Corporate protection from lawsuits against SE's 1

[JAE]

sundale and I got into a somewhat off-topic conversation on this post: thread507-153187 concerning the exposure we structural engineers have in terms of getting sued while working for a corporation.

One thought is that the corporation protects you from direct lawsuits since you as an employee of the corporation have no contractual relationship with the client (who is suing) and therefore the corporation will protect your personal assets. In other words, the engineering services are provided by the corporation, not you personally (in the eyes of the law).

The other thought is that, yes, perhaps the corporation has a layer of protection, but this can be penetrated to some extent.

The question is - what is the level of protection provided by your employer corporation? This is not about partnerships and sole proprietorships...only corporations.

Any experience or knowlege in this area?

 

[dik]

My understanding is that a client can sue you, your office or you and your office jointly.... as an employee, your office can sue you...

Dik

 

[Ron]

JAE...excellent question and point.

Some states have joint and several liability clauses in their engineering laws, so the corporation can be sued AND the engineer can be personally sued for the same activity.

For an employer who does not have an employment contract with the engineer (essentially employment at will), there is an assumption of indemnification of the employee since the primary benefit of the employee's efforts is for the corporation. To my knowledge, there is nothing that makes the employer provide such indemnification; however, it is generally accepted to be the case, particularly in larger firms.

The good part of all of this is that attorneys usually chase the money and individuals usually have comparitively little to contribute in a sizeable lawsuit. That doesn't keep them from making life miserable for you and causing one to spend a lifetime of savings or assets in the initial defense.

The accuser also bears the burden of proof of negligence or incompetence, both of which are usually tied to a local standard of care. One or the other is usually needed to cause license action and to affect a positive outcome for the accuser in court.

Now...anyone for moving their assets to their wife's name?

 

[sundale]

Moving your assets to your wife's name is only a valid scheme in a minority of states, I think. Fortunately, my home state of Colorado does not make one spouse monetarily liable for the debts/torts incurred by the other spouse. I learned this when I took a deadbeat client (and her husband) to small claims court for non-payment of a structural fee.

You could most likely protect your assets to some degree with such a spousal holdings scheme, but I have also heard this may work against you too. Plaintiff's lawyer: "You see, this guy knew he was incompetent and was intentionally planning on performing sub-standard engineering, and that is why he tranferred all his assets to his wife"

Most lawsuits involving construction typically seem to entail a "shotgun" approach by the plaintiff's dung beetle lawyer: sue everybody remotely involved with the project in an attempt to obtain a monetary settlement out of as many sources of insurance as possible: blackmail of a sort.

I sleep OK (not great, just OK) at night about the assets issue, but I would hate to see some kind of lifetime wage garnishment result from a judgement against me personally as an EOR.

 

[JAE]

I know a lot of engineers who set up corporations for the sole purpose of protecting (separating) their personal assets from the business so that lawsuits can't get at the personal.

 

[SlideRuleEra]

This did not happen to an SE, but something like it could have, I'll keep the story short. It's 1977, we (the Contractor) had a bridge construction contact with the State DOT. At the preconstruction conference an AT&T engineer assured both us and DOT that existing phone lines on the project site would be relocated by a certain date. They were not, causing us considerable delay & expense. We filed a claim for compensation with AT&T - claim denied. We filed a law suit against AT&T. In court - on the witness stand, our lawyer "tore apart" that AT&T engineer for his "empty" promises - this was done in front of AT&T executives. He had the "personal" shielding of his corporation, but I bet his future with AT&T was "limited".
We won the law suit (and collected), even after AT&T appealed the verdict to the State Supreme Court.

Note that we did not have a contractual relationship with AT&T. We sued AT&T (a third party) under the doctrine of "promissory estoppel". We had reason to rely on what the AT&T engineer had promised at the preconstruction conference as being true.

http://www.SlideRuleEra.net

 

[DRC1]

If you work for a corperation, you should be indemnified by the corperation if you are an employee (even a sloe employee. If you are malicious, you may incur personal liability. Partnerships and sole propriterships I do not believe afford the same protection. Different states are different. One place for exposure is if you are working for the owner managing the construction contract, and you recieve payment from the owner on behalf of the contractor and do not promptly pay the contractor, in some states the contactor can go after the officers. But as always, check with your lawyer.

