~ ~ ~
Tennessee Association of Professional Surveyors
Murfreesboro, Tennessee
March 9, 2018
Presented by Gary R. Kent, PS
Risk Management
~ for ~
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