Recent high profile sudden collapses, such as the June 2021 Champlain Towers South condominium collapse in Surfside, Florida and the April 2023 parking garage collapse in Manhattan’s financial district, have brought increased scrutiny on the engineering firms who completed facility assessments before the collapses.
In both cases, clients engaged structural engineers to conduct a facility condition assessment and start the process of developing rehabilitation plans. A sudden catastrophic collapse will bring scrutiny to any professional who provided services relating to the facility. Often, the assessments, recommendations, and rehabilitation plans are preliminary in nature and have not been finalized. In these circumstances, the scrutiny revolves around the notion of whether the engineer should have discovered the defects that caused the collapse and been more proactive in warning of dangerous conditions. This article will address ways to mitigate these risks and highlight professional liability policy features intended to protect firms.
Clarify your scope of services
When assessing an existing facility, the engineering firm should be very clear about the scope of services, making sure that the limitations and descriptions are reflected both in the agreement and the final report. Specifically, when providing studies and reports relating to existing conditions, it is critical that the firm’s agreement and subsequent report accomplish the following:
- Identification of the scope of services and limitations of use of the instruments of service.
- Awareness by the client and anyone referring to the report that unless a service is expressly included in the scope, it was not performed and, therefore, there should be no assumptions based on services that were not provided.
- Identification of the report as a statement of professional opinion based on information available during the assessment or evaluation and formed by the judgment of the engineer from available facts and other identified information.
- Acknowledgement that the services and report only reflect conditions at a specific point in time that is clearly identified in the report and those conditions can change.
- Awareness by third parties referring to the report that they can only rely on the information in the report in the same way that the client can rely on the opinion of the engineering firm.
- Disclaimer of any perceived warranties or guarantees and a statement that the report was prepared subject to the standard of care applicable to such professional services.
Here is an example of a disclaimer that can be included in the report.
This report is an expression of the professional judgment of the consultant based on the information available to the consultant at the time of the study leading to this report. Consultant makes no warranty, express or implied, related to the information or conclusions in this report or to the services provided. All opinions and conclusions of the consultant, whether written or oral, and any other documents provided by the consultant are based on the scope of services provided by the consultant and reflect facts and circumstances at the time the services were provided. This report is for the sole use and benefit of the client and is not to be provided in whole or in part to any other person or entity without the prior written consent of the consultant. Nothing contained in this report shall create a contractual relationship with, or a cause of action in favor of, any third party against the consultant. Client recognizes that any dissemination of the opinions or conclusions contained in this report to any third party may cause harm to consultant and agrees that any dissemination without the written consent of consultant shall be at the client’s sole risk and that the client shall defend consultant against any claims by any third party and indemnify the consultant for any costs, losses, or damages resulting from the unapproved dissemination.
Be aware of a duty to warn of dangerous conditions
If during the investigation the engineer concludes that the existing facility is unsafe and can endanger life or property, the engineer has a duty to warn promptly of the dangerous condition. Ideally, the client should take immediate action upon receiving such warning and take steps to safeguard lives and property. If the client is unwilling to take the necessary action, then it is generally understood that the engineer has a duty to notify the appropriate authorities of their findings; under these circumstances, the engineer’s obligation to protect public health, safety, and welfare takes precedence over the client’s wishes to maintain the status quo.
Preliminary repair plans should be clearly marked as “Not for construction”
Clients often ask for preliminary repair plans for initial budget estimates and a sense of the possible disruption to use of the facility during upcoming renovations. These preliminary repair plans will come to light in the event of a catastrophic failure. Clearly advise the client that preliminary plans should not be used to start repairs in any way since unauthorized construction activities will compromise the structural integrity of the existing facility. Repair activities that relate to structural integrity should always be undertaken based on a set of construction drawings that have been permitted with the local authority having jurisdiction over the project. It should be made clear to the client that repairs should not be made ad-hoc based on preliminary repair plans.
