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Fwd: Re: Limit of Liability

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Limits fo Liability (LOL) are valid in some situations.  
However, two common tests that they many times must pass 

They must be negotiated; and
They must be a reasonable amount.

The Council of American Structural Engineers (CASE) in 
developing LOL language accomplished this by setting the 
LOL to the LARGER of your fee or $50,000, or an amount 
agreed to before beginning work.  A blank space can be 
provided to insert another amount.  Offering to agree to a 
different amount and providing a blank for such an amount 
was judged to make the LOL negotiated.  A fee/premium 
(based on a % of additional coverage/limit) is charged by 
a number of engineers for limits above the offered limits 
to both temper those inclined to ask for extreme limits on 
small projects and in recognition of the risk involved 
relative to the reward.  This really helps to connect the 
client with the cost of providing coverage. Project 
insurance is also an option abailable to many.  Also, E&O 
insurers may provide rebates to those they cover for LOL 
clauses.  Having the LOL clause initialed by the client 
adds credibility that the LOL was negotiated.

The consensus  of case law as related by attorneys, and 
opinions provided E&O insurers support that $50,000 is a 
"reasonable" amount.  A LOL set to too small an amount 
(fee only) may prevent you from being able to be quickly 
dropped from a claim in summary judgement -- which of 
course is the objective in avoiding frivolous or 
"shot-gun" claims.  A too small LOL may also be thrown out 
all together.

Structural Engineering is a risky business!

Ed Dean

<---- Begin Included Message ---->
Date: Mon, 7 Apr 1997 13:48:17 -0700
From: "Dennis S. Wish PE" <wish(--nospam--at)>
Reply-To: seaoc(--nospam--at)
Return-Path: null(--nospam--at)
Subject: RE: Limit of Liability
To: "'seaoc(--nospam--at)'" <seaoc(--nospam--at)>

Content-Type: text/plain; charset="us-ascii"
Content-Transfer-Encoding: quoted-printable

>From a previous post Jeff wrote:

Back to the issue of limiting your Liability to your fee. 
I can not
>remember when I have had a client agree to this. Of 
course this would=20
>great to get, but this seems somewhat unrealistic to me. 
I would never=20
>such a contract. I have found that this clause is most 
often presented=20
>engineers that do not have any insurance. "

I restrict my liability to my fee's less expenses and have 
done this for =
the past ten years or so. I make sure that every one of my 
clients reads =
the terms and conditions and initials each page. I make 
the terms very =
clear and in words that every layperson can understand. I 
want no =
questions left undisclosed once the contract returns to my 
To date, every one of my clients have signed the work 
agreement. I once =
checked with an attorney who reviewed it and simply asked 
if I felt that =
I was sufficiently covered. He advised me that there could 
always be a =
time when it could be disputed given enough money to 
There are only one or two others in my area that have E&O 
coverage and =
it is because they do work for local municipalities that 
require it. =
None of us have the resources to pay up to 15% of our 
gross income for =
insurance - not with the 30%+ that the state and Feds take 
off the top =
(not even considering health insurance, auto insurance and 
homeowners =
insurance). .
I have been threatened on only one occasion - not as the 
defendent, but =
pulled in as one of the related fields to the testing lab 
being sued. =
Without E&O, I was dropped from the suit since I did not 
have the deep =
pockets to try and collect from.
E&O insurance is not an option with my one man office. 
Than combined =
with my big mouth forced the testing lab's attorney to 
drop ONLY me from =
the named associates draged into the claim.
Possibly I have been lucky, but I don't see that I have 
much choice in =
the matter if I want to continue to work competivly and to 
feed my =

Dennis Wish PE

<---- End Included Message ---->

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Subject: RE: Limit of Liability
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