Surety Trying to Extricate Themselves from Figg
Surety Trying to Extricate Themselves from Figg
(OP)
I put this here rather than the collapse thread.
Beware of your D/B contract language, arrangements and disclosures I guess. Or, just try to avoid catastrophes.
https://insuranceinsider.com/articles/120316/trave...
IC
Beware of your D/B contract language, arrangements and disclosures I guess. Or, just try to avoid catastrophes.
https://insuranceinsider.com/articles/120316/trave...
IC
RE: Surety Trying to Extricate Themselves from Figg
It seems that the design-build aspect is only part of the reason why they don't want to cover Figg. What are these "professional liability exclusions" they reference in the article? Apart from the design-build aspect this seems like the exact reason for having E&O insurance. Only thing I can think is that this wasn't E&O insurance and was just general liability insurance.
Anyone got more details about this?
Ian Riley, PE, SE
Professional Engineer (ME, NH, MA) Structural Engineer (IL)
American Concrete Industries https://www.facebook.com/AmericanConcrete/
RE: Surety Trying to Extricate Themselves from Figg
It's that the insurers are claiming Figg entered into a partnership or joint venture with a construction company without the insurer's knowledge or approval and was doing the bridge work under the umbrella of that partnership or joint venture.
Legal filing is here: Link (PDF)
The thing that jumped out at me (emphasis mine): 'All of damages sought by the claimants against Figg arise out of Figg's acts and omissions as the engineer responsible for the bridge's construction'.
Then add that with the language in some of their endorsements limiting partnerships/joint ventures to architectural, engineering, and surveying activities (notably omitting construction/contractors). I'd tend to guess the insurers are claiming that Figg was only insured for engineering activities and going into the joint venture with a construction company moved them over to the construction side for which their general liability and certainly professional liability would not cover them. From the insurer's standpoint, they thought they were insuring an engineering design company, not a construction company.
Will be interesting to see where it goes.
At very least I would think Figg (or anyone else) going into a joint venture would be wise to review with their attorneys AND insurers to make sure it doesn't jeopardize their coverage. If Figg did that and the insurers didn't take any issue with it, then that should help Figg.
RE: Surety Trying to Extricate Themselves from Figg
Check out Eng-Tips Forum's Policies here:
FAQ731-376: Eng-Tips.com Forum Policies
RE: Surety Trying to Extricate Themselves from Figg
If you are offended by the things I say, imagine the stuff I hold back.
RE: Surety Trying to Extricate Themselves from Figg
I get it, I don't agree with it, but I get it.
RE: Surety Trying to Extricate Themselves from Figg
If you buy E&O as a structural engineer and get sued for electrical engineering work, your insurance company would disavow anything unrelated to your structural engineering coverage.
TTFN (ta ta for now)
I can do absolutely anything. I'm an expert! https://www.youtube.com/watch?v=BKorP55Aqvg
FAQ731-376: Eng-Tips.com Forum Policies forum1529: Translation Assistance for Engineers Entire Forum list http://www.eng-tips.com/forumlist.cfm
RE: Surety Trying to Extricate Themselves from Figg
I imagine the situation is very complex. How often are project similar to the one in question developed on a design-build basis. I can't see the projects of similar size and nature being developed through traditional delivery methods (design bid build).
I also imagine it's easier for the insurance company to try this tactic than it is to pay out on the policy (6 families and the state). If it works, they save a ton of money, if it doesn't, its a drop in the bucket.
RE: Surety Trying to Extricate Themselves from Figg
Was this bridge insured for bad electrical work?
--
JHG
RE: Surety Trying to Extricate Themselves from Figg
RE: Surety Trying to Extricate Themselves from Figg
TTFN (ta ta for now)
I can do absolutely anything. I'm an expert! https://www.youtube.com/watch?v=BKorP55Aqvg
FAQ731-376: Eng-Tips.com Forum Policies forum1529: Translation Assistance for Engineers Entire Forum list http://www.eng-tips.com/forumlist.cfm
RE: Surety Trying to Extricate Themselves from Figg
RE: Surety Trying to Extricate Themselves from Figg
TTFN (ta ta for now)
I can do absolutely anything. I'm an expert! https://www.youtube.com/watch?v=BKorP55Aqvg
FAQ731-376: Eng-Tips.com Forum Policies forum1529: Translation Assistance for Engineers Entire Forum list http://www.eng-tips.com/forumlist.cfm
RE: Surety Trying to Extricate Themselves from Figg
Seems like JV is the sticking point here to me. Obviously JVs with contractors happen more often in design-build but they’re far from mandatory (or even common, I’d say). My firm has been part of dozens, if not hundreds, of design-build teams. To my knowledge we’ve never been part of of a JV. In fact I can only think of one job I’ve been on where I think any of the design team was on a JV with the contractor and even that one I’m not sure was actually a JV and not just an unusually friendly informal partnership.
