Engineering Inc. - January/February 2009 - (Page 25)

Economic Uncertainty 2008 Professional Liability Insurance Survey of Carriers Insurance Picture T Financial instability could lead to ‘perfect storm’ of increased claims and litigation By Maureen Conley he soft insurance market for design professionals continued this year, though some experts predict a harder future, results from the 2008 survey of professional liability insurance carriers show. The question then becomes: What will happen when the hardening begins? normally drive premiums higher might not have the same impact in a slow economy.” More Claims Expected A record 16 carriers responded to the 2008 survey, conducted jointly by ACEC, the National Society of Professional Engineers (NSPE), the American Institute of Architects (AIA) and the AIA Trust. It should be noted that 13 of the respondents were interviewed on Oct. 2, an important date considering that any fallout from the late October near-collapse of the global financial system was not reflected, explains Gregory Sauter, chairman of ACEC’s risk management committee and executive vice president of corporate development for AECOM’s U.S. Group. Still, Sauter says the survey illuminates market fundamentals over the past year and is a valid snapshot of trends when viewed as part of the overall picture—a picture that continues to unfold in unpredictable ways. Every carrier is, of course, interested in growing market share over the next year. But Sauter says that the economic downturn could mean “less market to go around.” At the same time, “pressures that would which could lead to underbidding of work” and increased claims. Sullivan says many firms expect to be hit with a negligence countersuit if they sue for payment of fees. In a more robust economy, parties might be more motivated to “work it out” and bring a project online. But a tighter financial market usually makes project participants more sensitive to delays and cost overruns, says Michelle Duffett, executive vice president of Insight Insurance Services, Inc. ressures that would Insurance carriers say conditions are ripe for normally drive premiums increased claims and litigation. John Farrar, higher might not have the vice president of Illinois-based Clark Dietz, says that even before the October financial same impact in a slow meltdown, carriers were predicting increases economy. in claim frequency and severity as a result of the soft economy. Timothy Corbett, founder and president of SmartRisk, believes the current economic conditions could create a “perfect storm” for increased litigation, as the credit crisis and other unpredictable external forces, coupled with internal turmoil driven by reduced revenue and evolving business strategies, could “increase risk on projects” and “dramatically increase liability.” Jerry Sullivan, product manager for A/E firms at London-based Beazley, agreed, adding that shrinking revenues mean “contractors are fighting over a much smaller pie, GREGORY SAUTER AECOM P January / February 2009 enGIneerInG InC. 25

Table of Contents for the Digital Edition of Engineering Inc. - January/February 2009

Table of Contents
Engineering Inc. - January/February 2009
From ACEC to You
News and Notes
Market Watch
Legislative Action
Exclusive Interview
RX to Ease Employer Health Care Pain
2009 Spring Course Catalog
That's Entertainment
2008 Professional Liability Insurance Survey of Carriers
Annual Convention Preview
Members in the News
Business Insights

Engineering Inc. - January/February 2009

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