Risk Management ~ for ~ Professional Surveyors ~ ~ ~ Tennessee Association of Professional Surveyors

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1 Risk Management ~ for ~ Professional Surveyors ~ ~ ~ Tennessee Association of Professional Surveyors Murfreesboro, Tennessee March 9, 2018 Presented by Gary R. Kent, PS

2 This program is not a substitute for, and should not be construed as, legal advice

3 Source material and recommended resource material: Staking Out Your Future Schinnerer s Guide to Managing Professional Liability Exposure A Publication of Victor O. Schinnerer Company NSPS.us.com EStore Books $20.00

4 Professional Liability Insurance Claims Reprinted with permission of Victor O. Schinnerer & Company, Inc.

5 Professional Liability Insurance Claims Reprinted with permission of Victor O. Schinnerer & Company, Inc.

6 Professional Liability Insurance Claims Reprinted with permission of Victor O. Schinnerer & Company, Inc.

7 Professional Liability Insurance Claims Reprinted with permission of Victor O. Schinnerer & Company, Inc.

8 Professional Liability Insurance Claims Reprinted with permission of Victor O. Schinnerer & Company, Inc.

9 Professional Liability Insurance Claims Notable Risk Management facts from Victor O. Schinnerer & Company, Inc.: : Claims requiring indemnity payments ranged from 21.2 to 44.9%. Firms carrying higher deductibles will results in fewer payments. In 2014, 70% of claims could be considered meritless, but 30% of those required defense payments above the deductible. 12.3% of claims came from 3 rd parties Number of claims per 100 surveying firms topped out at 19 in 1989 and was at 6 in (Volume of work? Better risk management?)

10 Professional Liability Insurance Claims Most expensive claims? Construction layout

11 Professional Liability Insurance Claims Common origination of claims No common understanding of additional services Untimely follow-up on unpaid invoices Poor communication on the part of the surveyor Untimely response to client questions or concerns

12 The surveyor s professional obligation Exercise reasonable Care Skill Diligence in providing professional services

13 Survey standards as a risk management tool Well-written standards Limit liability by providing a guideline for surveyors in providing professional services Help resolve questions as to the appropriate quality and content of surveys Provide a leveling effect amongst competitors when writing proposals Help prevent confusion on the part of potential clients on what level of services will be provided

14 Survey standards as a risk management tool Written standards set a minimum standard of practice Help establish the normal standard of care which is likely higher than the minimum standard

15 Survey standards as a risk management tool State mandated standards or guidelines Surveying society standards NSPS Pennsylvania ALTA/NSPS Land Title Survey standards

16 The written contract as a risk management tool The three most important items? Scope Clear and precise Compensation Prompt payment No unreasonable withholding Adjustment or renegotiation for termed or delayed projects Schedule Not a warranty; must allow for necessary adjustments

17 Professional Liability Insurance Claims Reprinted with permission of Victor O. Schinnerer & Company, Inc.

18 The written contract as a risk management tool Clearly stated expectations Parties rights and obligations are clear Risks and rewards are addressed and appropriately allocated Insurance is available to support obligations Change orders are addressed Understanding is confirmed in writing

19 The written contract as a risk management tool Onerous terms and conditions to watch for Express guarantees or warranties Not covered by professional liability insurance Warranty of facts is fine Warranty of services is not Clauses may be cleverly disguised; be cautious

20 The written contract as a risk management tool Onerous terms and conditions to watch for Indemnity or hold harmless clauses May shift liability from one party to another May not be insurable if unrelated to the surveyor s failure to perform pursuant to a standard of care Negligence is already a legal remedy; no reason for indemnity for negligence

21 The written contract as a risk management tool Onerous terms and conditions to watch for Highest standard of care [or highest professional standards ] Cross out and substitute with clauses like will be performed pursuant to the normal standard of care and [applicable standards]

22 The written contract as a risk management tool Terms that should be included Responsibility for work The contractor shall be solely responsible for all of the elements related to a survey project that will lead to construction The surveyor should bear no such responsibilities

