new jersey society of professional land surveyors ... · professional underwriters agency | speaker...

New Jersey Society of Professional Land Surveyors ConferenceFeb. 7, 2019

Risks and Exposure of the Professional Land Surveyor

Mark AmiraultPartner

LDIG/Klein Agency, LLC

Debbie ChristenProduction Underwriter

Professional Underwriters Associates(PUA)

Professional Underwriters Agency |

Speaker Bios

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Mark Amirault, Partner, LDIG / Klein Agency, LLC• Mark is responsible for providing insurance coverage and review to all facets of the

design community. Mark is a frequent presenter of continuing education sessions on insurance, risk management and business topics for land surveyors and civil engineers.

• In 1999 he received his BS from the Carroll School of Management at Boston College. Prior to joining the Klein Agency, Mark was a marketing representative responsible for completing RFPs for a large custodial bank and was then an insurance underwriter with a focus on small to mid-size contractors.

• Mark joined the Klein Agency in 2006, and after a year working at Klein’s headquarters in Maryland, he opened the Philadelphia office in 2007. Since 2018, Mark has been influential in developing member agencies for the Land Design Insurance Group (www.landdesigninsurance.com).

• Phone: (410) 527-0512; Email: [email protected]

http://www.landdesigninsurance.com/


Speaker Bios

• PUA/NSM Debbie joined PUA in May 2017 as an underwriter for the A/E Professional Liability Program, Design/Build & Contractor’s Professional Liability programso My role includes working with current retail & wholesale brokers on the east coast & mid-west as well as developing

new broker business partnerso Underwriting new & renewal accounts of all sizeso Our Carrier Partners: Arch - A+XV AM Best Rating & Lloyds of London.

• Marquis Agency/NIP Group, Inc. -10 Years, Vice-President and Risk Manager for Architects & Engineers Professional Liability Division:o Debbie managed a renewal book of business for 100+ clients in the NJ, PA, NY regiono Risk Manager- developed & presented Risk Management workshops o Author of two articles published in National A/E publications

» Responding to RFP’s» What You Need to Know When Purchasing Professional Liability Insurance

o Liaison to AIA National, NJ Land Surveyors, Society of Design Administratorso Was honored by the NJ Land Surveyors in 2005 with Friend of the Society award.o Member of A/E ProNet; served on the Board in addition to several committees

• Thomas J. Sharp & Associates, Inc. 15 years, Vice President- A/E Professional Liabilityo Debbie successfully managed a renewal book of business for 200 clients in the NJ, PA, NY region.

Debra Christen, Production Underwriter, PUA / A Division of NSM Insurance Group

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CLAIMS

• Bad contract language• Lack of coordination of services with other design

professionals on a project• Lack of oversight; internal & external• Poor Communication; internal & external• Over extending the firm & it’s employees due to too

many projects• Employees not performing• Mistakes in the field & in the office• Fee disputes• Client

Common Causes of Surveying Claims

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Presenter

Presentation Notes

Contracts- do you have Owner Drafted contracts reviewed? – helps to avoid disputes by having clear, concise language Communication & documentation protocols- everyone needs to be on the same page, follow the same procedure’s Education/Training for employees- other than licensing classes Invoicing & collection of fees- are your procedures in written form, is it in your contracts, & does your accounting dept. follow these procedures


CLAIMS

These policies should include:• How management expects company operations to

function• Who is responsible to implement these expectations (by

function or job title)• Staffing- both in terms of specific project needs & quality

control monitoring• Incorporation of basic Checking & Review Procedures• Peer Review Procedures- Internal & external

Quality Control Program/Key Program Elements

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Presenter

Presentation Notes

Staffing- ae the right employees assigned to the projects/duties-who is monitoring?


Claims

DefinitionProfessional Liability Insurance Carriers define a claim as:A DEMAND received by you, the insured, for money or services and which alleges WRONGFUL ACT.

What is a Claim?

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Claims

Which of the following constitutes a claim?1. A civil summons naming your firm2. An invoice from your client advising you owe them

money due to your errors3. A letter from an attorney with a demand for services

to corrected due to your errors4. A termination letter from a client demanding

reimbursement of your fees

Quiz

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Claims

A pro-active approach by the Professional Liability carriers in assisting you, the insured, in mitigating a situation from becoming a claim, thus reducing the amount of claims and indemnity payments.

