen: § Negotiators are only those with knowledge § Otherwise may gut contract strength


…Where communication and contract intersect § CA may include various duties § Discuss with owner prior to contract § Include scope in contract


The NSPE Code of Ethics addresses Contracts?


Rule II.4.e; II.5.b; III.5.b. § No conflicts of interest § No contract with Gov’t body where Engr serves as member § In Procurement – no gifts/kick-backs § No direct/indirect commissions


§ Proactive risk management § Communication § Contracts

§ Ethics


NSPE Code of Ethics – Fundamental Canons: § Hold paramount the public HSW § Perform services only in areas of competence § Issue public statements only in an objective and

truthful manner § Act for each employer or client as faithful agents

and trustees § Avoid deceptive acts

© Kubes Law Office, PLLC 2013 54

NSPE Code of Ethics – Fundamental Canons: § Conduct yourself honorably, responsibly, ethically,

and lawfully so as to enhance the honor, reputation, and usefulness of the profession.

§ www.nspe.org § No distinction between public vs. private life


http://www.nspe.org/�

§ We learn what we live § Train emerging professionals – give resources § Fear inhibits communication § Create atmosphere open to discussion on ethics and problems


With this knowledge intact, get proactive: § Where are the weaknesses: § People § Paper § Processes

§ What needs to change? Open the channels for communication on these issues


The benefit your receive from: § Proactive thinking and critical analysis § Good contracts § Good communication § Ethical practice § Covered by a solid insurance program


Risk Management: Strategies to Avoid Professional Liability Claims

ó Be proactive ó Use a contract and get the client to sign it (!) ó Employ sound practice management ó Keep aware of applicable standard of care ó Practice open and clear communication in firm, with clients ó Maintain an ethical and honest practice


Do not hesitate to call for assistance:

Kristine A. Kubes

Kubes Law Office, PLLC Serving Design and Construction Professionals

612.333.3262 ■ [email protected]


national society of professional engineers july 18, 2013 · kristine a. kubes . kubes law office,...

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