CAN ENGINEERS BE HELD LIABLE FOR THEIR PROFESSIONAL MISTAKES?

Article :Camargue Weathervane newsletter #84 FastinoMakandwa 14 Dec 15

Imagine working on a multi-billion rand project and something goes wrong due to your negligent errors and omissions as an engineer. There are many situations where engineers can become legally liable to third parties; for example when you are undertaking a big municipal project; working on a Gautrain project; or soil and foundation engineering work for a shopping mall.

The question that begs answering is whether you can be held liable as an engineer for any pure financial losses to third parties as a result of your negligent mistakes or breach of contract? If the answer is ‘yes’ and if there is a possibility that you can be held liable, then professional indemnity cover is the ideal solution for you as an engineer.

The collapse of the Grayston bridge over the M1 in Johannesburg on Wednesday 14 October 2015 can be the talking point on whether the engineer who is involved can be held liable or not. Unfortunately, two motorists lost their lives and 10 people were hospitalised. In light of this incident, the engineer’s reputation and share price (if listed on the stock exchange market) can be negatively affected.

What Exactly Do Engineers Do?

Engineers provide various services which include but is not limited to the following;

  • Civil
  • Structural
  • Mechanical
  • Electrical
  • Soil & foundations consultancy
  • Heating and ventilation services
  • Project managementWhy Professional Indemnity Cover?A PI policy covers the engineer against the following risk exposures:
  • Professional indemnity (PI) policy is the answer to unforeseen financial losses caused by negligent errors and omissions. It is designed to protect professionals such as engineers against unforeseeable and unexpected errors whilst providing advice to their clients. In some instances, engineers are required by their clients to have professional indemnity in force when tendering for business. In this case, they are forced to take up a PI policy for the duration of the project or as stipulated in the tender documents. However, it is important to understand that PI is more than a paper that you include in tender submission.
  • Just like anyone else or any other professional, engineers also make mistakes, therefore it is imperative to consider taking out a professional indemnity policy in order to be protected against liability following such negligent mistakes.
  1. negligent errors and omissions
  2. negligent wrongful or inadequate advice to clients
  3. negligent breach of contract and breach of respective warranty
  4. breach of statute and regulations
  5. Defamation including libel and slander injuria and negligent breach of confidentiality
  6. Legal defence costs
  7. Loss of documents
  8. Any additional costs incurred in trying to mitigate or preventing a loss that is likely to occur.

Advantages of Having a PI policy

  1. It protects engineers against third part financial losses arising from negligent errors and omissions when rendering their services
  2. The policy provides engineers with a peace of mind. A third party claim can cause financial distress. Imagine a case where an engineer has to pay a PI claim from working capital which is meant to pay overhead and operating expenses such as wages and salaries, rates and rentals or even buying new equipment. PI claims can be substantial and can disrupt operations because capital will be used to settle a third party liability claim and related legal costs, as well as tarnishing the engineer’s good will and reputation.
  3. There is provision for any legal defence costs. In some cases an engineer can be sued even if he is not liable. This means that the defendant will incur costs in defending the matter. The PI policy provides cover for such legal costs.

Examples of professional indemnity claims in respect of engineers

  1. An engineer provided inaccurate specifications for an electricity supply to site contractors. This led to additional costs for alterations and for the use of a temporary generator
  2. A geo-technical engineer negligently failed to detect unstable sub-surface conditions and as a result the embankment collapsed
  3. Refurbishment proved inadequate following negligent miscalculations during the designing of heating system in a factory. In fact, extra units were required. The engineers and contractors involved were sued for breaches of building regulations
  4. A contract was terminated citing delays due to design inadequacies during the refurbishment of a noise test factory. Complete refurbishment was required in order to comply with Pressure Equipment Regulations

It is imperative for engineers to have PI cover in force to guard against pure financial losses emanating from the provision of their services. Engineers can be sued individually or joint and severally with sub-contractors or with other joint-venture companies.

One of I&DS preferred niche insurers, Camargue Underwriting Managers offers professional indemnity cover for engineers and other professionals such as accountants, architects and surveyors among others. In addition, they provide other ancillary benefits like risk management services. In order to learn more about Camargue’s risk management services as well as more information on professional indemnity cover, contact I&DRS on (011) 484 9401