Structural Engineering Liability - Wetstamp 10

[Ambemily]

My firm is working with a home builder on doing new residential design. They have Errors and Omission insurance but I wanted to make sure the contract was written so that I am personally protected. I've been reading that I will be personally responsible in the event that my firm is no longer in business or they drop their insurance within the statute of limitations period in our state. My question is we currently have a contract set up with the home builder for the design of a single plan. My employer did not put any terms or conditions or limitations for liability in the contract, just simply the fee. We are now being asked to wet stamp the same plan for use at multiple lots. For each lot this house is built at does my liability increase? If there was an error in the design, can I be potentially sued for the total number of times this single plan was built? Or is there a way to set up a contract so that it is limited to the single design and not duplicated?

I'm hoping for some guidance on what is typically done for contracts/liability when a single design is replicated and used in multiple locations.

 

[ARPASEVAN]

I would highly suggest you contact an attorney for your answers as you may be taking a huge liability. Personally I would not do it, because those developers cut corners all the time to save money.

 

[DaveAtkins]

I have never heard of an engineer being held personally responsible for work he or she sealed and signed while working for an insured employer.

DaveAtkins

 

[dik]

For each use, your exposure increases... For multiple use of a sealed drawing... I usually use 50% of the fee for the first re-use and 33% of the fee for the third and subsequent re-use, with no/limited changes to the plans. Unless agreed to initially, redos are not normally included and I usually stipulate a location in my Project Notes on the original set of documents. From the front of my Project Notes:
[ul]
[li]THE PROJECT NOTES ARE APPLICABLE TO ALL DRAWINGS FOR THIS PROJECT U/N[/li]
[li]THE CONSULTANT IS???[/li]
[li]THE OWNER IS ??? OR A DESIGNATED REPRESENTATIVE[/li]
[li]THE PROJECT LOCATION IS ???[/li]
[li]IN THE EVENT THE CLIENT IS DIFFERENT FROM THE OWNER, THE CLIENT IS RESPONSIBLE TO PROVIDE THE OWNER WITH ALL MATERIAL INFORMATION[/li]
[li]THE WORK SHOWN IS FOR ???[/li]
[li]THESE DOCUMENTS AND ASSOCIATED DOCUMENTS ARE THE PROPERTY OF ???. THEY SHALL NOT BE COPIED, IN WHOLE OR IN PART, WITHOUT WRITTEN PERMISSION FROM ???[/li]
[li]THE DOCUMENTS ARE FURNISHED TO THE CLIENT FOR A FEE AND SHALL ONLY BE USED IN CONJUNCTION WITH THE CONSTRUCTION SHOWN AND ONLY AT THE PROJECT LOCATION STIPULATED HEREIN.[/li]

You should check to see that you have coverage in the event your firm goes under... a real serious issue. Arpasevan is correct about contacting an attorney... but, your own, not the companies.

Rather than think climate change and the corona virus as science, think of it as the wrath of God. Feel any better?

-Dik

 

[dik]

I've done it often... except for one of my first projects about 50 years back... I designed a bunch of roof trusses for a single fee and I don't know how many hundreds or thousands were made using this design... you grow older and learn... hopefully.

Rather than think climate change and the corona virus as science, think of it as the wrath of God. Feel any better?

-Dik

 

[Ambemily]

We would not issue an open ended drawing and calculation set. We would charge a minimal fee for the re-use and produce lot specific drawings and calculations.

I believe this is how most new home construction designs work. I'm curious though what a typical contract in this case says? Is the liability limited somehow, perhaps to the fee or a flat amount?

What does happen if my employer were to go under.... legally am I response for the buildings, but under the terms of the contract that was written by the gone-under firm?

 

[r13]

I think if your employer go under, the contract goes with him too. The builder can go after him, but not his employee. Also, the old contract becomes useless, or hanging on litigation, since the plan does not belong to the builder, he can't reuse it until a settlement is reached. But, consult your lawyer on your liability, if you've stamped the drawing, and the project is ongoing, while your employer goes under.

