Engineering Inc - July/August 2019 - 28

Rabasca agrees, noting technical claims are rising, and while
AXA XL does not yet have the data to fully identify the causes,
it appears that a combination of the economy, availability of
qualified professionals and poor quality control may be leading
to this trend. He is also seeing increasing claims caused by
inexperience or inappropriately supervised team members, both
in the design and construction phases of the project. "Most
of which could have been avoided or at least mitigated with
properly trained professionals," says Rabasca.
Michael Dodd, general counsel at Shannon & Wilson,
Inc., sees three common denominators in PLI claims:
communication, observation and documentation.
"Designers should communicate what services are, and are
not, included in very clear, precise language that a lay reader can
understand," he says. "It is also critical to observe what is going
on around you, not only in your work but from a health and
safety standpoint."
Designers also should document everything they commu-
nicate and observe, according to Dodd. "You may have
communicated something perfectly, but if it is not in writing, it
did not happen, at least from a court's perspective," he says.
KPFF Consulting Engineers is experiencing slightly higher
frequency and severity of claims, according to Jefferson Asher,
managing principal. His main worry: senior-level employees
being stretched too thin, which can lead to mistakes.
"I also see contractors and owners more interested now in
getting into formal litigation battles, particularly on design-build
projects," says Asher.
This project delivery method shifts much risk from owners to
the design-build team and is becoming more popular. Referring
to a recent $600 million lawsuit, Dodd believes such large
projects have the potential to bankrupt a firm. "None of us, not
even the largest firms, carry that much insurance," he says.
Among smaller and midmarket design firms, Jim Schwartz,
U.S. A&E focus group leader and underwriter at Beazley, sees a
hint of increases in frequency and severity of claims. "These are
probably driven by higher limits being demanded by owners and
clients," he says.

Furthermore, the limits required on state government projects
in Virginia keep escalating and are generally non-negotiable,
according to Jeffrey Lighthiser, president and CEO at Draper
Aden Associates. "As a civil engineering firm, typically our role is
pretty small compared with the cost of overall construction, yet
we are being held to the same insurance limits as the architects,"
he says.
Project limits of $10 million per claim/$10 million aggregate
are double from just four years ago, according to Lighthiser.
But Morgan West, president of PLAN and president and
CEO at Dealey, Renton & Associates, observes that projects
have increased in complexity and cost. "A hospital today, for
example, is not what it was just a few years ago, and the limits
have not really kept up," he says.
EVALUATING AND MANAGING RISK

When evaluating and managing risk, J-U-B uses a "go/no-go"
checklist that includes three important risk control elements:
whether it is a client J-U-B wants to work with, whether it is
work J-U-B is competent in, and finally, the firm takes a serious
look at the contract.
"If the contract is bad-uninsurable-that will stop us from
moving forward," says Haener. 
Many ACEC Member Firms follow similar strategies-49
percent frequently or sometimes turn down work, and the main
factors are contract terms (69 percent), high risk (62 percent)
and client history (53 percent).
Even though it may go against his instincts to turn down work,
Lighthiser will do so if there is a sense of increased risk with a
potential client. "We evaluate the risk for every job, and some-
times we have to make challenging business decisions," he says.
"But signing contracts with uninsurable language makes it diffi-
cult for other firms that do pay attention because if a claim arises,
the only recourse might be to put that firm out of business."
KPFF also does not like to turn down work. However, when it
does, which occurs infrequently, the reason is usually a record of
problems with the client or contract terms so unreasonable they
cannot be accepted, according to Asher. For every project, KPFF
looks at whether the funding
and schedule are sufficient,
Causes of Claims
and whether the team has the
48% necessary capabilities. "And
Communication
we try to take a very sober
48% approach when assessing
Third-Party Claim
that," says Asher.
42%
Error or Omission of a Technical Nature
"Contracts are an impor-
tant means of managing risk
23%
Client/Project Selection
but are becoming longer and
23%
Contract
more complicated, and own-
ers are a little more unwilling
21%
Scope of Services
than in past to make changes,"
says Joe Bunker, vice president
19%
Project Management
and corporate secretary of
23%
Other
Strand Associates, Inc. "We
0%
10%
20%
30%
40%
50% have not gotten involved in
condos, schools, apartment
buildings or geotech services,
28

ENGINEERING INC.

JULY / AUGUST 2019
Engineering Inc - July/August 2019

Table of Contents for the Digital Edition of Engineering Inc - July/August 2019
