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RE: E/O Insurance

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Roger,
This is an excellent report on how "underwritten" insured engineers
really are. Insurance is the pot of gold and because of this; the legal
profession will sue under a contingency contract with the client because
it almost always ends in a settlement without litigation.
What does this really mean? If the engineer decides to protect his or
her reputation, he does so without the consent of the insurance company
that represents him under his E&O policy. If he does not, then the
settlement costs him a deductible and challenges his creditability. 
The way I see it is that it is a no-win situation and as you noted, you
might be safer from suit if you go "bare".

I had the same type of meeting with an attorney. The first time it was
an issue if I was responsible for the retrofit of a building that turned
out to be reinforced. The answer here was that I was designing base on
the test results of a laboratory hired to determine if the walls were
reinforced. The Pachometer used had a problem and the technician did not
verify if the batteries were good or bad. In short, his equipment failed
and he interpreted it as not finding reinforcing in the building. I
should not have been sued, but I was named as a cross-complainant and
later dropped because I did not have E&O coverage. 

The second time, I was asked to review another engineers calculations
and report. The engineer erred in the calculations and interpretation of
the testing labs report. However, the fact was that the engineer was not
given the entire report nor was the engineer allowed to do additional
testing or find out what damage the owner had caused in exposing some of
the problem areas he claimed existed. In this case, the attorney I
represented wanted the truth and if there was no case so be it.

I've had another attorney replace me because he did not like the report
I gave him. He wanted to nail the contractor for an error but the
problem was not with the contractor even though he was a poor
contractor. In this case I had to address the fact that he was on the
right side of the issue and did a decent job. 

In almost all cases it works out to a settlement before litigation or it
becomes a pissing contest to see who has the best qualifications and who
is most believable in court and who wears the best fitting suit and
looks corporate. It has little to do with how accurate the facts are and
in some case, engineers overstep the limits and spin the information to
suit those who are paying them. There is a lot wrong with the system and
maybe this is why the insurance companies are dropping engineering
coverage.

Dennis S. Wish, PE

-----Original Message-----
From: Roger Turk [mailto:73527.1356(--nospam--at)compuserve.com] 
Sent: Friday, November 21, 2003 10:34 AM
To: SEAOC Listservice
Subject: Re: E/O Insurance

Paul,

Apologies for the long response.

Insurance companies will frequently refer to "underwriting losses" when
they 
increase rates.  "Underwriting losses" refer to payments made by the
company 
being greater than the premiums collected, and conveniently omits income

received from investments.

You ask some very good questions about "going bare."  If a client
requires 
E&O insurance, I try to find out what the client expects the E&O
insurance to 
do as far as they are concerned.  Usually, they expect to be "protected"
by 
the insurance, however, they are generally not aware that E&O insurance
is a 
"claims made" insurance policy, as opposed to an "occurrence" policy,
i.e., 
that the policy must be in effect when the claim is made, not just when
the 
design is done.  If the client still insists on E&O coverage, I offer
them 
that I will try to obtain "project coverage" for a specified number of
years, 
which would really protect the client, but that would be a reimbursable
cost 
to the client as it applies to his/her project only.  I have yet had a
client 
take me up on the project coverage, maybe it is because some years ago 
Arizona rescinded the "deep pocket" liability provisions of the law and
made 
parties to a lawsuit only responsible for *their* portion of any award.

So, what protection does E&O insurance provide to either the insured,
client 
or public?  In my opinion:

None, if you have it when the project is designed, and don't have it
when the 
claim is made.

None, if you have it when the claim is made, but the policy requires the

insurance be continuously in force from when the design is performed to
when 
the claim is made.

None, if the attorney selected by the insurance company offers to settle

(usually within the deductible) and you don't agree.

None, if your present insurance company decides to stop offering E&O 
insurance and your new company will not cover work designed under
previous 
policies.

None, if you want to be represented by an attorney of your choice,
instead of 
an attorney selected by the insurance company.

As a side note, I met with an attorney for a large corporate client 
concerning a project in which some failures were occurring.  The
attorney 
kept asking me if the structural engineer for the project made a mistake
in 
his calculations.  My response was that the calculations were correct,
but 
the wrong criteria was used.  In the end, the attorney remarked that
they 
could not sue the engineer if a mistake had been made.  Whether it was 
because of pride or advice, the engineer refused to admit that he had
made a 
mistake and ended up being sued.

A. Roger Turk, P.E.(Structural)
Tucson, Arizona

Paul Feather wrote:

. > Hi Roger,

. > I do not know if rates will climb to the levels you indicate, but I
can 
. > say that rates have been increasing.  Our rates have increased in 
. > disproportion to our revenue increase for the past two years. The
first 
. > year the agents were singing some song and dance number and trying
to 
. > blame the increase on Sept. 11., rather than the poor performance of
the 
. > Markets. At least this past year the increases were not accompanied
by 
. > the lame excuses.

. > As a side note, I know a lot of you "go bare" without E/O insurance.
I am
. > note sure how you accomplish that, we could not perform the projects
we do
. > without E/O insurance.  Do you limit your projects to those without
E/O
. > insurance requirements?  From my perspective, E/O insurance is one
of 
. > those unavoidable expenses in a captured market. I can complain when
the 
. > rates go up, but there are not a lot of options beyond that.

. > Paul Feather PE, SE
. > pfeather(--nospam--at)SE-Solutions.net
. > www.SE-Solutions.net

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