The Engineer and

Professional Indemnity

Insurance Claims - Current

Trends

Rochestown Park Hotel

23 October 2017

Donal Twomey, Partner

C O R K D U B L I N G A L W A Y L O N D O N W W W . R D J . I E

What typically happens when a claim (or a circumstance likely to give rise to a claim) is made:

• Policyholder notifies his/her Insurer (or broker) as quickly as possible.

• Insurers appoint a solicitor to investigate the claim to see if it is covered by the Policyholder's Professional Indemnity insurance.

• Policyholder will be requested to send project file to the solicitor and/or meet with the insurers' solicitor.

• If cover is confirmed, the solicitor appointed by Policyholder's Insurers will come on record for the Policyholder in the defence/settlement of the Claim.

• Policyholder has an on-going duty to co-operate with Insurers and their solicitors in the defence of the claim.

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C O R K D U B L I N G A L W A Y L O N D O N W W W . R D J . I E

Current Trends

Presently, we are in a welcome trough in respect of the volume of new claims and notifications against construction professionals.

-The boom/recession claims have largely being washed through

-New claims arising out of the recent pick-up have not, for the most part, yet materialised.

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C O R K D U B L I N G A L W A Y L O N D O N W W W . R D J . I E

Characteristics of Construction PI Claims

• Typical claim against an engineer is a multi-party claim taken against the entire design team and builder.

• During the recession, and perhaps again in the future, the multi-party nature of many claims against engineers presented some practical problems arising out of the insolvency of other defendants.

Civil liability Act 1961Civil liability Act 1961Civil liability Act 1961Civil liability Act 1961

(Section 11) “For the purpose of this Part, two or more persons are concurrent wrongdoers when both or all are wrongdoers and are responsible to a third person (in this Part called the injured person or the plaintiff) for the same damage, whether or not judgment has been recovered against some or all of them”.

(Section 12) Subject to some limited exceptions, “concurrent wrongdoers are each liable for the whole of the damage in respect of which they are concurrent wrongdoers”.

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C O R K D U B L I N G A L W A Y L O N D O N W W W . R D J . I E

Statute of Limitations

• The law in relation to the Statute of Limitations in construction disputes is currently somewhat unclear, which has led to uncertainty.

• In March 2016, the Court of Appeal overturned a decision of the High Court in Brandley and WJB Developments Limited v Hubert Deane T/A Hubert Deane & Associates and John Lohan T/A John Lohan Ground Works Contractors (High Court 2010/10994P and Appeal 2015/245) in which negligence proceedings relating to a construction dispute were held to be statute barred.

• In its decision, the Court of Appeal set out some guidance on when the clock begins to run on negligence claims which, conversely, has only served to bring a degree of uncertainty to this area.

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C O R K D U B L I N G A L W A Y L O N D O N W W W . R D J . I E

Brandley case

• The case concerned two houses in Co Galway. The first defendant was the project engineer who issued certificates of compliance. The second defendant was the grounds work contractor whose work included the foundations of the houses.

• As a general rule, proceedings for negligence must be commenced within 6 years from the date on which the cause of action accrued.

• In this case, the proceedings were commenced more than six years after both the laying of the foundations and the engineer’s certification. However, proceedings were commenced within six years of the date upon which the damage became apparent to the plaintiffs. Below is a summary of the key dates:

March 2004 The foundations of the houses were completed

September 2004 The engineer issued his certificates of compliance.

December 2005 The plaintiffs noticed cracks in the houses.

November 2010 The plaintiffs issued proceedings against the engineer and the contractor.

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C O R K D U B L I N G A L W A Y L O N D O N W W W . R D J . I E

Brandley case

• The parties agreed that the test for when the cause of action accrued was not one based on discoverability but rather the question to be answered was “when did the plaintiffs suffer damage by reason of the negligence of the defendants”.

• The nub of the plaintiffs’ case was that although the negligent installation of the foundations and the negligent certification were outside the six year time limit, the damage that came about as a result was within that period.

• The High Court dismissed the claim as being statute barred, on the basis that the cause of action accrued on the date the foundations were laid

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C O R K D U B L I N G A L W A Y L O N D O N W W W . R D J . I E

Brandley case

• However, in a unanimous decision in March 2016, the Court of Appeal overturned the High Court decision. It held that damage is an essential element of any negligence/tort case as negligence without damage is not actionable. The plaintiffs did not suffer damage at the time when the defective foundations were installed – here were merely defective foundations – but that is not damage of a kind that is actionable in tort.

• The evidence was that while the foundations of these houses were defective, they did not cause damage until December 2005. The evidence was not that there was hidden damage which became discoverable at a later point but rather that the damage resulting from the defective foundations did not occur until December 2005.

• The Court of Appeal found that the fact that the foundations were defective was not a cause of action in tort, and so the Statute of Limitations could not start to run until damage had actually occurred.

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C O R K D U B L I N G A L W A Y L O N D O N W W W . R D J . I E

Points of Appeal in the Brandley case

• The Supreme Court granted leave to appeal on the following points:

�Does time run for the purpose of the Statute of Limitations in property damage claims from when the damage is manifest?

