How to Avoid a Professional Liability Claim and What To Do ... · architect, engineer, land...

Copyright © 2019 by The Hartford. Confidential. For internal distribution only. All rights reserved. No part of this document may be reproduced, published or posted without the permission of The Hartford.

HELP US HELP YOU: How to Avoid a Professional Liability

Claim, and What To Do When a Claim Does Arise

Jessica Grund, Claims Professional

Lauren Griffith, Claims Professional

June 10, 2020

Copyright © 2019 by The Hartford. Confidential. For internal distribution only. All rights reserved. No part of this document may be reproduced, published or posted without the permission of The Hartford. 2

• Prevention and Preparation

– The Contract

– Documentation

– The First Line of Defense: Pre-claim Assistance

– Important Steps for Project Closeout

• What To Do When a Claim is Made

– Reporting

– Dispute Resolution Methods

• Closing the Claim

– Release

– Reimbursements

Today’s webinar will cover…

Agenda:


Preparation part 1: THE CONTRACT…


– The Top Five Provisions:

• Standard of Care

• Indemnification

• Scope of Services

• Ownership of Documents

• Dispute Resolution

– The Extras:

• Limitation of Liability

• Betterment

• Waiver of Subrogation

• Waiver of Consequential Damages

• Certificate of Merit

It all starts with your contract…

Contract language is important!


– Insured was the structural engineer for a townhome renovation in NYC.

– Neighbor filed suit for damage to adjacent wall in excess of $500,000 allegedly

caused by excavation activities, bringing in the owner, architect, and insured

engineer.

– Insured filed Motion to Dismiss, citing contract language in which the insured

specifically stated in the scope of services that underpinning and support of

excavation were specifically EXCLUDED.

– Insured was dismissed from the case.


SCENARIO



– Suggested changes and deletions

– Replacement language

– Identify areas of concern

The Hartford offers complimentary contract reviews.

Send your proposed contact for review

Performed by the Claims Team

Usually 24 to 48 hour turnaround


– SIGN IT AND SAVE IT!

• Make sure you and your client sign

and date the contract and any

addendums

• Initial any changes or deletions

• Save to the project file


What’s next?


Preparation part 2: Document, Document, Document

8


Document, Document, Document

• A complete copy of the project file will help you

defend your efforts in the event of claim and

hopefully lessen the likelihood of liability.

– Save all correspondence, emails, change

orders, notes, memoranda, field logs, design

drawings, specifications electronically or in a

file folder.

• This will also prevent headaches in the event you

receive a subpoena for documents many years after

the project completion.


– Make sure to keep a copy of the following:

• Any substitutions

• All field reports if you perform construction administration

– If you see an issue on the project, document it and document your

notification to the owner.


Sound business practices dictate keeping structured working files

from bid through completion.

Firms should create clear and repeatable document maintenance

procedures for employees to follows. Be consistent!


– Insured was sued for verbally approving a substitution on a condo project with

respect to the exterior wrap.

– When the exterior wrap failed and required replacement of the entire exterior

façade, the owner sued the insured and contractor, claiming the contractor

recommended the substitution and the insured approved it.

– The insured’s defense was that it verbally approved a different, more suitable

substitution but never approved the substitute method actually implemented.

– As there was no documentation surrounding either substitution, it was the

insured’s word against the contractor, embroiling them in years of litigation and

requiring multiple depositions.

– Documentation of the approval or rejection could have provided a solid defense

for the insured.


SCENARIO


Your first line of defense: PRE-CLAIMS ASSISTANCE


– Section V.A.2. of the policy indicates that if you become aware of a

situation that could lead to a claim during the policy period, immediately

notify us in writing, including:

• The entities involved

• The potential alleged act, error or omission

• The project type and location

• The dates the alleged error occurred

• The potential damages or injury

• How you were notified of the issue

• Include a copy of the proposal and/or contract, and any standard terms &

conditions

Pre-claim reporting basics

Who, what, where, when and how


– Protects you by insuring timely notice to the

carrier

– An assigned claims professional can walk you

through options

– If necessary, the claims professional can assign

counsel to assist at no cost to you

– This can often cut off a claim before its made

– $25,000 disciplinary actions reimbursement

– $25,000 FHA/ ADA/ OSHA regulatory

proceedings reimbursement

Then came a pre-claim…

Notification can do the following:

Other supplementary offerings


– Blanket accusations made on a project regarding pool tile and drain

specifications; assisted insured in drafting a letter advising that these

specifications were provided by a pool consultant hired direct by owner not by

architect. Owner then pursued the appropriate party.

– Investigation conducted by large domestic retailer concerning potential bid rigging.

Counsel assisted with document production, reviewed employee emails and

conducted internal interviews with employees. The effort prevented a claim from

being pursued.