 

[WARose]

They have Errors and Omission insurance but I wanted to make sure the contract was written so that I am personally protected.

Within the contract, the way to do that is to have a clause that indemnifies you. But it's hard to find any employer (or client) that will do that. Most firms' operating agreement only indemnifies the owners/corporate officers.

I've been reading that I will be personally responsible in the event that my firm is no longer in business or they drop their insurance within the statute of limitations period in our state. My question is we currently have a contract set up with the home builder for the design of a single plan. My employer did not put any terms or conditions or limitations for liability in the contract, just simply the fee. We are now being asked to wet stamp the same plan for use at multiple lots. For each lot this house is built at does my liability increase? If there was an error in the design, can I be potentially sued for the total number of times this single plan was built? Or is there a way to set up a contract so that it is limited to the single design and not duplicated?

If your employer is a LLC/INC, they should be operating under a Certificate Of Authorization (i.e. COA, licensed engineering firm). In addition to your own seal, in many states the COA stamp also goes on the drawings. This makes your firm liable rather than you (as you are acting as a agent of that firm). Even if the firm goes under, any potential lawsuits go against the former INC/LLC.

With proper planning, you can avoid personal liability.

 

[dik]

No... you want to charge a real fee, like I suggested 1/2 and 1/3... You are in the business of making money and by charging a reasonable fee you discourage multiple uses.

Rather than think climate change and the corona virus as science, think of it as the wrath of God. Feel any better?

-Dik

 

[Ron]

I think if your employer go under, the contract goes with him too. The builder can go after him, but not his employee.

Not true. The contract is only part of the issue. The major issue is signing and sealing an engineering document. Dik has laid out the financial reasonableness. In my terms and conditions, I do not allow re-use of my plans and specification without my review of each project for applicability, for a fee.

A contract can survive a business shutting down. Further, an individual engineer's responsibility is not just contractual, it is statutory as well.

As for time periods, you mention a statute of limitations. In your state it is only two years; however, you also have a statute of repose which is 10 years....so you are on the hook for design defects for a period of 10 years from substantial completion.

 

[dik]

The last two items of the project notes noted above... same here.

Rather than think climate change and the corona virus as science, think of it as the wrath of God. Feel any better?

-Dik

 

[r13]

Ron,

When a licensed engineer stamps the drawing, and named as EOR, does he/she considered an officer, or director, of that company employs him/her? I've seen a few companies went under, but I've not seen somebody (engineer) been chased by lawyer, or dragged into court for contract disputes (a few witness/disposition cases maybe). Can you please elaborate your view, that could serve as a legal advice for the present/future EORs.

 

[dik]

but let the damn thing jump the track and see who catches hell...

Rather than think climate change and the corona virus as science, think of it as the wrath of God. Feel any better?

-Dik

 

[phamENG]

r13 - it doesn't matter that they are not an officer of the firm. As licensed engineers, we are held legally responsible for our designs. By sealing a drawing, we are placing our name on it and taking responsibility. Is it common for engineers to be sued personally? No, not at all. We typically don't have a lot of money - the company's insurance does. But it costs the plaintiff's attorney nothing to add your name to the suit. And hey - they may get a few grand out of you if you can't get your name taken off, or if you have a good employer a few extra thousand out of your employer on your behalf. Perhaps that few is 10's of thousands or hundreds of thousands. I don't know how much you've got.

It's important to understand the difference between an engineer working for a corporation doing designs/work just for their employer (in-house) and a consulting engineer that offers their services to the public. They are not the same. In the first case, you'd likely be safe as an employee. In the second, you're safe only if your employer makes you so and if they don't, you're vulnerable as a licensed engineer who is responsible for the design in question.

