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Re: Limit of Liability

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> Jeff Smith wrote:
> Snip...
> > If my client has an attorney review my contract, 99.99 % of the time they
> > will not accept a limit of liability clause, no matter how small the job. I
> > have had some agree to a LOL = policy limits. I think that some of the
> > clients that sign this clause, do not know what it means.  I currently have
> > a proposal for a job that I am thinking of walking away from unless I get
> > some sort of LOL clause signed. I understand that LOL is not holding up in
> > court recently anyway. The same attorney also wants to omit any reference
> > to the Construction Industry Rules of the American Arbitration Association.
> > (Maybe he has not had much luck with the AAA  :^))
> >
> > If anyone has any thoughts on this please reply to the list or email me
> > directly.

I agree that some clients will "go with the flow" and sign a LOL
contract just to avoid discussing the provision. Perhaps if we were more
comfortable defending the provision as opposed to just using it because
it gives a reduction in premium we could avoid feeling sheepish.


Bill Allen wrote:

> I've had similar discussions with clients, attys and my E&O broker. The
> concensus has been that LOL is not enforcable but it is also not
> practical ($) to sue an engineer for more than his/her policy limits.
> Therefore, the probability is that, if the damages exceed the engineer's
> policy limit, attys on both sides will more than likely settle for the
> policy limit. I've also been told (by an atty) that this would be true
> for both sole proprietors as well as corps. It does make sense that the
> policy limit exceed the engineer's personal assets. In other words, if
> the engineer had $100k policy limit and had $500k in personal assets,
> then the plaintiff may want to go to court. If the engineer had $500k
> policy limit and $200k in assets, then the attys would probably settle
> for the policy limits.

Here lies the root of difficulty I have with defending a LOL clause. If
there are indeed "problems" with court cases, lets here more about it.
I'm not able to have daily, weekly ar even monthly contact with the
legal profession and hence when I read that someone (the courts) is
disenchanted with contracts that limit liability then it takes a notch
out of my confidence in defending it. I realize that we don't want to
throw the baby out with the bath water and will continue to try to have
this provision included in contracts. Perhaps the more important
discussion to have up front with all clients is the one which gives a
frank admission of policy limits. BTW, one should be aware of the claims
made provision. The limit at any particular time is not the stated
policy limit, but that number minus any other drawdowns such as legal
fees and other pending "situations". At the very least, it would seem
that a contract which says all I have in P/L insurance is $$$ then the
situation can be said to have been declared and perhaps move those
clients who think the structural should have a dollar limit which
matches his/her total construction budget toward project insurance or
some other solution if they want it so bad.

Hey, is this a business issue we're discussing here?!....

Barry H. Welliver