23 The written contract as a risk management tool Terms that should be included Worker safety Job site safety is the owner or general contractor s responsibility, not the surveyor s

24 The written contract as a risk management tool Terms that should be included Agency Unless hired directly by the contractor, the contract should state that the surveyor is acting as an agent of the owner Can help protect the surveyor from claims brought by the contractor

25 The written contract as a risk management tool Terms that should be included Document control and ownership Documents should be instruments of service and the property of the surveyor Documents should not be products which might otherwise be owned by the client Sophisticated clients may require that ownership of documents be transferred to the client Note that copyright and ownership are two different issues

26 The written contract as a risk management tool Terms that should be included Limitation of liability Value of contract or $? whichever is less Particularly appropriate on low fee projects with relatively high potential liability Business decision to strike

27 The written contract as a risk management tool Terms that should be included Dispute resolution Mediation, arbitration or litigation? Professional liability managers find mediation o less expensive o less time-consuming o less adversarial

28 Written contracts for Land Title Surveys Protect both you and the client But, the survey is typically required by whom? The lender Yet, the surveyor is usually negotiating and contracting with whom? The seller or buyer And the seller or buyer has what interest in a good (not to mention expensive) survey? None?

29 Written contracts for Land Title Surveys Specify scope 2016 ALTA/NSPS Standards Applicable state standards Table A items Exceptions/Qualifications to Table A items (e.g., utilities, zoning, wetlands) Section 7 Certification and certified parties Address lender s certificates and additional parties Title work to be provided Number of revisions/sets of comments

30 Written Contracts Land Title Surveys

31 Addressing Risk Management issues Certification Problem: Lender insists on its own certificate Often at the last minute Surveyor is admonished not to change anything in the certificate These are hollow threats having only one purpose To intimidate the surveyor into taking on inappropriate and unacceptable liability

32 Addressing Risk Management issues Certification Response: Surveyor has an obligation and responsibility to: Rewrite the certificate so it does not: o Contain express guarantees or warranties o Violate the surveyor s registration act o Constitute the practice of law On an ALTA/NSPS Land Title Survey: Provide it on a separate sheet, not on the face of the plat o (see Section 7 of the ALTA/NSPS Standards)

33 Addressing Risk Management issues Dispute resolution Problem: Client s contract contains no dispute resolution clauses Recall previous slide

34 The written contract as a risk management tool Terms that should be included Dispute resolution Mediation, arbitration or litigation? Professional liability managers find mediation to be: o less expensive o less time-consuming o less adversarial

35 Addressing Risk Management issues Dispute resolution Response: Acknowledging in the contract that disputes may arise is a first step towards amenable resolution of a dispute

36 Addressing Risk Management issues Dispute resolution Mediation Voluntary process Good faith (presumably) negotiation assisted by a facilitator ( mediator ) Mediator should be trained Usually an attorney, but can be otherwise May be mandated by a court prior to a trial

37 Addressing Risk Management issues Dispute resolution Arbitration Adjudication of a dispute by a selected neutral Note - Often allows consolidation and joinder so all parties are involved (may be detrimental to surveyors since they are often dragged into a dispute that had relationship to the professional services performed)

38 Addressing Risk Management issues Dispute resolution Certificate of merit Controls access to court system by mandating early determination by an expert witness that the harm could have been caused by the defendant Similar to a screening panel that evaluates the likelihood of fault being found

39 Addressing Risk Management issues Dispute resolution Other possible contractual arrangements Partnering o Contractually agreeing to resolve issues before they become disputes o Enables problem-solving at the lowest staff level possible

40 Addressing Risk Management issues Dispute resolution Other possible contractual arrangements Dispute review board o Independent experts are approved to evaluate problems and suggest resolution for agreement by parties

41 Addressing Risk Management issues Dispute resolution Other possible contractual arrangements Prevailing party has the right to collect legal fees May help prevent meritless claims May put party with more financial resources in a stronger position to force settlement in cases with little merit May be viewed as being outside the scope of professional liability insurance coverage

