Design, Construction Flaws Can Result in Devastating Financial Liabilities

Florida International University (FIU) wanted a signature bridge to help highlight the school’s “institutional aspirations.” However, the project’s planners appear to have overlooked a design flaw that was likely a key factor in the 950-ton bridge collapsing in March. The tragic accident resulted in the death of one construction worker on the bridge and five individuals in cars below.

The National Transportation Safety Board’s (NTSB) investigation into the cause of the collapse could take between one and two years. Multiple news reports point to the idea that professional negligence played a role. Survivors of the collapse and families of those affected have filed lawsuits alleging wrongful death and negligence. One FIU student filed a suit against seven companies involved in the design and construction of the bridge.

The incident illustrates the need for all parties involved with a significant construction project, including design professionals, to make sure they are properly insured and protected against professional liability claims that could bankrupt their firms.

An Architects, Engineers and Contractors (A&E) professional liability policy provides financial protection for licensed design professionals and trade professionals such as contractors and construction managers. This coverage can provide financial protection when held liable for errors and professional negligence that may occur while providing services that either result in either a design error or negligence in managerial oversight.

“The NTSB’s investigation will determine the cause of the collapse but it is likely none of the parties will escape some type of significant financial damages.” – Craig Boyle, Burns & Wilcox

Design construction projects are very complex and involve several different professionals throughout the design and build process. Each professional involved will be utilized for their specific area of expertise, to perform a specific task or render a specific professional opinion “signing off “on a section of the project to bring the project from a design concept to a standing structure.

From the project designer, contractor, construction manager and structural engineer to the construction labor crew and any specialty subcontractors; each professional will need proper A&E insurance to reduce liability before the project begins.

The risk involved with bridges

At least nine bridge collapses have occurred worldwide in 2017; three have happened so far this year, including the FIU incident and a collapse  in Colombia that killed 10 construction workers.

The 2017 Infrastructure Report Card developed by the American Society of Civil Engineers reports there are more than 614,000 bridges in the U.S.—about 40 percent of which are 50 or more years older. The report suggests that 9.1 percent of the bridges were structurally deficient in 2016 and on average 188 million pedestrian and vehicles crossed a structurally-deficient bridge every day in the U.S.

At FIU, the university wanted a new pedestrian bridge to link the main campus to Sweetwater, a nearby community where 4,000 students live. The bridge’s 174-foot main span crossed an eight-lane highway.

According to the Miami Herald, citing a review by three independent structural engineers, the unconventional placement of diagonal supports along the bridge produced a glaring weakness at a key connection point. The engineers believe contractors misjudged the impact of significant structural stress placed on a strut at the north end, the same spot where cracks were reported days before the collapse.

The NTSB’s investigation will determine the cause of the collapse but it is likely none of the parties will escape some type of significant financial damages, said Craig Boyle, Professional Liability Broker, Burns & Wilcox, Chicago, Illinois.

“In the Miami bridge case, it will be interesting to learn if FIU contractually assigned the management oversight of the project to the design firm or a project management firm or if they choose to retain this responsibility themselves. This would significantly impact the case and could have a huge impact on FIU financially,” Boyle said. “Perhaps an even more important question is—what steps did FIU take in their vetting procedures during the design selection process? Did they require all design professionals, contractors and subcontractors to have their own liability policies in place? In this tragedy, if FIU is found to have done its due diligence, the university could mitigate the liability to some extent,” Boyle said.

An Architects, Engineers and Contractor’s (A&E) professional liability policy provides financial protection for licensed design professionals and trade professionals such as contractors and construction managers.

Bridge projects are among the riskiest construction projects, as they require more complex engineering. As they expand in length, bridge projects become more structurally complex. They require additional professional staff to be involved, such as a structural engineer. A structural engineer will need to review the design plans and confirm that the bridge design is architecturally sound, prior to the commencement of the construction taking place. With more professional staff becoming involved in a project, so increases the potential for miscommunication, which can have devastating results.

“Bridge projects have a very high potential for bodily injuries and property damages arising from professional errors because of the number of vehicle drivers, passengers and pedestrians at risk if a disaster occurs,” said Nicole Greene, Associate Vice President, Professional and Executive Liability Center of Excellence, Burns & Wilcox, Corporate Headquarters.

Structural claims are the third-largest loss leader within the design field, behind architecture and civil claims. Structural claims account for about 20 percent of design claims and generally involve injuries and property damage. These cases may also take years to litigate, which often drive up the defense costs, as structural incidents are often very public, and have a highly emotional impact on the community. The average cost of a structural claim in the U.S. is about $550,000. Design claims average about $400,000, according to Burns & Wilcox statistics.

“Each of the parties named in lawsuits will incur defense costs, and therefore need their own professional policies. These policies generally cost less than $5,000 annually depending on the size of the professional firm and offer comprehensive coverage for errors including professional negligence that results in a bodily injury, property damage or financial loss,” Greene said.

Typically, when purchasing a policy such as a design or contractor professional liability policy, the most common policy limits purchased are $1 million per claim and $1 million policy aggregate (max payout).

“The bottom line is that design, engineering and construction mistakes are very costly and often result in catastrophic losses. Project owners need to be diligent when vetting and selecting their design contracting companies. They should also utilize industry-specific contracts with the professionals they hire. Within these contracts they should also require that these design professionals and any subcontracted professionals involved with the project have adequate professional liability insurance in place for the duration of the project.” Greene said.

Additional coverage

Endorsements, defined as an amendment or addition to existing insurance, serve as enhancements to current policies, Greene said. A First Dollar of Defense Endorsement policy, for example, covers forensic, defense and investigation costs without drawing from the policy’s limits, ensuring there is money left to cover other liabilities.

“This type of policy means that the dollar amount provided as part of the insurance claim will not be eroded by legal fees, but there will be money reserved to pay for the incident itself,” Greene said. “With this enhancement, the policyholder only pays the deductible in the event a settlement is reached.”

The costs of endorsements with design and contracting professional liability will vary greatly based on the work and costs associated with the project, she said.

Rectification coverage is another type of endorsement that falls under contractors’ professional liability coverage. It allows any party that notices a possible design error or other defect to cover the cost of fixing that defect prior to the project’s completion. It can mitigate expensive out-of-pocket costs for the contractor. Not all carriers will offer this type of policy so working with your insurance agent is recommended. Several other policy enhancements for the contractor are available as well.

“When reviewing the scope of a project and all parties involved, each firm should have their own insurance policies in place,” said Greene. “Contract language that outlines the responsibilities of each of the professionals involved in the project should be utilized, which can assist in determining who will be legally responsible when an incident occurs.”

As with any coverage need, an insurance broker or agent must be consulted. Click here to forward this article to your insurance broker or agent to ask if you need this coverage, or share this with clients to start the conversation and ensure proper protection.

This information was provided by Burns & Wilcox, North America’s leading wholesale insurance broker and underwriting manager. Burns & Wilcox works exclusively with retail insurance brokers and agents to assist clients like you with their specialty insurance needs. Ask your insurance broker or agent if an Architects, Engineers and Contractors (A&E) professional liability policy is right for you.