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REASSURE INSURERS

Sound risk management practice equals competitive professional indemnity premiums.Common sense, but not necessarily common practice in geotechnics, say Warren Jones and Andrew Bowyer.

The geotechnical industry is undoubtedly faced with a large number of liability risks. The very nature of the projects geotechnical engineers are involved in carries the potential for catastrophic exposures, and even the best run organisations may be subject to unknown hazards and risks to their business and the public.

A small human error can lead to large fi nancial consequences if these risks are incorrectly assessed or not managed correctly.

Insurers are, in general, a nervous bunch, uncomfortable with covering unknown or unquantifiable risks. Geotechnical engineers make them especially nervous.

This is because many industry disciplines include structural analysis, stabilisation or specific stress management, that are reliant on clinically accurate risk data and correct test result interpretation.

Even the more sophisticated software programs need accurate data entry and there is no guarantee that interpretation of results will lead to the right solutions.

Inaccurate conclusions may result in not only direct financial loss to the client, but additional and in some cases more serious liabilities to other parties. For example, where rock or slope stabilisation projects are not successful, serious damage and even bodily injury could result.

Geotechnical solutions carry an associated environmental risk.

When a fl ood barrier is being considered, the engineer must be as mindful of the surrounding area, which may include countryside, to ensure the solution has no side-effects that could lead to damage or injury.

Despite the duty of care owed to clients, there is a wider duty to the general public and the environment, including a requirement to meet stringent legislation. No firm in the geotechnical sector can hide from these wider issues.

Clients usually have limited budgets and tight schedules. Even with 'watertight' terms of engagement, contractual disclaimers and caps on liability may come under severe scrutiny should a project go over time or budget. For instance, remediation using soil stabilisation must provide a cost-effective solution but also ensure the method will work over a long period of time.

If the project goes wrong there may be accusations of delivering the wrong solution or spending too much when other techniques could have been used to deliver the same result. And in an industry where new techniques are being introduced almost daily, it can be hard to keep up with changes that can lead to an incorrect solution to a new problem.

Either way, such allegations can lead to a potential dispute.

So what can be done to establish good risk management practices, and convince insurers of a sound, well-run business?

Contracts and appointments . Limit liability to a definitive amount based on a multiple of fees.

. Restrict or exclude economic and consequential losses.

. Use company standard terms and conditions wherever possible - and get a broker to review them as they should be able to identify any clauses that will ring alarm bells with insurers.

. Stick to the brief agreed to for any appointment - if that brief changes, insist on a new agreement.

Reliance on third parties . Vet their financial viability.

. Check their own insurances.

. Use references and recommendations and look for evidence of a solid track record.

. Take advantage of independent accreditation as a 'kite mark' of quality. For example, any firm with UKAS (United Kingdom Accreditation Service) accreditation has demonstrated high levels of competency and performance capability, judged by independent auditors.

Internal business procedures . Invest in people and training and make sure it is demonstrated in an insurance proposal.

. Be up-to-date with new technologies and techniques wherever possible.

. Create a dedicated quality assurance team or individual, and empower them to actually do the job rather than treat it as a 'tick box' exercise - insurers will see through any surface measure that has no depth.

. Use an insurance broker to help put together a risk management strategy - they should know what will make insurers feel more comfortable and equally what will make them more nervous.

Risk management is not rocket science and by adopting a commonsense approach to put a few simple procedures in place, it is possible to present a good picture to insurers.

But a word of caution. While there are insurers out there who recognise geotechnical engineers are not a 'no-go' area, they will expect a demonstration of constant risk management procedure review.

In an industry that faces a large number of liability risks, practices must be shown to be reviewed, amended and managed on a regular basis.

Warren Jones is service company manager at AG Dore & Others Lloyd's Syndicate 2526 and Andrew Bowyer is business development manager at Howden UK.

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