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.

 

[WARose]

Any suggestions on things I should ask the attorney in my response that I may not be thinking about?

One thing I've always wondered about is: when company A gets acquired by Company B.....is any future lawsuit against Company A now a liability against Company B?

You see these acquisitions happen all the time now (CH2 getting bought out by Jacobs comes to mind).....and I've always wondered how that worked.

 

[phamENG]

I believe that is how it works. When acquiring another company, you take the good with the bad. You buy the accounts receivable and the accounts payable, the assets and the liabilities, etc.

I suppose there are ways to negotiate it - splitting up the company so the seller keeps some things and the buyer gets others. To have the seller somehow keep existing liability I would assume the cost of the purchase would up considerably - or at least enough to cover the tailing insurance.

 

[r13]

One thing I've always wondered about is:.....

I don't think the liability is carried over to the purchaser, except for the carry over (ongoing) projects included in the deal.

 

[Ron]

@WARose and r13.....whether liability follows to a purchasing company depends on the terms of the sale and contract. A company can buy the assets of another company but not assume its liabilities. It is sort of like an indemnification by the selling company to the buying company. As with all litigation and contracts, there are exceptions and it doesn't prevent litigation in the future, but it might get you out of the liability if the provisions are clear enough.

I sold my first company to a large international firm. By contract, they got all of my assets but also assumed my liabilities, including future claims (which never happened!) Personally, I would not sell a company without the buyer assuming liability as well, but it does happen. phamENG is correct....if liability is not transferred, the price would likely go way up!

 

[r13]

Ron,

The buyer does not need to assume the past (Completed and closed) projects done by you correct? Because the insurer at the time of projects still bears the responsibility, false? The purchase contract can be quite complicate, but can be as simple as this, right?

 

[Ron]

A past completed project is not usually considered a liability. It only becomes such if there is a claim and that is when the insurance is supposed to kick in. Past project viability is usually not a consideration in the sale, though I suppose it could be.

 

[phamENG]

r13 - my understanding (as it relates to my professional liability/E&O policy) is that it matters what insurance is in place at the time the claim is made, not the policy in place at the time of the project. That's why tailing insurance is important for retiring engineers - if you get sued 4 years later but canceled your insurance, you're up a creek.

 

[r13]

pham,

In case of professional liability insurance purchased individually, I think it is more like personal health insurance, so you are correct that it will kick in whenever it's needed, no matter the triggering event is pre-existing condition or not. But the insurance can reject your initial application on the ground of pre-existing condition (before ACA), or charge you a higher rate. Also, it would be complicated by your company's insurance, which could be the first defender/obligator in the line. Also, as discussed previously, it is extremely rare that the plaintiff will aim at an individual engineer rather than the entire chain. I've never had personal insurance, so I could be wrong though.

 

[phamENG]

r13 - my policy IS my company's policy.

 

[r13]

Then you are covered by your company's insurance for everything/anything you've done for your company.

 

[RTF5199]

https://www.newcivilengineer.com/la...ite-not-being-involved-in-project-28-09-2020/

I'm fairly certain this has been discussed in the FIU pedestrian bridge collapse thread if not elsewhere. The gist of it is that since WSP purchased the Louis Berger Group subsequent to the collapse but prior to the filing of this lawsuit, they're now a defendant.

 

[r13]

It is a fictitious transaction that WSP paid $400 M for a company deep in trouble. Let's wait to see the end of it.