What is Pre-Claim Assistance

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Claims

Which of the following may be considered for Pre-Claim Assistance?1. Your firm receives a subpoena for your project file2. While performing services on a project site, you notice the

concrete slabs of a building are not in alignment3. There is a accident on jobsite and a construction worker is

seriously injured4. You receive a subpoena to testify at a deposition on behalf of

the Project Owner in dispute with a contractor5. You are asked by the Project Owner & their attorney to

participate in a conference call regarding issues on a project

Quiz

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Presenter

Presentation Notes

your firm may elect to correct the problem with the Owners approval, the carrier will assist in drafting release from future claims by the PO The carrier may elect to visit the jobsite or request info. for use if there is future claim (use Tropicana garage collapse as an example)


Claims

In all of these situations and especially if your firm is served with a subpoena to testify or release of project files- Don’t Panic Your 1st course of action is to assess the situation & email or call

your BROKER. Discuss the situation & advise you wish to report the matter to your PL carrier

The PL carrier my elect to hire an attorney to assist you in the event you need to appear at a deposition, request for your project file or partake in a conference call

The PL Carrier & the attorney are protecting your interests, as you never want the opposing attorney to get you to say or release any information that could implicate your firm

Pre-Claim Assistance

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Claims

What are the advantages of early reporting?• Pre-claim assistance is “Free”• No charge to your deductible• It could keep your firm out of a CLAIMIt is also your DUTY under the terms of the PL policy to report a matter as soon as practical. This will avoid possible denial of coverage by a carrier

Pre-Claim Assistance/Potential Claim

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Presenter

Presentation Notes

A carrier can deny a claim if an insured has delayed reporting the matter. Example- insured receives an email or letter from their client advising there are various cost overruns due to improper layout of the curbing. The owner desires to address the situation immediately to avoid further delays. The insured respond's to the email that they did nothing wrong & chooses to ignore the situation not does they report it to their carrier. 5 months later the PO submits an invoice to the LS stating they owe $$$, & the meantime the insured changes carriers. NO coverage!!


Claims

Gather pertinent information including any information your employee(s) may have knowledge of.1. Date, time, name & location for the project/or claim2. Allegations- what are the allegations, if not served with a

formal suit. If served with a civil complaint/suit papers, review the complaint, start preparing a summary of services rendered and the facts as you see it

3. Gather a list of any other parties that may or could be involved4. Find the Contract5. Send information to your Broker/Insurance Carrier ASAP

What steps to take when faced with a Claim

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Presenter

Presentation Notes

If served with a with a civil summons- send a copy of the complaint Immediately to your broker- DO NOT DELAY. You can sendadditional information to the claim analyst after the claims has bee accepted by the carrier.


Claims

• DO NOT SEND EMAILS REQUESTING INFORMATION FROM OUTSIDE PARTIES

• DO NOT DISCUSS ISSUES OR CONCERNS WITH OUTSIDE PARTIES• BE CAREFUL WITH INTERNAL COMMUNICATIONS- ALL EMAILS

PERTINENT TO THE CLAIM IS DISCOVERABLE• DO NOT AGREE TO ATTEND MEETINGS/CONFERENCE CALLS TO

RESOLVE THE SITUATION. IF ABSOLUTELY NEEDED, BE A SPONGE, DO NOT VOLUNTEER ANY INFORMATION

• DO NOT SIGN A JOINT DEFENSE OR SIMILAR AGREEMENT WITHOUT THE ADVICE OF DEFENSE COUNSEL & CLAIM ANALYST

What Not To Do

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Claims

• DO NOT BLEND PROJECT RECORDS WITH CLAIM RELATED CORRESPONDENCE

• DO NOT DESTROY ANY EVIDENCE• DO NOT ADMIT RESPONSIBILITY OR LIABILITY TO ANYONE • DO NOT SIGN OR ACCEPT ANY RELEASES RELATED TO THE

SITUATION

What Not To Do- cont.

