Professional indemnity claims: pitfalls for geotechnical engineers to avoid by
Nobody wants to face a claim on their professional indemnity (PI) insurance.
As firms face increasing pressure from clients to deliver more work at reduced costs, it is easy to get caught up in the rush to secure business and, in doing so, get caught out by some common pitfalls that give rise to a claim.
Here are some of the most common traps that trip up geotechnical engineers together with some examples of real life claims. Also included are some simple tips to help avoid these traps and keep a clean claims record for your broker to present to insurers next time you renew your PI policy.
Pitfall number one: consequential loss
Geotechnical engineers are often appointed by consultants and contractors to provide expert advice and recommendations on building techniques. These can represent a relatively small fee for the engineer and may be considered low risk jobs, but it is surprising how many firms fail to take the big picture into consideration. The consultant's role might be small, but the overall project could be massive and potential consequential loss, should something go wrong, can run into the tens of thousands if not millions of pounds.
Claim example: The insured soil engineer investigated a site and provided calculations for a small agricultural reservoir, which began to suffer severe leaks 18 months after it was built. The landowner claimed substantial loss of profits as a result of crops dying through lack of irrigation. It was impossible to establish whether the leaks were caused by poor design arising from incorrect calculations or from bad workmanship on the part of the contractor, and both parties contributed equally to a settlement of £73,000 to avoid litigation costs.
Tips: Ensure you go through the contractual arrangements with a fine tooth comb and understand the liabilities you could face should something go wrong
Make sure you are given the big picture - what the overall project is; who the client is and who else is involved - so that you fully understand the risk and potential consequential loss that could result if a problem does arise . If you are unsure, ask your insurance broker to review the contract and help you limit your potential risk exposure and liability.
Pitfall number two: alternative methods
It is only natural for firms to look at alternative methods if they can save money - particularly when facing pressure from the client - and put forward what seems to be a cost-effective solution. This can be despite the fact that a more expensive method with a proven track record offers greater certainty.
Suggesting a cheaper method may look attractive on the surface, but it could lead to greater risk exposure and cause more trouble in the long run.
Claim example: The insured engineer recommended a load transfer platform be used for construction of a car park and various small buildings.
The load transfer platform proved to be inadequate and the car park will have to be rebuilt. The claim is put at £7M, a sum not reflected in the fee the engineer received. Unfortunately, the same engineer faced a multimillion pound claim for a similar error where it recommended a load transfer platform for a housing development.
The entire site has had to be bulldozed.
Tip: If you are proposing to employ an alternative and/or particularly innovative method to deliver a project on a more cost effective basis for the client, you need to be more certain than ever of its limitations, structural or otherwise. Everybody appreciates the need for the engineering profession to progress. But it is often the case that widely used methods today have had to substantially evolve to gain acceptance. Before innovating, perhaps consider: 'Is this the type of project that is best suited to cope with potential teething problems?'
Pitfall number three: scope of duty
It has become common practice for construction professionals to go above and beyond their core disciplines in a bid to help the client. This is one of the most common pitfalls that lead to a professional indemnity claim and geotechnical engineers must be wary of advising on matters outside their remit, qualifications or experience. Other consultants may well have the specialist knowledge to assist in the project, but the duty of care may still lie on the geotechnical engineer's shoulders.
Claim example: A fi rm of engineers thought it could build an office supply warehouse using ground bearing slabs on vibro improved surface layers. It had no relevant expertise but the geotechnical subcontractor came up with the solution and said it could be done.
The engineer approved the viability of the scheme, despite the fact that surface layers were 2m deep underlain by 18m of un-degraded domestic refuse. The warehouse was damaged by settlement and the engineer now faces a claim for more than £20M.
Tips: If you become involved in a project that requires specialist knowledge that you do not have, you should tell the client right from the start. It is essential to state in writing any limitations to your role and ensure that, in return, your client formally accepts your position. If a third party is contracted by a consulting engineer, make sure it is qualified to do the job and approve the services provided.
Matt Farman is a director with broker Howden UK