Engineering Professionals Face Growing Complexity of Risks and Liability

Malcolm Padayachee, Manager of Professional Risks at Aon South Africa

Collection of Practical CESA Case Studies Provides Invaluable Risk Insights

If ever there was a trend indicator for 2013 and beyond, it would be that volatility is here to stay. Analysts agree that volatility is something that the built environment will face for at least a number of years and businesses providing professional services into this environment will need to find solutions to working within such an environment and building it into their risk mitigation strategy.

This is according to Malcolm Padayachee, Manager of Professional Risks at Aon South Africa, a leading risk consultancy and insurance brokerage.

A joint collaboration by Aon South Africa Professional Risks Division, Consulting Engineers South Africa (CESA) Quality and Risk Management Committee and Mr Ivor GW Evans PR. Eng (Retired) published their annual comprehensive report profiling a collection of case studies on professional liability claims against consulting engineers in South Africa. The collection of case studies provides invaluable insights into the scope, severity and magnitude of risks faced by consulting engineers in a practical and easily understood format.

“The world in which engineering professionals operate is one of ever increasing pressure, with demands for quick answers and cost-effective solutions to stay competitive and seal the deal so to speak. That pressure can lead to errors and omissions by professionals. That factor, together with the increasingly litigious nature of our society, underscores the need for professional indemnity (PI) insurance,” says Malcolm.

“The range of risks that professionals are exposed to is complex. In most instances understanding and getting a handle on this risks is massively challenging, as they often arise out of complex interdependencies which may not be immediately visible. These case studies provide an invaluable tool to study and further explore the potential risks faced by professional companies in this sector with real-life accounts and scenarios providing lessons to be learned,” adds Malcolm.

The case study collection covers various claims case studies from CESA members including:

• Risks and consequences flowing from cancellation of a construction contract
• Typical problems associated with bridge widening, and the value of an in-house quality management system
• Faulty design of a beam and cantilever slab in a reinforced concrete structure and its effect on the project
• Implications for a consulting engineer from a mishap involving a fatality
• The wisdom of including a limitation of liability clause, based on a multiple of the professional fees
• Risks of incorrect interpretation of trial hole profiles and inaccurate geotechnical reports
• Lessons from insufficient geotechnical investigation and foundation design – even for a dwelling
• Malperformance in the airconditioning system of a large building – who is to blame?

Another crucial consideration for professionals is that of legal risk management, ensuring that professional services organisations and individuals fully understand their potential exposure to legal liability. In this regard, contract vetting is critical in the context of insurance. A thorough analysis of the legal liability that can attach to a professional should they fail to exercise their obligations strictly in accordance with the contract is essential, particularly when it comes to ensuring that the terms of the insurance contract will respond to the terms set out in the contract.

“2013 should be the year that that the built industry focuses on developing solutions to these challenges, building overall resilience and ensuring that they are aware of the risks and that they have plans and procedures in place to reduce their risks to levels that are as low as are reasonably practicable. It is vital to see the increasing linkages between the various special risks; integrating their plans and planning across the broad spectrum of possible risks; engaging subject matter experts to quantify the changing risk landscape and provide appropriate assistance.

“Threats also provide opportunities for growth in that the best-prepared companies will be the ones that better manage their vulnerabilities and thus can withstand a greater range of threats; that can recover more quickly and can return to commercial activities sooner than their competitors,” concludes Malcolm.

Aon is the leading PI broker in South Africa with its broking and risk transfer services supplemented by administration of schemes for many of the country’s leading professional bodies, including Consulting Engineers South Africa (CESA) and the Attorneys Insurance Indemnity Fund (AIIF). Aon services from small to large professional services organisations including individual professional practitioners.

For a copy of the case study collection, contact Malcolm Padayachee at Aon on (011) 944 7897 or e-mail malcolm.padayachee@aon.co.za