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CLAIMS

• Boundary errors• Construction stakeout errors• Topographic errors- seems to be on the

rise• Fee Disputes- still a problemThey all cost money in time, defense & resolution

Type of Common Surveying Claims

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Claims

Insured- Surveying firm in FloridaProject- Residential Subdivision Services- Construction Stakeout, Topo. & Boundary – 2015-16Claim – Data used for the subdivision was incorrect. The original survey was based upon 1929 datum for the topo. Map. The county advised the surveyor the datum must be dated no earlier than 1988. The surveyor made the corrections and sent the 1988 datum to the Civil Engineer. The CE used the datum from 1929, thus resulting in a 1 foot elevation error (1929 datum was 1 FT. lower than the 1988 datum) which resulted in the the Project Owner incurring costs of $350,000 to bring in extra fill for the property.

A Look at Recent Arch/PUA Claims – Case #1

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Claims

The CE claims they never received the 1988 Datum. Defense counsel for the surveyors has proof the 1988 datum was sent to the CE prior to the commencement of construction.Insurance Company Reserve - $70,000 legal expenses- no indemnity reserve. Defense counsel seeking Summary Judgement dismissal.Premiums Paid by Surveying firm- $71,967 - 4 yrs. insured with the same carrier. Loss ratio 100%2018 renewal- Did the premium increase, decrease or remain flat?

Florida Claim- continued

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Presenter

Presentation Notes

Premium increased by 8% due to billing increase of 14%. We felt the news on the claim to be positive & hope for a good result. We are rewarding loyalty to our program + taking a wait & see position.


Claims

Insured- Surveying Firm in FloridaProject- ResidentialServices- Construction Stakeout, Topo., BoundaryClaims- Firm has had 2 claims with Arch in 2018.1. Claim brought by the Builder due to alleged stakeout error

for a retaining wall- Claim settled for $11,000. 2. Claim brought by Project Owner- alleged error in topo.

survey. Claim settled for $33,521.Both claims settled without incurring legal expenses.

A Look at Recent Claims- Case #2

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Presenter

Presentation Notes

Last year the 2 AIG claim only has a reserve of 102k. Arch claims -Insured delayed in responding to the plaintiffs seeking damages in both claims & delayed reporting to insurance carrier, thus resulting the need for quick settlement. It was also determined by the claim analyst the firm did make errors. The insured’s remedy to the issues was to fire the employee.


Claims

3. In addition to these 2 claims - the firm has incurred claims with the previous carrier with a current total reserve of $220,000. These claims are still open.The current loss ratio with Arch is 61.7%. With 4 claims on the books between 2016-18, this firm is not looking favorable.

2018 Renewal- Did the premium increase or did Arch decide to non-renew this account?

A Look at Recent Claims -Case # 2 Cont.

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Presenter

Presentation Notes

PUA/Arch- offered renewal terms; Exp. premium was $29,000, renewal terms were $47,700. The firms billings also grew. This was our way of saying we did not want to renew this account. The insured did attempt to shop, but to other carriers would offer terms. We will monitor this account & possibly non-renew at the next renewal. We encouraged the firm to participate in the ARCH/PUA risk management webinars.


Claims

Insured - Land Surveying firm, NY/NJ areaProject - ResidentialServices – Boundary surveyClaim - Boundary dispute on a project under construction, alleged property line error, foundation of building needed to be moved.Claim Closed – $25k in legal expenses; $85k in indemnity- total claim $110,000.

2018 Renewal- Did PUA/Arch increase the premium or elect to non-renew?

A look at Recent Claims- Case #3

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Presenter

Presentation Notes

This was the least costly & quickest resolution to this claim vs. going for a variance & incurring delays. Renewal- account renewed. Firm had been insured with PUA/Arch for 3 yrs. with a total of 34k in premium. Incr. in premium was minimal- 10%. Total loss ratio is 223%. PUA/Arch definitely rewarded loyalty as firm had no other claims in 5 yrs.


Claims

Insured- Land Surveying Firm in NYProjects- 3 – all residentialServices- boundary, topo.Claims:1. Alleged error in setting benchmarks for 2 foundations. Indemnity

reserve- $116k, defense expense reserve, 16k2. Alleged improper, incorrect property survey- boundary error.

Indemnity reserve $7500, defense expense reserve, $2500.3. Failure to identify a boundary line incursion on the survey.

