October 2006 ISSUE
WHAT'S IN IT FOR ME?
National Program Offers
Secondary Liability Protection
Professional liability insurance for errors and omissions arising from the practice of engineering, geology, or geophysics is not mandatory in Alberta. Individuals and firms decide for themselves if insurance is appropriate.
APEGGA has, however, a secondary professional liability insurance program in place for all our members to ensure that those members who do not get to participate in decisions about their firms’ insurance still have some basic coverage.
Introduced in 2002 in conjunction with several other provincial and territorial associations across Canada, the National Secondary Professional Liability Insurance program forms part of your APEGGA membership.
The program is not meant to take the place of primary insurance, but instead exists to protect members, and ultimately the public, in the case where primary insurance is unavailable. This particularly applies to employees of operating and consulting companies, former employees of defunct organizations, and anyone involved in incidental practice or “moonlighting.”
To help you better understand the program, the insurer has prepared a frequently asked questions document.
Q Why was this program set up?
A As practicing professionals, engineers and geoscientists take responsibility for their work. If their work subsequently fails, they may be held legally liable (personally) for any resulting costs or damages. Unless they have sufficient professional liability insurance they may be forced to pay thousands of dollars in damages and legal fees from their own pockets.
Many engineers and geoscientists have insurance coverage, either through their employers or their own policies, to cover most risks. This is especially true for those engineers and geoscientists in the consulting field. On the other hand, many employed engineers or geoscientists in fields other than consulting do not always appreciate the need for coverage distinct from that provided by their employer, under say, a general liability policy. There are many situations where these engineers or geoscientists need to call upon additional professional liability insurance.
Q Do I need to arrange with my broker to buy this coverage?
A No. As a member in good standing of one of the associations that have joined the program, you are automatically enrolled in the program effective March 31, 2002.
Q Who is an insured?
A All members in good standing of the associations participating in this program are insured.
Q What type of insurance does this program provide?
A This program provides insurance for your individual liability arising out of professional services that you may provide.
Q What insurance do I have if I am an employer, principal or another decision maker in a firm or another entity?
A If you are a sole proprietor or a decision maker in a firm that is engaged in providing stand-alone engineering or geoscience consulting services, you as a decision maker are not insured for those services. A “decision maker” is any director, officer or sole proprietor of an entity, or any associate or shareholder who holds more than 10 per cent of the shares of an entity or shares issued that include voting rights of an entity.
If you are a decision maker in a non-consulting firm or another entity that constructs, manufactures, installs, fabricates, or engages in some other activity, you as a decision maker are not insured for those services, with one exception. The policy will respond where you had a role as a designer in the product produced by your firm and a claim relates specifically to that design.
Q What insurance protection do I have if I am an employee in a firm or some other entity?
A While you are an employee for an engineering or geoscience consulting firm, you are not insured under this program for the professional services you provide. Any liability you may incur in providing these services to or on behalf of your employer should be protected under conventional professional liability insurance available in the marketplace.
While you are an employee for a non-consulting firm or another entity, you are insured for the professional services you perform in the course of that employment.
Q When I change employment, do I have insurance protection for the professional services I provided to my past employer?
A Yes, as long as you are not a decision maker of an engineering or geoscience consulting firm. If you are decision maker of a non-consulting firm or another entity, you only have insurance protection for design as described above.
Q What protection do I have if my firm ceases operation or goes bankrupt?
A You will have insurance protection for your past work for the defunct or bankrupt firm as long as you are not a decision maker of an engineering or geoscience consulting firm. Your insurance protection if you are a decision maker of a non-engineering or non-geoscience consulting firm or entity would be for design only as described above. If you are a decision maker of an engineering or geoscience consulting firm, some restrictions apply before you receive insurance protection. These restrictions are explained later in this document.
Q Do I have insurance protection for my past work if I retire?
A Yes, as long as you are a member in good standing with a participating Association. Also, certain restrictions pertain to decision makers as explained below.
Q Do I have insurance protection for professional activities that I may engage in when I am retired?
