OSPE - The Voice - Fall 2012 - (Page 30)
KEEP YOuRSELF COVERED
Contracts can impact your liability insurance coverage
When engaging an engineering firm, clients often create contracts that attempt to impose blatantly one-sided insurance requirements. Insurers might not be able to accommodate some of these requirements, as their policies sometimes exclude from coverage the very things that opposing parties may wish indemnity for. In some cases, there is a complete misunderstanding of what the nature and scope of professional and commercial general liability insurance policies truly are. If you are an engineer who works directly with clients, you and your firm must ensure that any contract you enter into with another party for your professional services has been correctly written and is within the scope of what your professional indemnity insurance policy will cover. It goes without saying that you should review all contracts with your legal counsel, and modify demands that do not match what your underwriters are prepared to offer.
PAY PArTICULAr ATTEnTIOn TO ThESE CLAUSES whEn YOU rEvIEw COnTrACTS: 1. InDEMnITY CLAUSES
Indemnity clauses, those through which you are asked to indemnify a client or other persons for any problem that arises on site, thereby transferring the risk from them to you, are frequently the source of much contention in contract negotiation. The prospect of losing a lucrative project incites many engineering firms to sign contracts that transfer liability to the engineering firm for which there is no professional liability insurance coverage, a serious business risk for the firm. You should not agree to indemnity clauses by which you assume the liability of others or of circumstances beyond your control that exceed your normal legal duty. Engineers are responsible for their errors and omissions and sometimes those of their sub-consultants. Normally a professional liability policy only insures “negligent acts, errors or omissions.” It does not cover contractual liability you assume, unless you would be liable anyway in the absence of that contract. Contracts may ask you to indemnify your client from “any and all claims” or “any wrongs.” All insurance policies have exclusions, and this terminology may leave the design professional’s firm exposed to a loss that is specifically excluded under the policy.
2. LEGAL COSTS
Does the indemnity agreement require you to pay your client’s legal costs in the event of a problem? If so, be advised that your professional liability insurance policy will not automatically cover your client’s costs. The policy will only respond to costs awarded by a Court of Law, which may only be a fraction of the real costs your client may be incurring.
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Table of Contents for the Digital Edition of OSPE - The Voice - Fall 2012
OSPE - The Voice - Fall 2012
A Great Day on the Green
Don’t Miss the 65th OPEA Gala
Engaging Tomorrow’s Engineers
The Business End of Engineering
Profile: Pierre Lassonde, P.Eng.
Continuing Professional Development: Mandatory or Not?
PAN Expands Outreach to Ottawa
You’ve just had an auto accident. Now what?
Ask the Expert: Facing a Complaint
Keep Yourself Covered
What’s 2 + 2? Depends Who’s Answering!
Custom-built Learning for Engineers
OSPE - The Voice - Fall 2012