power point presentation template…•provision of cad files response: contract needs to address...

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Tennessee Association of Professional Surveyors

Murfreesboro, Tennessee

March 9, 2018

Presented by Gary R. Kent, PS

Risk Management

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Professional Surveyors

This program is not

a substitute for,

and should not be construed as,

legal advice

Source material and recommended resource material:

Staking Out Your Future

Schinnerer’s Guide to Managing Professional

Liability Exposure

A Publication of Victor O. Schinnerer Company

NSPS.us.com

• EStore

• Books

• $20.00

Professional Liability Insurance Claims

Reprinted with permission of Victor O. Schinnerer & Company, Inc.

Professional Liability Insurance Claims

Reprinted with permission of Victor O. Schinnerer & Company, Inc.

Professional Liability Insurance Claims

Reprinted with permission of Victor O. Schinnerer & Company, Inc.

Professional Liability Insurance Claims

Reprinted with permission of Victor O. Schinnerer & Company, Inc.

Professional Liability Insurance Claims

Reprinted with permission of Victor O. Schinnerer & Company, Inc.

Notable Risk Management facts from Victor O. Schinnerer & Company, Inc.:

• 2005-2014: Claims requiring indemnity payments ranged from 21.2 to 44.9%.

• Firms carrying higher deductibles will results in fewer payments.

• In 2014, 70% of claims could be considered meritless, but 30% of those required defense payments above the deductible.

• 12.3% of claims came from 3rd parties

• Number of claims per 100 surveying firms topped out at 19 in 1989 and was at 6 in 2014. (Volume of work? Better risk management?)

Professional Liability Insurance Claims

Most expensive claims?

Construction layout

Professional Liability Insurance Claims

Common origination of claims

• No common understanding of additional services • Untimely follow-up on unpaid invoices • Poor communication on the part of the surveyor • Untimely response to client questions or concerns

Professional Liability Insurance Claims

Exercise reasonable…

• Care • Skill • Diligence

…in providing professional services

The surveyor’s professional obligation

• Well-written standards Limit liability by providing a guideline for

surveyors in providing professional services

Help resolve questions as to the appropriate quality and content of surveys

Provide a leveling effect amongst competitors when writing proposals

Help prevent confusion on the part of potential clients on what level of services will be provided

Survey standards

as a risk management tool

• Written standards set a minimum standard of practice

• Help establish the normal standard of care which is likely higher than the minimum standard

Survey standards

as a risk management tool

• State mandated standards or guidelines

• Surveying society standards NSPS

Pennsylvania

• ALTA/NSPS Land Title Survey standards

Survey standards

as a risk management tool

The three most important items?

• Scope Clear and precise

• Compensation Prompt payment

No unreasonable withholding

Adjustment or renegotiation for termed or delayed projects

• Schedule Not a warranty; must allow for

necessary adjustments

The written contract

as a risk management tool

Professional Liability Insurance Claims

Reprinted with permission of Victor O. Schinnerer & Company, Inc.

• Clearly stated expectations

• Parties rights and obligations are clear

• Risks and rewards are addressed and appropriately allocated

• Insurance is available to support obligations

• Change orders are addressed

• Understanding is confirmed in writing

The written contract

as a risk management tool

• Onerous terms and conditions to watch for

Express guarantees or warranties

Not covered by professional liability insurance

Warranty of facts is fine

Warranty of services is not

Clauses may be cleverly disguised; be cautious

The written contract

as a risk management tool

• Onerous terms and conditions to watch for

Indemnity or hold harmless clauses

May shift liability from one party to another

May not be insurable if unrelated to the surveyor’s failure to perform pursuant to a standard of care

Negligence is already a legal remedy; no reason for indemnity for negligence

The written contract

as a risk management tool

• Onerous terms and conditions to watch for

“Highest standard of care” [or “highest professional standards”]

Cross out and substitute with clauses like “…will be performed pursuant to the normal standard of care and [applicable standards]”

The written contract

as a risk management tool

• Terms that should be included

Responsibility for work

The contractor shall be solely responsible for all of the elements related to a survey project that will lead to construction

