Engineering Inc. - July/August 2007 - 26

he challenge for carriers is determining when the cycle will begin to turn around. lornA pArsons cna/Victor o. schinnerer t C Sullivan urges A/Es to “document everything” to assist with defending against future claims. This is especially true when contractors employ value engineering to reduce costs. If the A/E specifies “X” but the contractor chooses “Y,” and something goes wrong, Sullivan says, “the contractor could say, ‘that’s not my responsibility.’” Carriers urge design firms to use riskmanagement services, especially now that computers make them more easily available. London-based Beazley holds quarterly web seminars on risk-management topics such as contracts and defending against contractor claims. Schinnerer, for example, offers premium credits and deductible credits for firms that follow basic risk mitigation practices. Looking to the Future laims today “are not as rampant as they will be when the economy turns the other direction.” WyAtt sAnders professional liability agents network together with the softer market—enables more insurance carriers to shoulder the risk. Geotechnical claims involving soil condition and slope movement also are increasing, according to the survey. Any soil problem “can cause significant damage to the building itself, and they are very, very expensive cases to defend and investigate,” Rabasca says. Figure 1 Sullivan is keeping his eye on the subprime lending market, which he believes will have a “dramatic” impact on A/E firms if the number of personal liability claims made against member firms in F.y. 2006 Response Percent 0 1 2 3 4 5 64% 16.1% 8.0% 3.9% 2.7% 1.3% 1% 6 0.8% 7 8 0.2% 9 0.0% 10 0.2% More than 10 0 1.3% 10 20 Response Count 30 40 50 60 70 Figure 2 Cause of Claims 16% 14% Project Management (lack of training, management of human or technical resources, etc.) Contract (contract language, scope of services, no written contract, etc.) Communications (breakdowns when conflicts arise, documenting changes in scope, project team not aware of scope, etc.) 22% 24% Client/Project Selection (QBS vs. cost proposal, client not knowledgeable of construction, client/project financial strength, etc.) Error or omission of a technical nature Other 11% market implodes. If developers start filing for bankruptcy, Sullivan says, bankruptcy trustees looking to recoup funds will target designers. Parsons says she does not expect a 15year soft market. The challenge for carriers is determining when the cycle will begin to turn around. Sanders believes that the turn will begin in “six months to a year.” He expects the timing will coincide closely with the economy and the upcoming presidential election. Rabasca notes that the industry is “looking at one of the largest, most significant transformations to take place in decades and perhaps since the turn of the last century.” Thanks in part to new innovations, such as Building Information Modeling, sustainable design and lean construction, he says, traditional business models are undergoing drastic changes. Though the evolution holds promise for forward-thinking A/E firms, he says, it poses a challenge for insurance carriers, because a carrier’s risk increases as its role expands beyond traditional fronts. Parsons says the PLI market has been even more competitive in the first half of F.Y. 2007. Absent a huge increase in interest rates, or a world catastrophe, Parsons predicts a competitive market for the rest of this year and into the next. Complete results of the PLI survey will be available for purchase later this summer from the ACEC Bookstore at http://store. acec.org/. n Maureen Conley is a freelance writer based outside Washington, D.C. 13% 26 ENgINEERINg INC. July / August 2007

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Engineering Inc. - July/August 2007

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