| Risk Management Tips for Structural Engineers |
August 10, 2007 |
“I’ll Bet the Company” on that Job
As you know the owner receives the principal reward and the long term benefits of a project and is in a much better position to spread the liability risks over the life of the project. The engineer, on the other hand, receives a one-time fee which is just a fraction of the value of a project. You just might be betting the company if you are unable to limit your liability in some way. Courts have said the in general a clear and unambiguous limitation of liability agreement between two commercial parties of equal bargaining power is valid…notwithstanding a statute or public policy prohibiting such. What is equal bargaining power however is another question. If you are ready to walk away from a project if you have to then you have equal bargaining power.
Other Elements Involved in the Construction Process
It’s not as simple as engineer/owner/contractor. Would that it were. You may be called upon to address, provide information for or otherwise be involved with the following agencies. It would behoove you to stay informed about what is happening in their world because it could well affect yours. The business section of your local newspaper will frequently feature articles about them. Each of these elements has separate objectives, but all share a common purpose – to maintain stability in building with an adequate supply.
- Mortgage and Finance agencies — commercial banks, cooperative banks, savings and loans and some insurance companies.
- Real Estate Services — brokers, appraisers, building managers
- Building Officials and Zoning Boards — they are essentially restrictive but through them constructive action may be encouraged. Revised building codes encourage advanced building design and construction. Without zoning laws, land would become overcrowded. Building and zoning officials deserve intelligent cooperation.
- Planning Officials — depend upon recommendations of design professionals. When sound advice is given, it is usually followed.
- Testing and Research Agencies — Most testing is done by privately operated laboratories. Their published results serve as a useful guide to engineers.
I’m Shocked! Shocked I Tell You
Many foreign clients are shocked by the high rate of liability claims incurred by professional firms in the U.S. This may put U.S. firms at a disadvantage when competing against foreign firms. One thing you can do is emphasize your aversion to litigation and your preference for avoiding court proceedings. You can demonstrate this by stating your firm’s policy is to rely on alternative forms of dispute resolution including nonbinding mediation that you have in your contracts.
Successful Negotiating 101
Many firms now routinely ask for and get limitation of liability in their contracts. Your success at doing this depends on several factors not the least of which is your client’s confidence in you. The more confidence they have that you will not need the LOL the more likely it is that you will get it. Your strongest point is that the client gets the major and long term benefits of the project and thus should accept the majority of the risk. Also clients must be made to understand that your resources are limited and so is your insurance which has an aggregate policy limit…and it does not assure future coverage.
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