42 Addressing Risk Management issues Provision of CAD files Problem: Client insists on surveyor providing CAD files to architect/engineer

43 Addressing Risk Management issues Provision of CAD files Response: Contract needs to address intellectual property ownership in 5 important ways, i.e., 1. Signed/sealed copy controls over CAD files 2. Electronic info is a component of the instruments of service for use only on the specific project 3. No representation as to the use of the information for other purposes, durability, or medium 4. Any use other than for the intended purpose is at receiver s risk; receiver shall indemnify from claims, costs, losses, damages 5. Transfer of info does not transfer license to the underlying software and does not extinguish rights of surveyor to reuse info in his/her practice

44 Addressing Risk Management issues Provision of CAD files Other considerations Not the surveyor s responsibility to distribute subsequent changes to the provided files If client owns files, can surveyor transfer them to other parties? Who will be using the data? Surveyor needs to recognize that control over data is lost once transferred

45 Addressing Risk Management issues Surveying on a hazardous site Problem: Client wants you to provide surveying services on a site with environmental hazards

46 Addressing Risk Management issues Surveying on a hazardous site Response: Client needs to provide protections to the surveyor Provide protection and defense for any claims arising out of the release of any contaminants Provide for appropriate compensation for increased level or service and risk Allocate as much of the risk as possible to the contractor who is insured for, and can manage, the risks

47 Addressing Risk Management issues Surveying on a hazardous site Other considerations Although the likelihood of culpability is low, the chances of a third party claim are real Preferred method of controlling risk is release and indemnity agreement from client for any claims against the surveyor resulting from the actions of the contractor

48 Addressing Risk Management issues Indemnification clauses Problem: Client wants surveyor to defend it from any claims, costs, losses and damages resulting from the surveyor s work Recall previous slide

49 Addressing Risk Management issues Indemnification clauses Response: Your legal duty does not exceed the indemnification of losses directly caused by your negligence and that obligation is covered by your E & O policy Your contract should not extend your liability to parties to whom you would not normally be liable If you decide to take on risks not otherwise legally required, you should be compensated accordingly

50 Addressing Risk Management issues Additional insured on your policy Problem: Client wants to be named as an additional insured on your professional liability policy

51 Addressing Risk Management issues Additional insured on your policy Response: Be cautious, client does not understand the nature and scope of professional liability insurance Client cannot be named as an additional insured E & O policies pay on behalf of the named insured for substandard performance, not to the insured Rely on your broker to help educate the client s attorney

52 Addressing Risk Management issues High risk projects Problem: Client wants you to take on a project that involves risks beyond your control or far in excess of the compensation you will receive

53 Addressing Risk Management issues High risk projects Response: Contractual provisions that shift risk Limitation of liability Indemnification by client for expenses, losses or damages caused by risks beyond the surveyor s control e.g., meritless claims

54 Addressing Risk Management issues Standard of care Problem: Client wants you to perform the work to the highest professional standards Highest is vague, immeasurable and unattainable Common law standard is a duty to exercise the degree of learning and skill ordinarily possessed by a reputable surveyor practicing in the same or similar locality and under similar circumstances Be aware that client attorneys typically know that highest standard of care clauses hold the surveyor to an unachievable standard

55 Addressing Risk Management issues Standard of care Response: Educate client that a measurable standard is necessary; or more compensation is required to account for the higher level of responsibility and liability

56 The written contract as a risk management tool Review sample contract

57 Staking Out Your Future Schinnerer s Guide to Managing Professional Liability Exposure A Publication of Victor O. Schinnerer Company NSPS.us.com EStore Books $20.00

58 The Schneider Corporation Gary R. Kent, PS 8901 Otis Avenue Indianapolis, IN Phone

SHORT FORM OF AGREEMENT BETWEEN OWNER AND ENGINEER FOR PROFESSIONAL SERVICES

SHORT FORM OF AGREEMENT BETWEEN OWNER AND ENGINEER FOR PROFESSIONAL SERVICES THIS IS AN AGREEMENT effective as of March 3, 2016 ( Effective Date ) between College Community School District ("Owner") and