Professional liability insurance for engineers


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Professional liability insurance for engineers. Case study of 1-35 bridge collapse in Minnesota.

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Professional liability insurance for engineers

  1. 1. Professional Liability Insurance for Engineers This PowerPoint is available online at:
  2. 2. Professional Liability Insurance for Engineers
  3. 3. Update on MPLS Bridge Collapse <ul><li>Condition of US Highway Bridges by State: 2007 12% structurally deficient. </li></ul><ul><li>1,907 ft long, eight lane freeway bridge. </li></ul><ul><li>A deck truss with steel multi-girder approach designed in 1961 (Sverdrup & Parcel and Associates, Inc.) and built in 1967. Predecessor firm to Sverdrup Corp. acquired by Jacobs Engineering Group, Inc. in 1999. </li></ul>
  4. 4. Update on MPLS Bridge Collapse <ul><li>March 2001 University of MN, Dept. of CE report, “The detailed fatigue assessment…shows that fatigue cracking of the deck truss is not likely. Therefore, replacement of this bridge, and the associated very high cost, may be deferred.” </li></ul><ul><li>In 2004 URS began an engineering analysis of the bridge. </li></ul>
  5. 5. Update on MPLS Bridge Collapse <ul><li>June 5, 2006 inspection report described bridge as “structurally deficient.” </li></ul><ul><li>Progressive Contractors, Inc. resurfacing on August 1, 2007. </li></ul>
  6. 6. Update on MPLS Bridge Collapse <ul><li>August 1, 2007: 13 deaths, 145 injured. </li></ul><ul><li>MN Tort Claims Act: $300,000 per person $1,000,000 per accident. </li></ul><ul><li>$37MM State Fund – MN Legislature </li></ul><ul><ul><li>$24MM capped at $400,000/person. </li></ul></ul><ul><ul><li>$12.64 MM supplementals. </li></ul></ul>
  7. 7. Update on MPLS Bridge Collapse <ul><li>On April 16, 2009 all 179 eligible victims accepted final settlements ranging from $4,500 to $2.2 million. </li></ul><ul><li>Released State, City and University of Minnesota. </li></ul>
  8. 8. Update on MPLS Bridge Collapse <ul><li>NTSB released final results of its investigation 11/13/08. </li></ul><ul><li>Probable cause of collapse inadequate load capacity due to a design error of gusset plates at U10 Nodes which failed. </li></ul><ul><ul><li>Increase in weight from bridge modifications (2” of concrete = +20% design load). </li></ul></ul><ul><ul><li>Traffic and construction loads on day of collapse - 578,000 pounds. </li></ul></ul>
  9. 9. Update on MPLS Bridge Collapse <ul><li>Contributing to design error </li></ul><ul><ul><li>QC failure on main gusset plate calculations. </li></ul></ul><ul><ul><li>Inadequate design review by Federal and State transportation officials. </li></ul></ul>
  10. 10. Update on MPLS Bridge Collapse <ul><li>In 2009 20 law firms filed > 100 negligence lawsuits. </li></ul><ul><li>NTSB wrong on fractured gusset plate. </li></ul><ul><li>Corroded roller bearings was cause </li></ul><ul><li>PCI piled materials equal to a Boeing 747 </li></ul><ul><li>State of MN sues URS to recover $37MM. </li></ul>
  11. 11. Update on MPLS Bridge Collapse <ul><li>URS settles with MN for $5mm March 2010 </li></ul><ul><li>PCI settles with victims for insurance policy limits March 2010 - $10mm </li></ul><ul><li>PCI settles with MN for $1mm March 2010 </li></ul><ul><li>Victims vs URS </li></ul>
  12. 12. In re Individual 35W Bridge Litigation, 786 N.W.2d 890 (Minn. Ct. App. 2010) <ul><li>PCI & URS bring 3 rd party contribution and indemnity claims against Jacobs Engineering whose predecessor firm designed bridge in 1960’s. </li></ul>