Indemnity reserve $7500; defense expense reserve $25k; pd exp. of 5k.

A look at Recent Claims- Case # 4

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Claims

All 3 claims were reported 2016-18 & have a total reserve of $163,500.The firm has been insured with PUA/Arch for 3 yrs. with a total premium of $15,643 paid into Arch prior to the 2018 renewal.

2018 Renewal- Did PUA/Arch increase the premium or elected to non-renew?

A look at Recent Claims - Case #4 - cont.

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Presenter

Presentation Notes

We offered renewal terms at a substantially higher premium (21k) & removed 1st dollar defense; 1. due to claims 2. the firm added civil eng. services to the renewal app. 3. firm billings increased by 73%. Insured attempted to market their renewal to other PL carriers without success We will monitor this account this year & may elect to non-renew in 2019.


Claims

• BE AWARE• BE SMART• PRACTICE WHAT YOU PREACH• USE THE RESOURCES AVAILABLE TO YOU• HAVE A SOUND CONTRACT

All this leads to greater profits

How do we avoid?

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Presenter

Presentation Notes

Aware- evaluate the project prior to signing the contract, is it in your wheelhouse, can you take on more projects without over stressing your employees, Can you complete on time Smart- have contracts reviewed for language that can impose increased liability, know your client & the project, are you familiar with both, try to identify any potential problems early on Practice- everyone on the team needs to be on the same page, set expectations for your employee’s, no one is perfect, so don’t expect it, but be a problem solver when they occur, make sure your employees have the proper training & it is on-going. Set company reg’s/rule of practice in writing. Communication is vital, internal & external Resources- your broker, your insurance carrier. Good business practice includes utilizing what your specialty broker + your insurance carrier offers.


Contracts: Land Surveyor’s Scope of Services

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Included services

Excluded services

Additional services

Presenter

Presentation Notes

Clarify surveying versus civil services; Responsibilities often excluded: Means and methods Monitoring/inspection of construction Scheduling and sequencing Budgeting, quantity opinions, cost estimates Construction management Permitting Geotechnical engineering or subsurface testing and analysis Identification or handling of hazardous conditions Environmental site assessments Site safety/OSHA compliance ADA compliance


Standard of Care

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Common Law – Negligence

Standard

• Responsible to your client to meet the standard of care for your profession

• Design professionals don’t manufacture products; projects are one-of-a-kind

Perfection is not

contemplated

• Those who sell services for guidance of others in their economic, financial and personal affairs are not liable in absence of negligence or intentional misconduct

Presenter

Presentation Notes

The design professional’s standard of care is recognized in common law as one that has been tested over time through court decisions throughout the United States. However, the standard of care can be difficult for clients to understand because it’s not written down as a definitive statement in any single place. Under this standard, you as the design professional are held to use the “degree of care and skill ordinarily exercised by the same profession currently practicing under similar circumstances.” The Standard of Care is one of the most effective tools available to design firms in managing professional liability risk. Despite its importance to design professionals, the Standard of Care is one of the least understood facets among design professionals and clients alike. Considering the lack of understanding the Standard of Care has among those it protects, it’s not surprising that many project owners fail to understand or accept it. For the purposes of today’s course, the Standard of Care is your ally as a design professional. It’s an important component of any professional liability risk management program, and its a highly effective tool in the defense of professional liability claims. It’s also important to note that because you don’t manufacture products but rather design projects, your end result is generally “one-of-a-kind,” without the expectation of perfection. Therefore, some level of design deficiency is expected on plans and design specs.


Standard of Care

LAND SURVEYOR and its employees, subsidiaries, independent

professional associates, subconsultants, and subcontractors will

exercise that degree of care and skill ordinarily practiced at the

same point in time and under similar circumstances by

professionals providing similar services. Client agrees that

services provided will be rendered without any warranty, express

or implied.

Sample Contract Language

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Contractual Clauses

Outlines how the party who suffers damages (i.e. bodily injury, property damage, or economic loss) will be compensated or “held harmless” by the other party whose actions were the proximate cause of the loss.

