Common Claims in Engineering Insurance & How to Avoid Them

The world of engineering is one of precision and immense responsibility. This very nature of the work means that even a minor oversight can lead to disastrous consequences or costly repairs.

If you run an engineering firm that provides engineering services, you know that your professional reputation and financial stability are constantly exposed to risk. The good news is that engineering insurance is designed to be your essential safety net. Let us look at the most common claims engineers face and, more importantly, discuss practical strategies to avoid them altogether.

The Most Frequent Claims Against Engineering Firms

Claims against engineers typically stem from alleged professional negligence or omissions in their work. Below are some common pitfalls in the first step toward effective risk mitigation:

1.     Design Errors and Omissions

This is arguably the most common type of claim. It happens when the initial design contains flaws, errors in calculation, or crucial omissions that surface later in the construction or operational phase. These issues can lead to structural failures or require extensive and expensive rectification work.

2.     Property Damage and Financial Loss

An engineer's work can cause direct damage to the project property or surrounding structures. This often results from faulty planning or execution. If the standards were met, the engineering insurance provider would likely cover the legal fees, but the firm still faces litigation risk.

3.     Insufficient Field Review

Engineers often have a duty to review the progress and adherence to the design specifications on-site. A claim for insufficient field review arises when damages occur that could have been prevented had the engineer caught design flaws or improper construction methods during the site visits.

4.     Under-Design

This claim occurs when an engineer approves design changes, or the initial design itself is inadequate for the intended purpose or anticipated loads, often to cut costs. The structure or component then fails to perform as required, especially under stress or weather events.

5.     Bodily Injury

While often covered by General Liability, claims related to bodily injury or death due to a design defect are a severe risk for engineers. When a design or structure fails, the ensuing injury claims can be financially devastating.

5 Practical Steps to Avoid Costly Claims

Having the right engineering insurance is crucial, but implementing robust risk management practices can significantly reduce the likelihood of needing to file a claim in the first place.

1.     Implement Rigorous Review Processes

Mistakes are inevitable, but unchecked mistakes are catastrophic. Implement a multi-layered, independent checking and review system for all critical documents, including designs, calculations, and specifications, before they are finalised.

Do not rely on a single engineer to review their own work. Mandate peer reviews by another qualified professional in the firm.

2.     Document Everything Thoroughly

In a professional liability claim, your written records are your strongest defence. Maintain meticulous records of all project communications, decisions, changes, and site observations.

3.     Define and Manage the Scope of Work

Ambiguity is the enemy of a safe project. Ensure your contract clearly and precisely defines your responsibilities and, just as importantly, what is excluded from your scope of work. Scope creep can introduce liability that you did not anticipate or budget for.

Use a clear contract with your clients. If the client asks for work outside the defined scope, issue a formal change order immediately.

4.     Vet Sub-Contractor Coverage

If your firm uses subcontractors, they may not be fully covered under your primary Professional Liability Insurance (PLI) policy. Their errors can still lead to a claim against your firm.

Require all subcontractors to provide proof of their own adequate PLI or Errors and Omissions (E&O) coverage before they start work. Clearly define their obligations in a contract to avoid inheriting their liability.

5.     Review Your MSME Insurance

If you operate a smaller firm, your MSME insurance package needs to evolve as your business grows. Review your policy regularly, especially when you take on bigger contracts or hire subcontractors.

You may need additional coverage to ensure you are adequately protected against larger potential liabilities. Finding the right coverage limits is essential for your long-term security.

Final Thoughts

For an MSME or a large firm, a major lawsuit can threaten its existence. A well-chosen engineering insurance policy is not merely a compliance requirement; perhaps it is a strategic asset.

By having comprehensive coverage with proactive risk management, your firm can focus on what it does best: building the future.