In a recent newsletter to engineers there was a case study from the late 1970s that is still relevant – even to architects – today.  (a contribution from Board Member Michael Davis)

The Facts

An engineer was engaged by a contractor to design temporary works for a bridge project.  After some work was carried out it was discovered that it had been incorrectly set out.  The engineer agreed that they had made an error and to pay for the correction of the fault.  This was done as a verbal agreement, and the engineer did not consider it worthy of advising their insurer because the matter had been settled amicably.

The bridge was eventually completed but at the same time the contractor’s company went into liquidation.

The appointed receiver then laid a claim against the engineer alleging that their error had contributed to the delay and the company’s financial difficulties.

The liability that arose from this (including all the legal fees to defend the action) was not covered by the engineer’s insurance because they had not advised their insurer.

What are the Professional Liability Lessons?

In the first instance, the engineer should not have admitted liability – regardless of how obvious the error might have been.  The engineer should also have notified their insurers of the event as soon as they were aware of the likelihood of a claim being made against them.  Both issues are a standard requirement of your contract with an insurer for Professional Indemnity. 

Further, in trying to settle the matter quickly and amicably, the engineer should have obtained a written discharge from the contractor in respect to the claim and any matters arising from the claim.  In the absence of that, and of some insurance and legal advice on the wording of such an agreement, the engineer left the door open for a further claim.