I’m not sure that argument will get thrown out. At least according to the insurer’s filing, the policy endorsements exclude JVs except for those where all coventures are architecture, engineering, or surveying firms. If that’s true, Figg was in a true JV with Munilla, and Figg never got it cleared like the insurer is claiming, that potentially puts Figg in a rough spot. Will be interesting to see how it plays out.
Would think there’s a non-zero chance this ends up being a weird situation where it’s better financially for Figg for this to be a design flaw rather that a construction issue. With the JV they may be liable either way but probably have a higher likelihood of being covered if it’s a design flaw since that’s what their insurance is actually intended for.
RE: Surety Trying to Extricate Themselves from Figg
RE: Surety Trying to Extricate Themselves from Figg
However, if we were to create a Joint Venture - a new business entity where we were combining ourselves as a part of a new thing - sort of like we were temporarily becoming a part of a holding company - then we'd be violating our insurance coverage parameters and this might negate our coverage.
Here's some of our insurance language:
If, during the Policy Period, the Named Insured acquires a majority of the assets of another entity, creates another entity, or acquires any entity by merger into consolidation with the Named Insured, such entity shall not be covered under this Policy unless the Insured, prior to such acquisition or creation:
1. Gives written notice of such acquisition or creation to the Company;
2. Pays any additional premium required by the Company, and;
3. Agrees to any additional terms and conditions of this Policy as required by the Company.
One other response was: it only matters if your firm becomes a member/owner/partner of another entity.
Check out Eng-Tips Forum's Policies here:
FAQ731-376: Eng-Tips.com Forum Policies
RE: Surety Trying to Extricate Themselves from Figg
RE: Surety Trying to Extricate Themselves from Figg
Design-build basically means a contractor is selected before design is completed for the job and the design team is under the contractor. That's all. It's rearranging the chain of command, has nothing to do with JVs or legal partnerships or co-ownership or any of that stuff.
Sometimes the contractor could have a design team in-house. A prominent example on consumer side would be PV installation on your house. You're usually engaging a builder, but they usually take care of all the engineering, either acquire or assist in acquiring permits, etc. Instead of you engaging an engineer to design it and then have to engage a builder separately. Sometimes contractor will hire out the design team. Sometimes it's a little bit of both.
I'm not sure I can speak to why Figg would want to do the joint venture. It doesn't seem common in my field (buildings), maybe it's more common for bridge firms. I imagine it's more profitable as you have almost an 'ownership stake' of sorts. Perhaps in theory the designer has more control over the finished product since you're a coventure with the guys responsible for building it. But you can open yourself up to more risk as well, as we're seeing. If the legal entity doing the project is Munilla-Figg JV, then all members of the Munilla-Figg JV are going to get sued for any flaws. Which is probably what the insurer is balking at. They're insuring Figg, not the Munilla-Figg JV. Perhaps if it's design related then they end up getting covered down the road, not sure if that's part of this fight or if that needs to be a separate fight.
Moral of the story (and JAE probably already heard this from his insurer): If you're thinking of going into a JV or acquiring another firm, absolutely talk to your insurer and make sure you're covered. And get as much as you can in writing. At very least, take the time to read the fine print of your policy/endorsements and make sure you actually understand it so you know the rules you're playing by.
I used to think that. But since then I've seen so many people sign stuff that they haven't even read or understood that I really wouldn't be surprised at all. Not saying that's what happened here, I have no way of knowing. But Figg certainly wouldn't be the first company to fail to read all the fine print.
RE: Surety Trying to Extricate Themselves from Figg
In some cases (not all) it is a requirement of the bid process that all services required by the bid come from a single legal entity. I'm butchering the legal language a bit but basically we bid on jobs where having a contract with a provider of other services is not enough; the complete contract must come from a single source.
In my experience, the practical difference between being in a "Joint Venture" with a supplier, and just having a contract with that same supplier is nil. The joint venture exists solely to satisfy a specific requirement for our bid to be accepted.
I know nothing of the details of the arrangement between Figg and Munilla, but a similar situation seems plausible, if they were in fact involved in a joint venture together.
I would have to defer to those more experienced in the structural world to know whether or not what I've described above happens frequently, or at all, in that market.