Any fool with $250 and a typewriter can sue anybody. In my own practice I have seen a structural engineer sued over building envelope defects, a mechanical engineer sued over structural defects, and an architect sued over mechanical defects. A contractor often has no money and insurance will not cover workmanship defects, so the plaintiff will try to place liability on insured "deep pockets" defendants, like engineers and architects.
Design professionals cannot control whether they are sued, but they can control their exposure and outcome by managing risks from the outset. Wherever possible, an engagement letter should define a monetary limit to exposure and limit the types of claims. The monetary limit should be no higher than the policy limit for a single claim under your liability insurance. As well, you should always exclude liability for "consequential damages", such as loss of profits expected from a delayed project. Damages of this kind can break your company. A sub-consultant should make sure that any limits of liability negotiated by the prime consultant apply to the sub-consultant.
An engineer may not be able to negotiate the most favourable terms for limiting liability, but the engineer has complete control over the definition of the scope of services. Lawsuits are often not about the design, but about as-built construction relative to the design and the adequacy of field review. These topics are often ignored in the engagement letter. The engineer should exclude responsibility for changes made without engineering approval. The number, purpose and scope of field reviews should be defined, and expressly state that a review is not an inspection. The owner or contractor must be assigned the responsibility to call for a field review at defined stages. Too often a field review is not called at all or is called too late. Engineers are then asked to provide a certification of field review that they should not be issuing, and often lack the resolve to require finished work to be opened up for review.
If you are sued or if there is even a threat of a lawsuit, notify your insurer. An often-overlooked benefit of insurance is that it pays the cost of defence of any lawsuit, including frivolous lawsuits (subject to a deductible that may apply to defence costs, depending on the policy). Counsel appointed by your insurer can give you guidance on dealing with the claim. Experienced defence counsel will know how to set the stage for a higher award of costs against the plaintiff if the court dismisses the claim, but those costs will go to the insurer.
Due to the prohibitive cost of going to trial, most claims are resolved in mediation. Settlement often requires a modest contribution by all defendants, regardless of fault. Buying your way out of the lawsuit is often die most practical and cost effective solution. If there is no fault at all by the engineer, the payment will be made entirely by the insurer, as the insurer is paying to save on its defence expense. If there is some exposure to the engineer, die engineer will have to contribute its deductible.
I am often asked about recovering the internal costs incurred by the engineer in dealing with claims. Unfortunately, Canadian law does not recognize this kind of compensation.
In conclusion, get legal advice regarding your standard engagement letter and any engagement for significant projects. Talk to your broker to get appropriate insurance coverage, and look for protection under more general project insurance.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
