Risky Business

July 2004 » Business
While ignorance may not be bliss, the adage notwithstanding, it can help prevent some of the anxiety that knowledge can breed. In fact, that point is reinforced every time I lead one of ASFE's Introduction to Professional Practice seminars. I often hear attendees say, "If I had known all that before I chose civil engineering as a career, I probably would have chosen a less risky profession."
John P. Bachner

Statutes of repose
While ignorance may not be bliss, the adage notwithstanding, it can help prevent some of the anxiety that knowledge can breed. In fact, that point is reinforced every time I lead one of ASFE's Introduction to Professional Practice seminars. I often hear attendees say, "If I had known all that before I chose civil engineering as a career, I probably would have chosen a less risky profession."

This sentiment isn't much of an exaggeration for many professionals. Just look at the number of physicians who opt to find other careers in the face of growing litigiousness and malpractice (a.k.a., professional liability) insurance premiums. Fortunately, the government understands how important engineers are to society, which is why all states have established statutes of repose.

Although they vary from jurisdiction to jurisdiction, statutes of repose typically establish that a design professional's liability to all parties ends within a certain number of years (commonly 10 years) after completion or substantial completion of a construction project. Compare statutes of repose to statutes of limitations, which would establish that a design professional's liability to all parties ends within a certain number of years after a defect is discovered. In other words, if a design defect was discovered 30 years from today, the party allegedly injured or damaged by it would have up to 40 years from today to file a claim, assuming a 10-year statute of limitations was in effect. Given that type of exposure, if our industry had statues of limitations insurance rates would be far higher than they already are. Also, litigiousness would be encouraged rather than discouraged, and more civil engineers would enroll in night school to become lawyers!

Do not assume that the protection afforded by a statute of repose is automatic or unassailable. You need to understand intimately those that exist in each state where your contracts are enforced. You'll probably need the assistance of an attorney.

The following are some questions you should consider: Do statutes of repose apply to environmental remediation projects? The answer is maybe, maybe not. Some statutes of repose consider only "improvements to real property." Is an environmental cleanup an improvement? In common sense, yes. In law, not always.

What about the nature of the action? Some statutes of repose apply only in the case of "civil actions for malpractice or professional negligence…." Others apply to "actions based upon tort, contract or otherwise…." An attorney may tell you that such language makes a huge difference and has serious implications for how you word your contract. For example, you and your firm are agreeing by contract that you will not commit the tort of negligence language at the beginning of the "standard of care" provision: "Services performed by CONSULTANT under this AGREEMENT will be conducted in a manner consistent with that level of care and skill ordinarily exercised…." As such, if you do commit a negligent act, you would have committed a tort (a civil wrong for which the court will grant a remedy) and you would have breached your contract. A breach of contract action is not a "civil action for malpractice or professional negligence." Negligence also could trigger a claim for breach of warranty or guarantee on the ground that the "will be" of "will be conducted" means far more than "in the future."

There's something else you need to know about statutes of repose: You can establish your own by contract. Although such provisions have no impact on the rights of third parties, they can do a great deal to reduce your exposure to actions brought by clients - owner clients in particular. Consider the following excerpt from a sample contract provision included in ASFE Contract Reference Guide, Edition 3.1:

Time bar to legal action
Notwithstanding any statute that may provide additional protection, CLIENT and CONSULTANT agree that claims by either party against the other for breach of this AGREEMENT or for failure to perform in accordance with the applicable standard of care shall not be initiated more than [two (2)] years from the time the party knew or should have known of the condition giving rise to its claim, and shall under no circumstances be initiated more than [four (4)] years from the date on which CONSULTANT completes services….

The bottom line is this: The knowledge that breeds anxiety also should breed the desire to gain more knowledge so that risk can be managed. The victims of risk, first and foremost, tend to be victims of their own ignorance.

John P. Bachner is the executive vice president of ASFE, a not-for-profit trade association that provides programs, services, and materials to help geoprofessional, environmental, and civil engineering firms prosper through professionalism. Visit ASFE's website at www.asfe.org


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