 

[woodengineer]

Great discussion. I remember asking this very question when I was an EIT. I did not want my PE if it meant opening myself up to personal liability, being an employee of a large firm. I was assured by the company's lawyer that I would not be personally sued if a problem arose. I have since become licensed and now carry liability insurance as I now have my own firm.

If engineers can be personally sued for work performed under a corporation,then engineers should be paid a lot more than they are! Salaries should increase just as corporations inflate fee structure proportional to liability risk. I love this profession but see why it is difficult to attract young people into it.

Jordan

 

[sundale]

Structural Engineer Real Estate Agent
education: BSCE, perhaps MSCE 113 hour class
tutelage: 4 years zero to 2 years
testing: FE, SEI, maybe SEII 8 hr exam
liability: tremendous virtually none
fee %: 2% is wonderful 2.8% or 6%
work for fee: design and detail drive, look, forms

You have to LIKE our profession. From a cost to benefit anaysis, you should have your head examined if you are a structural engineer.

 

[woodengineer]

The running joke among my local colleages is: I wonder what I did in a previous life to deserve this? Most of our wives make more than we with far less responsibility to the public. It's a curse, but I love the job.

Jordan

 

[dik]

Woodengineer... you hear about the wooden cow...

wooden milk...

It might surprise you that even as an EIT... you may still be liable although the court may hold you to a lesser standard...

Sundale... the shotgun approach helps protect the lawyer... if there is someone he should have sued and didn't, he can be liable! and it gets sillier and sillier...

Dik

 

[JAE]

Shakespeare's quote from Henry VI: "THE FIRST THING WE DO, LET'S KILL ALL THE LAWYERS."

 

[BSE05]

I have been involved in a few lawsuits over the years. They were all based on worker injury and the shotgun approach.(GC, Owner, A/E) None were directed at employees of the corporation.

I was recently deposed on a project that I was involved with 30 years ago! I had made reference to a nearby oil tank to be removed, that was not removed, and subsequently leaked etc. etc. The firm wasn't liable, and we got paid $7 for the 3-4 hours of time.

So God bless the lawyers.

 

[woodengineer]

SteelyLee,

So the attorney's thought your time was worth somewhere between $2.33 - $1.75/hour? At the end of your testimony I might have asked, "would you like fries with that?"

At least you got paid.

Jordan

 

[drawoh]

I am on the executive of a couple of outdoors clubs which carry insurance. The logic is that if these clubs run events and get sued, the club's insurance will protect the assets of the club's officers.

Would this not be the relationship between say Dominion Widgets and its EOR? What happens if Dominion Widgets goes bankrupt, and then somebody sues?

JHG

 

[BSE05]

My understanding of professional liability insurance is that the employee is protected unless "gross negligence" is proven. That in itself should always be in the back of our minds as structural engineers -- as to what would constitute "gross negligence". I was an engineering Army officer and you could do a lot of without to much horrible retribution (although the army did like to garnish your pay) --but were also personally and criminally liable for gross negligence. They actually taught us what constituted GN.

 

[Ron]

SteelyLee....I'm not sure what state you're in, but in many states if an engineer is compelled to testify, whether a designated expert or not, he is to be paid for his time, not just given the parking fee that comes with the subpoena.

That happened to me once and we petitioned the Judge who had jurisdiction over the case and he made the attorney pay my fee (normal hourly rate).

It doesn't always work, but it's worth a shot.

Also, when you get a subpoena and you're not a designated expert in the case, send a confirming letter to the attorney or to the attorney you're working for if there's one involved, telling them your hourly rate and that you will expect payment of a reasonable retainer prior to the deposition. I've done this with much more success.

An attorney expects to pay other professionals for their time. Most of them will do it, almost all will do it if asked, and the remaining few might have to be "enticed" to pay.

 

[BSE05]

Ron,

I'm in MA. I think the statutory fee for a supoenaed witness is $7. I was recently deposed on a worker injury suit on a project (another $7, it comes in cash with the supoena). The defendants lawyer didn't want me but, the insurance company hired me as an expert witness and won the case. Your right better fee as an expert witness.

Lee

 

[PVGuy]

My understanding of this is that if you are a professional then you can be held liable if it is an issue dealing with your profession. For instance if I am in a
business (corp) and I provide faulty work, then both the corp. and myself are liable. If however, I do not salt the ice on the sidewalk and someone slips and breaks their hip, only the corp is liable. All the engineers I know, work for companies that have professional liability insurance covering them.