�Does time run for the purpose of the Statute of Limitations in property damage claims from when the damage is discovered?

�Does time run for the purpose of the Statute of Limitations in property damage claims from when the damage occurs?

• The matter was heard in the Supreme Court in April 2017, and a judgment is awaited.

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C O R K D U B L I N G A L W A Y L O N D O N W W W . R D J . I E

Brandley case

• The decision of the Court of Appeal in Brandley re-affirms that a cause of action in damages, for non-personal-injury claims, accrues only at the time that “damage” occurs, and creates a distinction between defective work, such as the installation of defective foundations, and actual damage, which is when the defective foundations cause damage to the building. Crucially, from the perspective of construction professionals, it creates the possibility that they may, in specific circumstances, face a liability for defective work more than six years after the defective work was carried out.

• The Supreme Court decision, which will hopefully set out a detailed analysis and statement of the law in this area, is awaited with interest to see if the apparent extension envisaged by Brandley is endorsed, modified or limited to its specific facts.

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C O R K D U B L I N G A L W A Y L O N D O N W W W . R D J . I E

Uncertainty following the Brandley case

• This uncertainty is having an effect in practice.

• Arising out of the uncertainty, and in anticipation of the Supreme Court decision in Brandley, both plaintiffs and defendants are ‘slow-peddling’ certain construction proceedings in the expectation of clarity on the issue from the Supreme Court.

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C O R K D U B L I N G A L W A Y L O N D O N W W W . R D J . I E

Other Developments in Constructions Disputes

• Rules of the Superior Courts (Conduct of Trials) 2016 – must engage experts earlier, courts may instruct a single joint expert, provides for ‘hot-tubbing’ of experts

• Rules of the Superior Courts (Case Management) 2016 – greater powers to judges to case manage proceedings so as, insofar as possible, to prevent ‘trial by ambush’ and reduce delays.

• Mediation Act 2017 - once commenced (which it is expected to be shortly), the Act puts the obligation on solicitors to advise re mediation on a statutory footing. In fact, solicitors need to execute statutory declarations confirming we have advised our clients about mediation. There is also a power for Courts to sanction a party that refuses to engage in mediation.

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C O R K D U B L I N G A L W A Y L O N D O N W W W . R D J . I E

Letters of Appointment & Collateral Warranties –Best Practice

• Ensure a clearly defined scope of works, ideally by reference to standard terms and conditions

• Limit your liability, at the very least to the limit of your PI

• Seek net contribution clauses

• A net contribution clausenet contribution clausenet contribution clausenet contribution clause states that where two or more parties involved in a construction project are each jointly liable for the same loss or damage, the liability of each party will be limited to the amount which would be apportioned to that party by a court.

• Limit number of assignments

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W W W . R D J . I E

A Presentation to Engineers Ireland

Monday 23rd October 2017

By Des Murphy

Director.

Why MBC Insurance• Established 1982

• Corporate & Personal Insurance Brokers

• Regulated by the Central Bank

• IBA, BFI Members

• Carry full Professional Indemnity Insurance

• Agencies with all major Insurance Companies

• Tribunalised at Lloyd’s/Cover holder status.

• 20 staff

• Offices in Cork City and Listowel.

What is Professional Indemnity

Insurance

• Professional Indemnity Insurance covers you and your business for

the financial consequences of damages or claim being upheld

against you or your company due to a breach or alleged breach of

your professional duty by way of neglect, error and/or omission.

• Professional Indemnity insurance is a key insurance requirement for

any individual, company, or organisation that provides professional

advice, design or other professional service for a fee.

What to look at when Purchasing PI.• Level of cover

• Business description

• In the Aggregate

• Any One Claim

• Applicable Courts

• Defence Costs

• Excess

• Geographical limits.

• Level Of Cover

• Retroactive Date

• Run Off cover

Key Features of the policy.• Policy is written on a claims made basis.

• The Negligence must have been

committed in the conduct of business.

• Partners Previous Business.

• Outgoing Partners.

• Discovery Period.

• Run Off cover.

• Cover On Documents.

• Collateral Warranties.

The Market at Present.

• We are still in a Hard market

• A lot of Insurers exited the market due to

the increase in the claims. WR

Berkley,Travelers Catlin, & Dual

• There is enough Insurers to make the

market competitive

• Give yourself Time

• Complete the Submission form Properly.

• Discuss with you Broker or Company.

RIAI Clause 26.

• This relates to “Responsibility for Existing

Structures” and effectively places the

Employer to insure both the existing

Building and its contents for specified

Perils.

• Its also gives a Waiver of all rights of

Subrogation against the Contractor and Or

Subcontractors.

ContactsCommercial Contacts:

• Des Murphy.

• Norma English for Personal Lines

MBC House,

36 South Mall,

Cork.

T: 021 427 5347

f: 021 427 0206

e: firstname.lastname@mbcinsurance.com

w: www.mbcinsurance.com