A Yes, but only for the performance of those services allowed by your association for retired members or for gratuitous advice you may give. Compensation received for any one project while providing such services must have a value of less than $2,000 and the total value that you receive for all such projects must not exceed $10,000 in any one calendar year.
Q If I provide professional consulting services, what coverage do I have?
A As a principal of a firm or an employee of a firm, this program does not provide protection when you provide engineering or geoscientist services to another person or firm as a consultant. Protection for that type of activity is provided by another type of insurance and needs to be purchased separately by those who provide those services.
If you provide engineering or geoscience services to a firm as an employee, you have protection as long as the firm is not in the business of providing those services as separate stand alone services to others. Those services, are in fact consulting services, for which separate insurance should be purchased.
An exception to this general rule has been made for those individuals who have regular employment and who decide to provide consulting services outside of their regular employment activities. The consulting services must be provided by the individual and not in a company name. The reason for this is that the program does not provide protection to companies. The protection provided by the program to individuals for this consulting activity is intended for small jobs only. In order to qualify for protection by the program, the fees earned for such activity must be less than $2, 00 per project and not more than $10,000 per calendar year.
Q Am I covered for mentoring?
A Yes.
Q The insurance policy is termed as being on a claims-made basis. What does this mean?
A This means that both the claim, as defined in the policy, and the report of that claim by the insured individual to the insurance company (XL Insurance Company Limited) must be made within the current policy period. Furthermore, it is a condition that the reporting of the claim be undertaken as soon as the insured is aware of it.
A practical example would be where an engineer provided professional services five years ago. Damage to the building involved is only now apparent and the building owner demands that the engineer rectify the damage.
The trigger for the policy is when the demand or claim was first made against the engineer, not specifically when the engineer performed the work.
QThere are restrictions in this program relating to individuals who are decision makers in a firm. Why is that?
A Decision makers hold senior positions that involve both administrative and business duties in a firm. This program is not meant to provide insurance protection for those non-engineering or geoscience duties.
Q What happens if I am a decision maker and my company goes bankrupt or ceases to operate?
A If you are a decision maker of a consulting engineering or geosciences service firm, the policy excludes claims against you during the first six-month period following the entry into receivership or bankruptcy of that firm, or during a two-year period following the closure and cessation of operations of that consulting firm.
If you are a decision maker of a non-consulting firm or entity, you will have continuous insurance protection for your design activities as described previously.
Q What happens if I as a decision maker retire and the consulting engineering firm I was employed with continues to operate? Do I as a retiree have insurance protection from this program following the expiration of a two-year period after retiring?”
A No. If the firm remains in operation after you retire, you should require that the firm provide continuing coverage post-retirement, as this program will not provide coverage. If the firm is no longer in operation (either cessation of operations, bankruptcy, etc.) then you, the retiree, will receive insurance protection once the appropriate waiting periods have elapsed (six months following the entry into receivership or bankruptcy, or two years following the closure and cessation of operations).
Q A new exclusion pertaining to mould was added to the policy in 2003. Can you explain the reason for that?
A You will find that almost all insurance policies contain an exclusion pertaining to damage caused by mould. Although mould is everywhere around us and has been since the beginning of time, it has only recently been identified as a health issue. The science on mould is in the developing stage. As this science evolves, there will be plaintiffs who will want to take full advantage of any funds that might be available to pay for damages, real or imagined, caused by the presence of mould. As other insurance coverage for mould disappears, it is not prudent for your policy to be the only one available to pay for such claims. In the future, after society has sorted out the real effects of mould and how such effects should be dealt with, insurance companies will be in a better position to decide what coverage can be provided for such claims.
Q Where can I get additional information?
A There is a toll free number 1-800-361-9080 set up for enquiries in all provinces except Quebec. The number in Quebec is 1-800-665-3742.
Q How do I report a claim and to whom?
A For immediate verbal notice of the claim, telephone the insurer’s claims department, 416-363-2914, or toll free at 1-800-665-2222. Also, by calling this number you can request a claims report form. Fax this directly to the insurer at 416-363-8038.
Please feel free to forward any additional questions you may have to the insurance provider by calling 1-800-361-9080.
For further information, please consult APEGGA’s website at www.apegga.org and click on Member Benefits.