  13. 13. In re Individual 35W Bridge Litigation, 786 N.W.2d 890 (Minn. Ct. App. 2010) <ul><li>Minnesota Court of Appeals held Jacobs entitled to dismissal of both claims: </li></ul><ul><ul><li>Contribution claim – statue of repose removed common liability </li></ul></ul><ul><ul><ul><li>Court rejects argument that statute of repose is merely a technical defense </li></ul></ul></ul><ul><ul><ul><li>Statute of repose extinguished Jacobs’ liability in 1977 - thirty years before the bridge collapse </li></ul></ul></ul><ul><ul><li>Indemnity Claim – No relationship between URS and Jacobs that would establish vicarious or derivative liability </li></ul></ul>
  14. 14. Update on MPLS Bridge Collapse <ul><li>Feb 2010 3 day court ordered mediation no results on URS case </li></ul><ul><li>Aug 2010 13 hours of negotiations URS </li></ul><ul><li>Threat of punitive damage ruling by judge </li></ul><ul><li>URS and insurers agree to $52.4 mm </li></ul><ul><li>MN vs Jacobs – MN Supreme Court accepted appeal April 2011 </li></ul>
  15. 15. URS State of Minnesota 07/29/11 Page $37 million fund 4/2009 Negligence, Breach of Contract and Violation of Professional Standards $1 million settlement $10 Million settlement for maximum under insurance policies – March 2010 Allegations Against PCI : Excessive loading of materials Removal of critical bridge deck elements Failure to do any engineering analysis Gusset Plates too thin Weight of Construction Materials Jacobs Engineering PCI Progressive Contractors Inc. 3P Beneficiary NTSB March 19, 2010 $5 million settlement Breach of Contract and Negligence Key_________ Litigation: Settlements: VICTIMS 13 Deaths 145 Injuries $95.6 Million Received Original Design Contribution and Indemnity Insurance Memorial $52.4 million $2.3 mil $1.5 mil $48.6 million
  16. 16. Forms of Practice <ul><li>Sole Proprietorship </li></ul><ul><li>Partnership </li></ul><ul><li>Limited Liability Partnership (LLP) </li></ul><ul><li>Limited Liability Company (LLC) </li></ul><ul><li>Corporation </li></ul>
  17. 17. Statutes of Repose <ul><li>Bar actions against architects and engineers after a specified period of time following completion of services or substantial completion of construction. </li></ul><ul><li>Statutes of limitations bar actions against architects and engineers after a specified period of time following an injury or discovery of a deficiency. </li></ul>
  18. 18. Certificate of Merit Statute <ul><li>Requires plaintiff attorney obtain certification from an impartial third party (practicing same discipline) stating in writing there is a fundamental basis for the negligent complaint. </li></ul><ul><li>11 states have viable statutes. </li></ul>
  19. 19. Design Professional Contracts <ul><li>AIA Contract Documents </li></ul><ul><li>EJCDC Contract Documents (ASCE, ACEC, NSPE, AGC + 15 others) </li></ul><ul><li>AGC Contract Documents </li></ul><ul><li>Construction Owners Assn. of America </li></ul><ul><li>Design Build Institute of America </li></ul>
  20. 20. When Insurance Will Not Protect <ul><li>Assume liabilities by contract that are excluded. </li></ul><ul><li>Do or fail to do something to invalidate coverage. </li></ul><ul><li>When damages and costs exceed limits of liability. </li></ul>
  21. 21. Design Professional Liability Insurance <ul><li>Covers claims from rendering or failing to render professional design services. </li></ul><ul><li>Claims made trigger. </li></ul><ul><li>Prior acts coverage. </li></ul><ul><li>Defense and payments to third parties. </li></ul><ul><li>Endorsements and exclusions. </li></ul><ul><li>Limits/deductibles and cost. </li></ul><ul><li>Contractual liability (vicarious liability of consultants). </li></ul><ul><li>Extended Reporting Periods (Tail). </li></ul><ul><li>Practice policy vs. project policy. </li></ul>
  22. 22. Understanding Claims Made <ul><li>Claim made during policy period. </li></ul><ul><li>Claim or circumstance reported during policy period (or if ERP activated). </li></ul><ul><li>Negligent act happened after prior acts or retroactive date. </li></ul><ul><li>Good faith statement no knowledge of negligent act on inception date of policy. </li></ul>
