Risk Management Best Practice Starts With Open Lines Of Communication

The best way to avoid problems arising on any construction project is to maintain open lines of communications.

Too many costly claims and lawsuits against design professionals begin as nothing more than a simple miscommunication among the owner, contractor, subcontractor, and design professional.

The key to all communication is to be pro-active. Recognizing that an issue or miscommunication has popped up is the most important first step.

Maintaining open dialogue with your clients will keep costs lower and improve overall business relationships. Many times, simply keeping open lines of communication can prevent a problem on the job site from developing into a claim or potential lawsuit.

Weigh the value of involving experienced professional liability attorney early. Involving an experienced counsel early could protect your communications with the owner, contractor, or subcontractor as “settlement negotiations,” and possibly prevent discussions from being used against you in any subsequent lawsuit.

Involving inexperienced counsel early, however, could have the unintended consequence of elevating the situation before it can get resolved by the parties. Not all lawsuits can be avoided, but working together with experienced professional liability counsel, and possibly the insurance carrier, is often risk management best practice.

If you choose to communicate without an attorney, speak in one voice. Designate a single person to respond on behalf of the company.

Once a serious issue arises, activate the company’s “Litigation Response Team” immediately. If the company doesn’t have a Litigation Response Team, you should work with the company internal risk manager and attorney to develop one, and make sure every key leader understands their role at each stage of the process.

For example, while “Requests for Information” are a normal part of the construction process, be wary. Some contractors generate RFIs to lay a foundation for future claims for delays or extras.

The design professional should always respond promptly to a request for information even if the request is unrelated to the design professional’s responsibilities. Always, communicate in writing and copy all necessary parties, including the owner.

Be prepared to discuss the problem honestly and professionally. Be prepared to compromise even if you technically may not be at fault. The design professional, however, should avoid giving an opinion or advice about how to resolve the problem that is outside his scope of work to avoid creating future liability.

The design professional should weigh the costs of early repairs against the risk of future claim for damages, litigation costs, attorney fees, and loss of a future business relationship.  Sometimes, being willing to give an inch will stop an owner from going the extra mile of filing a lawsuit out of anger.

Be careful about making voluntary payments, however, because it could prevent you from recovering those payments from the truly liable party later.

The design professional also should always check with his insurance agent and broker to determine if voluntary remediation is covered under the policy because every insurance policy is unique.

The design professional should remember that while their professional liability insurance carrier generally will be understanding about protecting long-term, valuable relationships with important clients, a professional liability insurance policy is only meant to cover errors in design.

Never assume a voluntary payment will be covered without first consulting with an insurance professional and experienced legal counsel, who also can advise the design professional on when it should put the insurance carrier on notice to preserve the design professional’s rights under the insurance policy.

When an allegation arises, find out the source of the complaint as quickly as possible. Determine who the “decision maker” is and open a direct line of dialogue as quickly as possible. Get out in front of the problem early with the ultimate decision maker.

Consider taking advantage of “Pre-Claims Assistance” potentially offered as part of a professional liability insurance policy.

The best professional liability insurance policies often provide pre-claims assistance, including hiring an experienced professional liability attorney to help the design professional evaluate the risk faced, develop an effective strategy to minimize exposure to damages, and hopefully, avoid a lawsuit entirely.

Every design professional should fully understand their professional liability insurance policy before a lawsuit or claim is filed. Every Litigation Response Team should have one person designated to fully understand the terms of any insurance policy that may be available.

Contrary to what many design professionals sometimes believe, their professional liability insurance policy may provide such pre-claims assistance at no cost to the insured even if the company may eventually owe a large deductible if a lawsuit is filed.

When a claim is asserted, it’s not uncommon for design professional firms to think they are saving money by hiring their regular company attorney to “settle” a claim outside the insurance policy, or worse, doing it themselves.

However, some professional liability insurance policies may offer incentives to the insured, such as reducing the insured’s out-of-pocket deductible by as much as half, if the claim is resolved by formal mediation with the involvement of the insurance carrier.

Why would the insurance carrier do that?

The reason is simple: insurance carriers want their design professional insureds to take advantage of the insurance carrier’s experienced claims people – and experienced professional liability attorneys – rather than try to “do it themselves.”

In the long run, the insurance carrier knows it reduces the risk of future claims and saves the insured and insurance carrier money.

The design professional should create a “Claim File” at the first sign of a potential claim. Pull together all relevant communications with all other parties involved, including the contract, specifications, change orders and critical documents.

Every design professional should implement an effective internal email retention policy and be certain to enforce it throughout the company.

Maintaining a thorough, consistent system of documentation can prove invaluable when a claim does arise.

Before communicating about a problem, get your facts right the first time. Don’t assume anything. Send the message early to the other side, your attorney, and insurance carrier that you:

(1)  have identified the problem;

(2)  understand the cause;

(3)  have developed a solution if appropriate and within the scope of the contract; and

(4)  are prepared to defend your position that you are not to blame should a claim or lawsuit arise.

Be flexible. Respond to combative emails quickly. Respond in writing. Do not ignore accusations, but always stay professional.

Take the high road whenever possible, especially during the “Pre-Claim” phase. Remember the adage about an ounce of honey.

Never forget that everything you do, say, and write may eventually be used against you. Working together with an experienced professional liability attorney can often help avoid cringe-worthy emails from eventually being read out loud to a jury.

Every design professional wants to get paid. At the first sign of problems such as the project may be over-budget or underfunded, communicate with the owner to discuss payment as set forth in the contract.

While putting everything in writing is sound advice, nothing will replace face-to-face communications.

Don’t shy away from setting up a meeting to sit down with the appropriate people to confront the issue. If you do have a meeting, send a follow up letter, summarizing the agreements you believe were reached and the plan of action agreed on by the parties.

If the contractor or owner refuses to meet with you in person, that may be a good sign that a claim or lawsuit is on the horizon, and you can start preparing further.

Whatever you do, don’t overreact. Be professional, and keep the lines of communication open as long as possible or until your attorney advises you to stop.

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Tim Soefje - 04--09-18Timothy B. Soefje is the Managing Member and head of the professional liability section at the boutique firm of Seltzer Chadwick Soefje & Ladik, PLLC based in Dallas, Texas. He is admitted in Texas and Oklahoma. For regular information about professional liability matters, follow him on Twitter at @TimSoefje and search #ProfessionalLiability. For more information, visit us at www.realclearcounsel.com or contact him at tsoefje@realclearcounsel.com.

 

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