The surveyor should bear no such responsibilities

The written contract

as a risk management tool

• Terms that should be included

Worker safety

Job site safety is the owner or general contractor’s responsibility, not the surveyor’s

The written contract

as a risk management tool

• Terms that should be included

Agency

Unless hired directly by the contractor, the contract should state that the surveyor is acting as an agent of the owner

Can help protect the surveyor from claims brought by the contractor

The written contract

as a risk management tool

• Terms that should be included

Document control and ownership

Documents should be instruments of service and the property of the surveyor

Documents should not be “products” which might otherwise be owned by the client

Sophisticated clients may require that ownership of documents be transferred to the client

Note that copyright and ownership are two different issues

The written contract

as a risk management tool

• Terms that should be included

Limitation of liability

Value of contract or $? – whichever is less

Particularly appropriate on low fee projects with relatively high potential liability

Business decision to strike

The written contract

as a risk management tool

• Terms that should be included

Dispute resolution

Mediation, arbitration or litigation?

Professional liability managers find mediation

o less expensive

o less time-consuming

o less adversarial

The written contract

as a risk management tool

• Protect both you and the client

• But, the survey is typically required by whom?

The lender

• Yet, the surveyor is usually negotiating and contracting with whom?

The seller or buyer

• And the seller or buyer has what interest in a good (not to mention expensive) survey?

None?

Written contracts for

Land Title Surveys

• Specify scope 2016 ALTA/NSPS Standards

Applicable state standards

Table A items

Exceptions/Qualifications to Table A items (e.g., utilities, zoning, wetlands)

Section 7 Certification and certified parties

Address lender’s certificates and additional parties

Title work to be provided

Number of revisions/sets of comments

Written contracts for

Land Title Surveys

Written Contracts – Land Title Surveys

• Certification

Problem: Lender insists on its own certificate

Often at the last minute

Surveyor is admonished not to change anything in the certificate

These are hollow threats having only one purpose

To intimidate the surveyor into taking on inappropriate and unacceptable liability

Addressing Risk Management issues

• Certification

Response: Surveyor has an obligation and responsibility to:

Rewrite the certificate so it does not:

oContain express guarantees or warranties

oViolate the surveyor’s registration act

oConstitute the practice of law

On an ALTA/NSPS Land Title Survey: Provide it on a separate sheet, not on the face of the plat

o (see Section 7 of the ALTA/NSPS Standards)

Addressing Risk Management issues

• Dispute resolution

Problem: Client’s contract contains no dispute resolution clauses

Recall previous slide

Addressing Risk Management issues

• Terms that should be included

Dispute resolution

Mediation, arbitration or litigation?

Professional liability managers find mediation to be:

o less expensive

o less time-consuming

o less adversarial

The written contract

as a risk management tool

• Dispute resolution

Response: Acknowledging in the contract that disputes may arise is a first step towards amenable resolution of a dispute

Addressing Risk Management issues

• Dispute resolution

Mediation

Voluntary process

Good faith (presumably) negotiation assisted by a facilitator (“mediator”)

Mediator should be trained

Usually an attorney, but can be otherwise

May be mandated by a court prior to a trial

Addressing Risk Management issues

• Dispute resolution

Arbitration

Adjudication of a dispute by a selected neutral

Note - Often allows consolidation and joinder so all parties are involved

(may be detrimental to surveyors since they are often dragged into a dispute that had relationship to the professional services performed)

Addressing Risk Management issues

• Dispute resolution

Certificate of merit

Controls access to court system by mandating early determination by an expert witness that the harm could have been caused by the defendant

Similar to a screening panel that evaluates the likelihood of fault being found

Addressing Risk Management issues

• Dispute resolution

Other possible contractual arrangements

Partnering o Contractually agreeing to resolve issues before

they become disputes

o Enables problem-solving at the lowest staff level possible

Addressing Risk Management issues

• Dispute resolution

Other possible contractual arrangements

Dispute review board o Independent experts are approved to evaluate

problems and suggest resolution for agreement by parties

Addressing Risk Management issues

• Dispute resolution

Other possible contractual arrangements

Prevailing party has the right to collect legal fees May help prevent meritless claims

