Professional Liability/ Risk Management Brief: Certifications
Professional service firms are often requested or required to issue certifications, which, by virtue of the language and the representations contained in their provisions, result in additional liability exposure and involve possible uninsurable obligations such as express warranties and guarantees. Professional service firms can only appropriately sign certification statements that are accurate, contain suitable qualifying language, and relate to conditions within their knowledge or control.
Dangers of Unqualified Certifications
Certifications often increase the risk to a firm because of their seemingly absolute nature and the detrimental reliance often placed on them by a third party. In a certification, a design professional may be assuming a level of liability that is both beyond the standard of care required under the law and the coverage afforded by the professional liability insurance policy. Design professionals are required by their standard of care only to carry out the duties of their contract in a reasonable, professional manner.
While a design professional may assume that a certification is no more than a statement of professional opinion based on the scope of services provided on the project, the rest of society imparts to the certification a meaning tantamount to an absolute assurance. This natural assumption establishes a detrimental reliance that tends to create increased and uncontrollable risk for the design professional.
In the event of a loss by a party relying on a certification containing absolute language, it is highly likely that the certification would be interpreted to be an authoritative verification of fact rather than an opinion based on the knowledge of the design professional and the information available at the time of the certification. There also is a high likelihood that such a certification will be interpreted as an assumption by contract of a liability that is excluded from coverage under professional liability insurance.
Preserving Insurance Coverage
Although it is beneficial to the design professional to include language in the certification, declaration, or representation clearly establishing that the statement is intended to be interpreted only as an expression of professional opinion—constituting neither a guarantee nor a warranty—this is unlikely to be acceptable to most clients. While the inclusion of such a clarification may not be feasible, it is necessary to, at the very least, identify the certification as a statement based on both the design professional’s knowledge of the relevant issues and the information that it has obtained directly about the situation being certified. It must be clear in the language that the certification represents a belief formed by the professional based on the application of its professional judgment of that knowledge and information.
This absence of clarity surrounding certifications stems from the basic fact that clients do not often understand that design professionals are insured against their own professional negligence, and not for breaches of contract that extend beyond that negligence. It is this lack of understanding that must be addressed. The design professional needs to explain to the client the benefits of qualifying certifications based upon its professional opinions. Further, design professionals need to make clients aware that by accepting a professional opinion qualifier, the consideration of the certification as an express warranty that would be excluded from coverage by the professional liability policy becomes significantly less likely.
Detrimental Reliance and Express Warranties
When a design professional undertakes to certify that something has been done, not done, or done in a certain way, the client has the right to rely on the professional knowledge and skill of the individual and the firm certifying that information. A design professional should be certain that what is being certified is consistent with the services rendered. It is the design professional's duty to avoid providing a certification that goes beyond the scope of services for which the professional service firm was retained and to avoid making the certification an unqualified statement of fact.
Certifications and Contractual Obligations
Both the contract that a design professional negotiates with a client and the certifications that the design professional provides to or through the client must be consistent with one another. Contracts signed by professional service firms include descriptions of the services to be provided. In the certification, a firm is best protected and the client best informed when the certification lists the standards by which those services were performed, the factors that may have limited the scope of the services, and the parties for whose benefit the services were performed.
Any request for a certification should be carefully examined since it may create risks for the design professional and provide benefits to the recipient that are unknown or unintended. The following are questions that should be asked in every instance:
- Based on the scope of services provided, is the design professional capable of making a declaration related to conditions within the direct knowledge or control of the design professional?
- Is the design professional required to perform additional services or have additional tests conducted to be able to certify a fact?
- Is the language of the certification properly qualified? If the certification is not based on a known fact, is it stated as a professional opinion so that it is clearly an expression of knowledge, information, and belief?
- Does the proposed language of the certification constitute an express warranty or guarantee?
- Does the certification language or the mere fact of providing the certification establish a claim of detrimental reliance by a third party?
- Is the certification a contractual requirement between the client and design professional?
Appropriate Certification Language
Certification language should be properly stated as being “in the professional opinion of [the professional’s name] as a [identification of the licensed design profession] in the State of [State of registration].” The certification should clearly identify when and to whom the statement constituting the certification was made. Careful attention to the language of certifications and satisfying the necessity of stating to a client the practical limitations of a professional service firm's certification constitute a prudent, assertive program of risk management that allows the firm to better predict the costs and consequences of practice.