The professional services agreement should indicate that the parties agree as to the limited scope of the engineer’s services and the resulting limitations of the preliminary repair plans. In addition, a statement of limitations should be included on the preliminary repair plans supplied to the client or any contractors. Given that the client is unwilling to pay for a more complete scope of services, the engineering firm should consider a limitation of liability as well as indemnity by the client for third-party claims alleging incomplete design documents.
It is important that the client understand that the engineer’s design solutions comply with applicable law. It is advisable to consult with local code enforcement officials. Here is sample language that the engineering firm can adapt for a waiver of claims and indemnity obligation from the client:
Client agrees that Consultant shall not be jointly, severally, or individually liable to Client or to anyone making claims through or under Client, or for any claims from any third parties, including any party constructing the project, anyone working at the facility or using the facility that are the result of the changes made to the Consultant’s original instruments of service which are intended only to define the design intent of the project. Client agrees to waive any claim it may have against Consultant based on Consultant’s services and to defend, indemnify, and hold Consultant harmless from and against any and all claims, defense costs, including attorneys’ fees and dispute resolution costs, damages, and other liabilities, actual or alleged, arising out of, or in any way connected with, the providing of professional services by Consultant related to the limited scope of professional services requested by the Client regardless of how or under what circumstances or by what cause such injuries or damages are sustained, provided, however, that this defense and indemnification shall not apply in the event of an act or omission by Consultant constituting gross negligence or a willful and malicious act.
Crisis management plans are essential
A crisis management plan is a prudent step for all design firms so that they have a plan to turn to in case a sudden catastrophic failure happens. While sudden catastrophic failures are very rare, each engineering firm should go through the steps of developing a crisis management plan to be implemented when a crisis happens. A crisis management plan will describe how your business will react to a crisis, including who will be involved and what they will do. The goal of such a plan is to shorten and lessen the impact of the crisis, preserve operations and productivity as much as possible, and safeguard your firm’s reputation.
Crisis management plans typically develop response scenarios for a broad range of crises, such as a cyber-attack, technology failure, or catastrophic failure at one of the projects where you provided services. To develop the plan, you first need to outline each crisis scenario that your firm could face. The next step is to plan how you will respond to the specific scenario, including assigning responsibility for each task. You should identify the resources that will be needed during the crisis, such as credit cards, account information, and flowcharts of key processes and procedures.
Once you have developed your plan, it is important to include triggers for the various tasks. The first natural response to an emergency is often paralysis, but the firm’s first learned response should be to refer to the plan. There should be clear chains of command to make sure that your response is coordinated. The plan should also have internal and external communication efforts. The internal communication plan should have contact information for all crisis team members as well as anyone they might need to call upon, including outside consultants. You should also establish protocols to inform your employees, providing updates as necessary. The external communication plan should establish how you will communicate with the public and key external stakeholders.
It is essential that the firm hold exercises to check that the crisis management plan will work in real life. Crisis team members should be trained on their roles and responsibilities. The plan should be updated periodically to make sure that it is current and reflects the latest risk environment. If you are hit with an actual crisis, you should analyze what went well, what did not, and implement any necessary changes.
Professional liability policy has “crisis events” support coverage
In addition to exposure for negligence in the performance of professional services, a sudden catastrophic failure is a crisis event that has the potential to harm the firm’s reputation. In the event of a catastrophic failure, firms must be adept at coordinating resources to address the needs of the affected parties, responding to requests for information from the press, and taking necessary steps to maintain their reputation in the community. A public relations firm is necessary to coordinate proper responses, and the CNA professional liability policy provides coverage for a “crisis event,” which is defined as a situation that would be expected to cause “a material adverse effect” on the firm’s reputation. A “crisis event” payment will be made to a public relations firm that is working on behalf of the engineering firm during the first 60 days after an event to counter any negative perceptions. The policy will pay for public relations consulting services at 50% up to $30,000 per crisis event. This is a supplementary payment that is not subject to the firm’s deductible obligation and is in addition to the limit of coverage liability by the firm.