There's an anecdote in the business issues forum from a civil guy in this situation. Firm went under, developer got sued, plaintiff's attorney went after the design team, too. His firm was gone, so they only one who could be sued for the civil design was him. Personally.

Indemnity will be worthless if the firm goes under. There's nobody left to indemnify you.

 

[Ron]

@r13....signing and sealing a document does not make you an officer of a company, but in many cases you would be considered an "agent" of that company. Most states require that some engineer within the company be designated as an officer and become the responsible engineer on the company's Certificate of Authorization. There can be more than one engineer designated for a company. Back in my "corporate" days, I was one of several engineers designated on the company's Certificate of Authorization. I did that for two different companies....one a larger international engineering firm, the other a medium size regional engineering firm.

Depending on the state laws, an engineer can be held individually liable for acts done on behalf of a company. My home state is one of those. Even if representing a company, I am still individually liable for my actions. A corporate entity can agree to indemnify its engineers for their actions; however, they do not have to do so. If you work for a company that does not indemnify its engineers, make sure you have your own liability protection.

As phamENG noted, if a company goes under, their indemnification might be worthless; however, insurance can often still apply after a company goes under. Insurance companies often fight these provisions when a claim is made and the company no longer exists. This creates another fight within the fight and makes the whole issue so murky that even attorneys have trouble figuring it out.

ALSO....my comments should not be construed as legal advice by any means. They are just based on my experiences in dealing with hundreds of litigation projects, many of which involved suits against the design professionals, either Architects, Engineers or both.

 

[Settingsun]

What Ron's saying is there's no shortage of engineers who'd help crucify you.

 

[dik]

and unless you're a president... if it's a matter of criminal liability, you likely cannot be indemnified.

Rather than think climate change and the corona virus as science, think of it as the wrath of God. Feel any better?

-Dik

 

[dik]

Based on information from the Manitoba professional association... you have to be a 'full time' employee to be the engineer on their CofA...

"I am writing as I recently received an application for Certificate of Authorization for ???, with you listed as a Responsible Member. Please be advised that in order to be a Responsible Member you must be a full time employee of the entity applying. Currently your member profile is showing a different employer. Can you please log into your profile to review your employer status, and if necessary please update and save any changes."

The profession is all $%#$%#$ up... and I wasn't a full time employee of the previous firm... didn't know it was a requirement..

Rather than think climate change and the corona virus as science, think of it as the wrath of God. Feel any better?

-Dik

 

[WARose]

r13 - it doesn't matter that they are not an officer of the firm. As licensed engineers, we are held legally responsible for our designs. By sealing a drawing, we are placing our name on it and taking responsibility. Is it common for engineers to be sued personally? No, not at all. We typically don't have a lot of money - the company's insurance does. But it costs the plaintiff's attorney nothing to add your name to the suit. And hey - they may get a few grand out of you if you can't get your name taken off, or if you have a good employer a few extra thousand out of your employer on your behalf. Perhaps that few is 10's of thousands or hundreds of thousands. I don't know how much you've got.

I've had in-depth conversations with numerous lawyers (and even one with a guy who lost his license over a catastrophic failure)....and I am convinced what I posted in my previous post is accurate: you will likely not be liable (with or without assets, or whether you are named as a codefendant or not) simply because you are acting as a agent of the LLC/INC. But you need to be sure you follow the steps I laid out.

And before anyone asks: the lawyers I talked to are people who specialize in the engineering & construction business and are well aware of these types of liability issues.

Enjoy the advice....because it cost me a few $$$ to get it (some years ago).

 

[WARose]

[blue](Ron)[/blue]

Depending on the state laws, an engineer can be held individually liable for acts done on behalf of a company. My home state is one of those. Even if representing a company, I am still individually liable for my actions.

What state are we talking? And what does the state law say?

[red]EDIT:[/red] Looking at your profile....this appears to be in Florida. And apparently this is the case:

https://www.keglerbrown.com/publications/inspecting-engineers-found-personally-liable/