© 2010, Victor O. Schinnerer & Company Inc. Statements concerning legal matters should be understood to be general observations based solely on our experience as risk consultants and may not be relied upon as legal advice, which we are not authorized to provide. All such matters should be reviewed with a qualified advisor. Victor O. Schinnerer & Company Inc. is managing underwriter for the CNA/Schinnerer Professional Liability Insurance Program, commended by NSPE/PEPP since 1957.
NSPE Annual Meeting
1. State and national leaders will participate in a two-day NSPE State Leader Conference. The conference focuses on building strong leadership teams. Day one will facilitate a session on "Roles, Rules, and Responsibilities” for associations. Leaders learn life-enhancing skills that will help them be a better leader. Day two will begin with a face-to-face session with NSPE leaders. A discussion on PE topics of importance, a best practice exchange, and an interactive session (elevator pitch) with Ira Koretsky, the chief storyteller, will round out the two-day session.
2. The most prestigious awards granted by the National Society of Professional Engineers will be presented during the NSPE Awards of Excellence Luncheon. The NSPE Distinguished Service Award and the NSPE Young Engineer of the Year Award will be conferred. In addition, the NSPE-PEI New Product Awards and the NSPE-PEE Engineering Excellence Award will be presented.
3. "NSPE Education Workshop: A Day of Engineering Substance" (ethics and licensure)...participants will earn 7 PDHs for only $99. All-day session includes lunch with "speaker of note.”
4. During the educational workshop lunch, NSPE’s partnership with EPA Energy Star will be introduced by EPA speaker, National Program Manager Bob Sauchelli. He will explain the EPA Energy Star building program and highlight how PEs are crucial to its success.
5. NSPE Educational Foundation Golf Tournament. This tournament benefits the NSPE Educational Foundation, state educational foundations, and interest group scholarships.[ return to top ]
Significant Legal and Legislative Activities
Art Schwartz, NSPE Deputy Executive Director & General Counsel (firstname.lastname@example.org).
New York PEs Oppose Elimination of PE Requirements – The New York State Society of Professional Engineers is standing in opposition to actions by two local jurisdictions that are moving away from the PE license as a requirement for critical government positions.
NYSSPE President James Yarmus, P.E., believes that recent efforts in Colonie and Syracuse to reduce spending by replacing a PE with an unlicensed political appointee will jeopardize the public safety, health, and welfare.
Colonie, north of Albany, replaced Public Works Commissioner Robert Mitchell, P.E., with Jack Cunningham, a former town supervisor in Bethlehem, New York. Cunningham holds a degree in political science from the University of Massachusetts.
The commissioner's job description states that the person in the position must hold a New York professional engineering license.
In Syracuse, officials have proposed amending the city charter to remove the PE license requirement for the commissioner of water.
Florida PEs Back Bills to Limit Liability – The Florida Engineering Society is supporting legislation that will help design professionals better manage their risk through contract language.
The legislation (S.B. 1964 and H.B. 701) states that the economic loss rule applies to claims against licensed design professionals who provide design services and have a contract with a client. The economic loss rule protects design professionals from unfair exposure to huge liability losses, including lost profits and other economic damages. In previous court cases, NSPE has argued in support of the rule because it encourages parties to negotiate economic risks through contract provisions and price terms.
The bills have been introduced in response to Florida court decisions that have inconsistently applied the economic loss rule to malpractice claims against individual professionals. The state's current law says that the economic loss rule does not ban any action for professional malpractice, which includes actions against design professionals.
Oregon PEs Oppose Board Consolidation – The Professional Engineers of Oregon and other design professionals are opposing Governor Theodore Kulongski's proposal to consolidate several licensing boards to deal with the state's budget crunch.
In June, Kulongoski submitted a list of numerous boards, commissions, and agencies for the state legislature to study and consider for elimination, suspension, and consolidation during the February 2010 session or next year. Kulongoski recommended consolidating semi-independent boards into the Building Codes Division: the Oregon Board of Architect Examiners, the Oregon State Board of Examiners for Engineering and Land Surveying, and the Oregon Landscape Architect Board.
A coalition of organizations representing licensed professionals sent a letter to Kulongoski on November 17, 2009, to express that the proposal would not improve critical services and would have a negative result. They asked that he not include the licensing boards in his restructuring plan.
PEO Legislative Chair Dennis Hickman, P.E., says that the governor's "broad brush approach" to streamlining the state budget with the consolidation effort would not be in the best interests of the public and the profession. He points out that the boards are currently financially self-sufficient but still have oversight from the state government.