Then came a pre-claim…

SCENARIO


Preparation Part 3: Project Closeout


– A copy of the stamped plans in the project file

– If possible, keep a copy of the certificate of substantial completion or

certificate of occupancy in the file

The work has been completed, what else is there to do?

Make sure to save the following documents:


A Claim is Made: What to do?


– A claim is “a demand for money or services received by the Insured arising

out of a wrongful act or pollution incident in the performance of

professional services.”

• Wrongful act is “an act, error or omission in the performance of professional services by

the Insured or by any entity or person, including a joint venture, for whom the Insured is

legally liable.”

• Professional services are “services the Insured performs for others in the practice of an

architect, engineer, land surveyor, landscape architect, construction manager, space

planner, land planner, interior designer, scientist, technical consultant, expert witness, or

as defined by endorsement to the policy.”

– Claim includes the institution of arbitration proceedings or service of suit.

A Claim? Now What?

How to identify a claim:


– The more time we have, the better

• If you’re not sure if you should report, call your broker

• Answer dates can be tricky, especially in federal court

• Even if there is no suit filed, get us involved early!

• When you notify a claim, the more information the better

– Same as a pre-claim, tell us the who, what where, when and how

– Include a copy of the contract

– Include any easily accessible relevant correspondence

– Preserve and/or pull your project file

A Claim? Now What?

Once you know it’s a claim, tell us about it!


– Waiver of Subrogation – the policy automatically acknowledges any waiver of

insurer rights given by a policyholder in a written agreement.

– Limitation of Liability

• Damages – Negotiate an amount that limits liability to the compensation

received by the Design Professional, a specific dollar amount, or limits of

the Design Professional’s available professional liability Insurance.

• Time – Contractually limiting period of time the Client can bring a claim.

For example, in states were the statute of limitations is ten years limiting

the time to bring a claim to five.

– Waiver of Consequentials – limits recoverable damages to direct costs to

address act, error or omission

What does your contract say?

Key Contract Provisions

If the claim is not in suit, this when a signed contract can stop a claim in its tracks.


– Mediation

– Mediation then litigation

– Litigation

– Arbitration

– Parties mutually agree on a neutral third party

to facilitate negotiations

– Not an admission of liability

– Discussions are confidential

– Time out of the office limited compared to trial

or arbitration

– Non-binding

– Mediation Credit standard on all Hartford A&E

policies

Resolution Remedies:

Common dispute resolution methods

Mediation can be helpful


– Insured’s services completed in October 1992 and that Plaintiff’s claims were time

barred based on statute of repose.

– We also advised the Court that Plaintiff failed to provide an expert to prove her

malpractice claim. Plaintiff did not submit opposition papers.

– After arguing the grounds for summary judgment based on Plaintiff’s stale claims,

the Court granted the summary judgment motion and dismissed plaintiff’s claims

against the insured.

A Lawsuit has been filed… What are your options?

– Certificate of merit / Affidavit of Merit

– Timeliness of claim - Statute of Repose / Statute of Limitations

– Failure to State Claim

Early Motion Practice

Scenario


– Subrogation action was commenced by the insurance carrier for the building

located adjacent to the construction project where the insured was the architect.

– Claims were made that during construction, including installation of formwork for

the building, there was an over pour of concrete which encroached upon the

adjacent building resulting in damage to the adjacent building.

– We argued that as the architect, the Insured was not responsible for the incident

and resulting claimed damages since the project had a separately retained

Special Inspector and Structural Engineer.

– Further, the Insured did not perform any services with respect to the design or

installation of the subject concrete forms at issue.

A Lawsuit has been filed… What are your options?

– Motion for Summary Judgment after discovery is complete

– Offers of judgment

If the claim is in suit at the close of discovery:

Scenario


Closing out the claim


The finale

If it is a claim not in suit:

• Sometimes the claim is not pursued

– Always best to try to obtain some sort of

documentation from the claimant

• Sometimes a settlement is reached

– If a settlement is reached, whether it is for in kind

services or payment of money, get a release

If a claim is in suit or arbitration:

• Voluntary dismissal: Get a signed dismissal order from the

opposing party

• Settlement via mandatory settlement conference or

voluntary mediation: get a release

1

2

How Claims Resolve


– Section F.4 = $500 reimbursement per person for attendance at

mediations, trials

– Think about why the loss occurred - weak contract? Failure to

document?

– Consider risk management procedures that could be implemented as a

result

Live and Learn…

Think about any reimbursable costs

Use the claim as a risk management tool


Questions?


• Report early

• Document, document, document

• Complimentary contract reviews

A few things to remember before you go….

Contact us if you have questions-

Jessica Grund – [email protected]

Lauren Griffith – [email protected]

mailto:[email protected]

mailto:[email protected]

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