  23. 23. Insurance Availability for Practice Policies <ul><li>CNA/Schinnerer </li></ul><ul><li>Everest National </li></ul><ul><li>Lexington/NH (AIG) </li></ul><ul><li>One Beacon </li></ul><ul><li>XL/Hudson </li></ul><ul><li>Argonaut Ins Co </li></ul><ul><li>ACE USA </li></ul><ul><li>St. Paul/Travelers </li></ul><ul><li>Hanover Ins Co </li></ul><ul><li>Catlin Ins Co Inc </li></ul><ul><li>Admiral Ins Co </li></ul><ul><li>Ironshore Spec Ins Co </li></ul><ul><li>Evanston Ins Co </li></ul><ul><li>RA&MCO </li></ul><ul><li>National Casualty Co </li></ul><ul><li>Beazley Ins Co </li></ul><ul><li>Lloyds of London </li></ul><ul><li>RLI Ins Co </li></ul>
  24. 24. TEXAS UPDATES <ul><li>Case Law – AIA B151 Balcony Case </li></ul><ul><li>HB274 - Loser Pay Bill </li></ul><ul><li>HB425 – Certificates of Insurance </li></ul><ul><li>HB2093 – Anti Indemnity and Anti-Additional Insured Legislation </li></ul>
  25. 25. Black + Vernooy Architects (BVA) v. Smith, 2010 Tex. App LEXIS 9784 (Tex. App. Dec. 8, 2010) <ul><li>Jury upholds verdict against architect based on construction administration obligations </li></ul><ul><ul><li>Architect designs home; Standard AIA B151-1997, Abbreviated Standard Form of Agreement between Owner and Architect </li></ul></ul><ul><ul><li>Contractor did not construct balcony in accordance with Architect’s design </li></ul></ul><ul><ul><ul><li>Thin metal clips used in place of joist hangers, and nails instead of bolts </li></ul></ul></ul><ul><ul><ul><li>Deviations from design were evidenced as observable, but were not observed </li></ul></ul></ul><ul><ul><ul><ul><li>Architect was unaware of defects </li></ul></ul></ul></ul><ul><li>AIA contract language required Architect to periodically visit the site and “endeavor to guard the owner against defects and deficiencies” </li></ul><ul><ul><ul><ul><li>Architect’s liability was upheld based on this obligation </li></ul></ul></ul></ul><ul><li>10% of liability attributed to BVA - more than $380,000 in damages owed, plus prejudgment interest </li></ul>
  26. 26. HB274 -Texas Loser Pay Bill <ul><li>Allows early dismissal of actions that “have no basis in law or fact on motion and without evidence,” with fees paid to the winner </li></ul><ul><li>Promotes cost-effective resolution and lower discovery costs for civil actions with amounts in controversy greater than $10,000 and less then $100,000. </li></ul><ul><li>Expands cap on fees recoverable by party whose settlement offer is rejected </li></ul><ul><li>Prevailing party, not just the claimant, able to recover reasonable attorney fees </li></ul>
  27. 27. Certificates of Insurance (COI) <ul><li>January 1, 2012 effective date </li></ul><ul><li>Only TDI approved forms can be used </li></ul><ul><li>Acord form will be approved </li></ul><ul><li>“ for information purposes only” </li></ul><ul><li>COI may not convey a contractual right </li></ul><ul><li>Fine of $1,000 per violation </li></ul>
  28. 28. Anti-Indemnity and Anti-Additional Insured HB2093 <ul><li>Prohibits and voids broad form and intermediate indemnity clauses (sole or concurrent negligence) </li></ul><ul><li>Prohibits and voids additional insured coverage for same types of conduct </li></ul><ul><li>Except to employees of indemnitor or contracts for residential or public works projects </li></ul><ul><li>Jan 12, 2012 – Owners and GCs to revise contracts and insurance programs </li></ul>
  29. 29. RISKPRO Insurance Agency, LLC Gerald P Brunker, CPCU, ARM Principal/Owner <ul><li>Facebook: Gerald Brunker & RISKPRO Insurance Agency, LLC </li></ul><ul><li>Twitter: RISKPROInsAgy </li></ul><ul><li>LinkedIn: Gerald Brunker </li></ul><ul><li>Blog: </li></ul><ul><li>Email: [email_address] </li></ul><ul><li>This presentation is available online at: </li></ul><ul><li> </li></ul>