May put party with more financial resources in a stronger position to force settlement in cases with little merit

May be viewed as being outside the scope of professional liability insurance coverage

Addressing Risk Management issues

• Provision of CAD files

Problem: Client insists on surveyor providing CAD files to architect/engineer

Addressing Risk Management issues

• Provision of CAD files Response: Contract needs to address intellectual

property ownership in 5 important ways, i.e.,

1. Signed/sealed copy controls over CAD files

2. Electronic info is a component of the instruments of service for use only on the specific project

3. No representation as to the use of the information for other purposes, durability, or medium

4. Any use other than for the intended purpose is at receiver’s risk; receiver shall indemnify from claims, costs, losses, damages

5. Transfer of info does not transfer license to the underlying software and does not extinguish rights of surveyor to reuse info in his/her practice

Addressing Risk Management issues

• Provision of CAD files

Other considerations

Not the surveyor’s responsibility to distribute subsequent changes to the provided files

If client owns files, can surveyor transfer them to other parties?

Who will be using the data?

Surveyor needs to recognize that control over data is lost once transferred

Addressing Risk Management issues

• Surveying on a hazardous site

Problem: Client wants you to provide surveying services on a site with environmental hazards

Addressing Risk Management issues

• Surveying on a hazardous site

Response: Client needs to provide protections to the surveyor

Provide protection and defense for any claims arising out of the release of any contaminants

Provide for appropriate compensation for increased level or service and risk

Allocate as much of the risk as possible to the contractor who is insured for, and can manage, the risks

Addressing Risk Management issues

• Surveying on a hazardous site

Other considerations

Although the likelihood of culpability is low, the chances of a third party claim are real

Preferred method of controlling risk is release and indemnity agreement from client for any claims against the surveyor resulting from the actions of the contractor

Addressing Risk Management issues

• Indemnification clauses

Problem: Client wants surveyor to defend it from any claims, costs, losses and damages resulting from the surveyor’s work

Recall previous slide

Addressing Risk Management issues

• Indemnification clauses

Response: Your legal duty does not exceed the indemnification of losses directly caused by your negligence and that obligation is covered by your E & O policy

Your contract should not extend your liability to parties to whom you would not normally be liable

If you decide to take on risks not otherwise legally required, you should be compensated accordingly

Addressing Risk Management issues

• Additional insured on your policy

Problem: Client wants to be named as an additional insured on your professional liability policy

Addressing Risk Management issues

• Additional insured on your policy

Response: Be cautious, client does not understand the nature and scope of professional liability insurance

Client cannot be named as an additional insured

E & O policies pay on behalf of the named insured for substandard performance, not to the insured

Rely on your broker to help educate the client’s attorney

Addressing Risk Management issues

• High risk projects

Problem: Client wants you to take on a project that involves risks beyond your control or far in excess of the compensation you will receive

Addressing Risk Management issues

• High risk projects

Response: Contractual provisions that shift risk

Limitation of liability

Indemnification by client for expenses, losses or damages caused by risks beyond the surveyor’s control

e.g., meritless claims

Addressing Risk Management issues

• Standard of care Problem: Client wants you to perform the work to

the highest professional standards

“Highest” is vague, immeasurable and unattainable

Common law standard is a “duty to exercise the degree of learning and skill ordinarily possessed by a reputable surveyor practicing in the same or similar locality and under similar circumstances”

Be aware that client attorneys typically know that “highest standard of care” clauses hold the surveyor to an unachievable standard

Addressing Risk Management issues

• Standard of care

Response: Educate client that a measurable standard is necessary; or more compensation is required to account for the higher level of responsibility and liability

Addressing Risk Management issues

Review sample contract

The written contract

as a risk management tool

Staking Out Your Future

Schinnerer’s Guide to Managing Professional

Liability Exposure

A Publication of Victor O. Schinnerer Company

NSPS.us.com

• EStore

• Books

• $20.00

The Schneider Corporation

Gary R. Kent, PS

8901 Otis Avenue

Indianapolis, IN 46216

Phone – 317-826-7134

gkent@schneidercorp.com