• It’s OK to indemnify the Client for claims arising out of and to the extent caused by a finding of a Professional’s negligent acts, errors or omissions

• Avoid terms which require you to provide defense for your Client. Your insurance carriers are not obligated to honor this provision

• No use of dangerous terms and phrases such as “Warrant”, “Highest”, “Suitable”, “In Connection With”

• No assumption of damages arising from anyone else (other than own Subconsultants)

Indemnification

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Contractual Clauses

To the fullest extent permitted by law, Consultant shall defend, indemnify and hold harmless Developer…against any and all claims… including the reasonable fees of attorneys, arising out of or in any way connected with any act or omission of Consultant…whether such claims, liens, demands, damages, losses or expenses are based upon…any other legal…theory whatsoever, and regardless of whether or not such claim…is caused in part by a party indemnified hereunder, including the partial negligence of any such party.

Bad Indemnity Clause

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Presenter

Presentation Notes

Take a second to review


Contractual Clauses

To the fullest extent permitted by law, Consultant shall defend, indemnify and hold harmless Developer…against any and all claims… including the reasonable fees of attorneys, arising out of or in any way connected with any act or omission of Consultant…whether such claims, liens, demands, damages, losses or expenses are based upon…any other legal…theory whatsoever, and regardless of whether or not such claim…is caused in part by a party indemnified hereunder, including the partial negligence of any such party.

Bad Indemnity Clause

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Presenter

Presentation Notes

Marked up—the issues are: The phrases “to the fullest extent permitted by law,” “any and all claims,” “demands,” and “any other legal theory whatsoever” speak for themselves (very broad obligations); “defend”—insurers do not pay to defend parties other than the named insured, nor do they pay other parties’ attorneys’ fees after the fact unless these are deemed to be damages caused by the insured’s negligence in its rendering of professional services; “arising out of or in any way connected with” is also too broad because insurance covers damages to the extent that they are caused by the negligence of the insured in its performance of professional services; “act or omission of Consultant” is not limited to negligence and would therefore refer to anything the Consultant does—right or wrong; “regardless of whether or not such claim…is caused in part by a party indemnified hereunder, including the partial negligence of any such party”—how or why should insurance pay on your behalf for the negligence of other parties?


Contractual Clauses

• Financing sources are changing the project delivery methods

• What is the Land Surveyor’s responsibility when they are hired by another design firm?

• Has the Land Surveyor received/reviewed the Prime Agreement?

• Does the Prime Agreement supersede any other agreements?

• Are there any “paid when paid” provisions?

Beware the Flow Down

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Contractual Clauses

“The Subconsultant further agrees to be bound by any modification of the Prime Agreement that may occur from time to time. The Consultant agrees to notify of all such changes on a timely basis.”

Dangerous Flow Down Language

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Contractual Clauses

The following came directly from an ENR 500 firm hiring one of our engineering/surveying clients as a subconsultant:

“Subconsultant agrees to comply with and be subject to the same contractual requirements with respect to Consultant as the Consultant is subject to with respect to Client under the Prime Agreement…”

“A copy of the Prime Agreement is attached heretoand by reference made a part of this Subcontract Agreement”

Dangerous Flow Down Language

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Presenter

Presentation Notes

As the subconsultant they are now legally responsible for what is included in that Prime Agreement – despite the ability to negotiate on their own behalf Discuss the Brown and Caldwell language that we built in: For the avoidance of doubt, Subcontractor shall not be required to indemnify any Indemnitee for anything other than liabilities and damages (including associated defense costs) arising out of third party claims, but only to the extent determined to be caused by the Subcontractor’s negligence or willful misconduct.” On a weekly basis I have conversations with clients that they can’t negotiate the Prime and that their clients agreed to it, so they have to agree


Contractual Clauses

Client shall pay LAND SURVEYOR pursuant to the rates and charges set forth in the Proposal. LAND SURVEYOR will submit monthly invoices to Client for services rendered and expenses incurred. If Client does not pay invoices within thirty (30) days of submission of invoice, LAND SURVEYOR may, upon written notice to the Client, withhold deliverables and/or suspend further work until payments are brought current. The Client agrees to indemnify and hold LAND SURVEYOR harmless from any claim or liability resulting from such suspension.

