Exposure to liability is high for engineers and other professional consultants to the civil and construction industries. In fact, professional service providers have the second highest standard of care known to the law (second only to the duties of trust and confidence of trustees, lawyers, company directors and other fiduciaries). That professional standard of care requires that professional services be provided with due care, skill and diligence.
How careful, skillful, and diligent a professional service provider needs to be in order to meet this standard of care is not always clear and will depend in large part on general industry expectations and the nature of the specific service being provided. General industry expectations are defined from the perspective of both a professional’s peers (i.e. others practising at a similar level in the same field of expertise) and reasonable users of the same professional service. This human perspective on professional standards means, in theory at least, that in setting the bar, limitations of knowledge within the profession, resourcing and, to a degree, human fallibility, are taken into account.
Having said this, even the most skilled professionals are imperfect and may from time to time find themselves exposed to the risk of liability for some error of judgement or oversight that occasions loss. In such circumstances, it may be tempting simply to disclose the claim and hand over the client files to the professional indemnity insurer and leave it to defend the claim and have nothing more to do with it.
Delegating and removing oneself from management of a potential or actual claim in this way is often a mistake. First, it cannot be taken for granted that the interests of insured and insurer are necessarily aligned in all respects. Insurance companies will respond to claims made against their insured professionals in a way that maximises their own gains and minimises their own losses. Clearly, from an insured’s perspective, there is nothing wrong with these objectives – indeed, the insured would have the same objectives – but these are often not the only things that matter to an insured who will also be concerned about critical matters like impact on premiums, brand, reputation, culture, employees, management, client relationships, business development strategies and overall commercial objectives. Further, the insured professional will often have an ability that its insurer will lack, to innovate a solution that is both cost-effective and potentially capable of restoring the relationship between professional and client and so, avoid the need for expensive and time-consuming litigation.
One common example involves exterior structures that are exposed to the elements. Wind, for example, can exert lateral loads (i.e. blow into walls and other structures, side-on) and cause them to collapse if they have been under-engineered. An insurer looking at this situation might decide not to investigate remedial solutions beyond simply demolishing and rebuilding the affected structures, on the assumption that an alternative solution is unlikely to be found. The insured engineer, on the other hand, will have the skill and experience to innovate ways to reinforce the affected structure without detracting from the look, feel and usability of the overall building. In the process, they may even improve the performance of other parts of the structure, resulting in a win-win for all concerned.
So, if you, as a professional, ever find yourself in the unfortunate position of defending a claim for professional negligence, by all means, give full and early disclosure of the facts to your insurer, but don’t hand them complete control of your defence and dispute resolution process. Ask questions, propose solutions and if you feel the direction your insurer wants to take may diverge from your own interests, seek independent legal advice.
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