Witt v. LaGorce – The Florida Engineering Society and other design professional and related groups have filed a friend of the court brief in this matter before the Florida Supreme Court. Earlier following a trial, in Witt v. LaGorce (3rd DCA Case No. 3D08-1812), the Florida 3rd District Court of Appeals had ruled that pursuant to Moransais v. Heathman, 744 So.2d 793 (Fla. 1999), and the Florida Statute licensing Geologists, even if an individual professional is specifically referenced in a limitation of liability provision, “such a limitation would be unenforceable as a matter of law.”
If the appeals court’s decision herein becomes the law of Florida, individual professionals (except lawyers, who can limit their liability in accordance with the Rules regulating the Bar) and doctors (who can limit their liability pursuant to Florida Statutes) will face unlimited personal exposure to clients whether they operate those corporations or not. Further, this case may bring into question whether individual professionals can lawfully enforce a contractual indemnification provision.
The Supreme Court brief states that Florida design and construction professionals have negotiated limitation of liability provisions to allocate risk in consulting agreements for nearly 40 years. FES and FICE believe the trial court's decision that limitation of liability provisions are invalid, unenforceable, and will call into question the validity of thousands of contracts, bring great harm to the state's construction industry, and lead to a flood of unnecessary litigation.
In re Katrina Canal Breaches Consolidated Litigation – In a landmark decision, the U.S. District Court for the Eastern District of Louisiana ruled that the U.S. Army Corps of Engineers was negligent and liable for damages under the Federal Tort Claims Act for flood damages following Hurricane Katrina. The decision could have significant implications for design, engineering, and even construction contractors.
On November 18, 2009, Judge Stanwood Duval Jr. found that the Corps' failure to follow the requirements of a federal environmental statute and to properly maintain and operate the Mississippi River Gulf Outlet (MRGO) canal was a substantial cause for the plaintiff's damages. In doing so, Duval found that the Corps was not entitled to immunity under the Flood Control Act of 1928 or other exceptions.
The plaintiffs of In re Katrina Canal Breaches Consolidated Litigation filed suit against the Corps, and separately 32 contractors, asserting, among other things, claims pursuant to the Federal Tort Claims Act (FTCA) that the Corps was negligent in designing, maintaining, and operating the MRGO. The government moved to dismiss the plaintiff's claims based on the Flood Control Act's express immunity provisions and various exceptions precluding government liability under the FTCA.
UDC v CH2M Hill – The California Court of Appeals has held that a consultant's duty to defend a developer against a homeowner association's negligent action arose despite the lack of an underlying claim of negligence against the consultant. Thus, even though the consultant was found not negligent, the court still imposed an obligation upon the consultant to pay for the developer's defense costs and fees under the indemnity clause contained within the parties' contract.
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What is NICET?
The National Institute of Certification in Engineering Technologies (NICET) is a nonprofit division of the National Society of Professional Engineers. Since its founding in 1961, more than 125,000 technicians and technologists have met NICET's rigorous certification criteria. This number grows rapidly as more employers and local and state governments rely on NICET certification to measure the qualifications of their workforce.
The certificate and wallet card issued by NICET serve as a portable credential for certified technicians and technologists who seek to maximize their skills and knowledge and advance in their professions. By employing those workers who have demonstrated their technical mastery, employers can provide their customers higher quality goods and services. And, ultimately, the public enjoys a higher degree of safety and protection.
NICET defines engineering technicians as the "hands-on" members of the engineering team who work under the direction of engineers, scientists, and technologists. They have knowledge of the components, operating characteristics, and limitations of engineering systems and processes particular to their area of specialization.
The Institute defines engineering technologists as members of the engineering team who work closely with engineers, scientists, and technicians and have a thorough knowledge of the equipment, applications, and established state-of-the-art design and implementation methods in a particular engineering area.
A strong force in many technical fields, NICET regularly brings together industry leaders and subject matter experts to identify industry needs and design and maintain technician certification programs that promote technical knowledge and skills. The resulting programs measure the competency of and layout career paths for engineering technicians and technologists, while at the same time supplying industries and employers with a more highly skilled workforce. Further, the Institute promotes the continuing professional development of its certified technicians and technologists through a recertification process that emphasizes updated skills and state-of-the-art knowledge.
As of February 1, 2010, NICET is employing cutting edge technology and transitioning to Computer Based Testing (CBT) in the Standard Model for the fire alarm systems program. The new format is a quality improvement that features convenient test scheduling (more times and locations) and scores before leaving the testing facility.
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