Payment Terms

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Presenter

Presentation Notes

It doesn’t matter who the client is or what the project is, everyone has concerns about getting paid. This slide shows payment terms that are favorable to the surveyor. But let’s be honest, how often are the payment terms this straight forward and agreeable? Typically what happens is you receive the contract after the work is started and that is when you start to notice many items that may cause issues: Their contract will then place a paid-when-paid provision The insurance requirements become higher than what you have on your existing policies Contractual terms that are outside the scope of your insurance policy The Professional Liability policy has an exclusion for Contractual Liability, so need to be careful of what is written down is not always cover: as a result of liability assumed by the Insured under any contract or agreement. This Exclusion does not apply to liability for Damages that the Insured would have in the absence of the contract or agreement.


Contractual Clauses

• In the absence of a professional standard for CA services, it must/should be defined by contract

• The contractual descriptions of scope should also include disclaimers

• Claim issues impacting CA serviceso Job Site Safetyo Faulty Workmanship / Product Issueso Schedulingo Coordination / Communication o Overbillings / Payment issues o RFI’s / Change Orders

Construction Phase Services

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Presenter

Presentation Notes

Construction Administration or CA, also known as: Construction Phase Services and Site Visitations Your client needs to understand that CA is not Construction Management – which means you are not responsible for construction means and methods, scheduling, or budgeting. This is a VERY different responsibility and carriers substantial risk. Be sure the terms in your scope of services use the correct terminology for the services you’re providing From a risk management perspective this is an ideal offering as you have the ability to advise your clients that your involvement allows you to interpret and explain your design, which will have major benefits to your client. When you take on CA servvices you need to understand that the claim issued because you are now responsible more with the project


Contractual Clauses

Site Visitation:“In the event LAND SURVEYOR’S scope of services listed under Exhibit A shall include periodic site visits during the construction phases, LAND SURVEYOR shall be serving only in the capacity as a consultant to advise Client on issues involving progress and general design compliance. The LAND SURVEYOR does not assume any responsibility for the quality, sequences, techniques or timeliness of any contractor’s work, job site safety, continuous on-site inspections, or any issues that fall outside of the LAND SURVEYOR’S scope of services as defined in this Agreement”


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Presenter

Presentation Notes

Is this something that you all good agree to?


Contractual Clauses

Other Considerations:

• Trend of inexperience among CA providers and their staff

• If CA is provided by the prime engineer or architect, the experience and skill of prime’s CA staff can greatly impact you as the sub

• Be wary of lump sum fee for CA services. CA is the area where most design professionals underestimate their time

• “If it can’t be read, it wasn’t said” – Documentation (how and when) is key


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Presenter

Presentation Notes

Where we see claim activity


Contractual Clauses

• Set expectations up front – “we’re not perfect”

• Specifics that can lead to problems:o Designing out of sequenceo Fast-track scheduleo Unrealistic budget

• Keep talking to client, and help when a problem occurs• Identify the issues, and solve them quickly

Communicate and Document

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Presenter

Presentation Notes

By setting the stage up-front that designs are typically “one-of-a-kind” and that design deficiencies are to be expected on plans and specifications, your client understands that perfection is not a reasonable expectation. RFIs, change orders, and contingencies for design should be expected and are not an indication of design negligence! Once your client recognizes that designs aren’t intended to be perfect, it’s also helpful to point out what situations they, as the client, can create and impact which could increase the likelihood for design deficiencies. Asking for components to be designed out of sequence makes it difficult to foresee specific needs and how one thing impacts another. A fast-track schedule can be the result of trying to overcome a delay, and not only can this increase costs, but it can also create oversights and increases the potential for an error. And an unrealistic budget, whether it be the owner’s or the lowest-bidding contractor’s, can increase the potential for claims. Be firm about what can be modified and what cannot without compromising the integrity of your design. It seems to be a recurring theme, but frequently communicating with your client in difficult times can help address issues early. Doing so hopefully keeps the project on track, saves money, and controls schedule impacts.


Closing Thoughts• Unfortunately claims will happen, it is part of the business.

• A solid contract with appropriate terms and conditions will help deflect those claims

• Keep open communication between your staff and client

• Managing expectations is one key to a successful surveying firm

• Remember why you went into this business and don’t dwell on the negative

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