MANAGING RISK ON DESIGN-BUILD PROJECTS THE SURETY'S PERSPECTIVE

By Mark V. Niemeyer, CPCU

(Editor's note: This author's intent, in writing this article, is to clarify and communicate the surety industry's perspective on design-build project delivery, while presenting recommendations that are equitable, manageable and beneficial for all parties. In preparing this document, the author sought extensive input from professionals in the fields of construction, design, law, insurance and surety.)

03p56.gif The surety industry can responsibly support and embrace the design-build concept when it is applied in a format that supports prudent design risk management. This article specifically addresses the complexities of design risk, and common factors that prevent a design-build contractor from managing that risk responsibly. Three elements of design-build programs are essential to prudent risk management.

First, risk allocation in design-build contracts should be fair and manageable. Second, appropriate errors and omissions insurance coverage requirements should be delineated in the insurance specifications of the contract. Third, professional liability should be directed to the appropriate risk-financing tool by specifically excluding design performance from the performance bond guarantee. Some common tactics for reducing design risk management costs are then addressed with some caution.

COMPLEXITIES OF DESIGN RISK MANAGEMENT

A design-build contractor (D/B) provides a single source of responsibility to the owner for project design and construction. Regardless of whether design services are provided by an in-house design staff, joint-venture partners, or subcontracted architects/engineers (A/Es), the design-build entity cannot divorce itself from design responsibility and the related exposure to professional liability. A D/B's legal obligation for design often exceeds the legal obligation of any A/Es providing design services to the project. D/Bs generally become responsible for the accuracy and completeness of project plans, specifications and cost estimates. Should there be any deficiencies in design performance, the associated contractual, tort or statutory liability will fall upon the design-build entity. Allegations of negligence relating to design preparation, site surveys, material selection, increased construction costs, and construction observation are common. These allegations often lead to claims for economic loss, property damage and bodily injury from participating parties and third parties.

A D/B is a designer with exposure to professional liability, but a D/B is also contractor who must rely heavily upon sureties, banks and other creditors to conduct business. These creditors will require D/Bs to maintain certain levels of corporate net worth and to protect that net worth with comprehensive risk management. Regardless of whether the design-build entity is a firm formed by both design and construction professionals, a firm formed by a contractor planning to subcontract the A/E services, or a firm formed by an A/E planning to subcontract construction services, the design-build entity will assume design risk that must be managed responsibly.

Additional design liability assumed by a D/B

In traditional design-bid-build project delivery, A/Es generally do not warranty their design services by guaranteeing perfect results. Instead, the law simply requires an A/E to perform in a manner consistent with generally accepted standards of care and skill for that profession. It is understood that professionals are "called upon to exercise their skilled judgement in order to anticipate and provide for random factors which are incapable of precise measurement. The indeterminable nature of these factors makes it impossible for professional service people to gauge them with complete accuracy in every instance, ...[so] the law has traditionally required, not perfect results, but rather the exercise of that skill and judgement which can be reasonably expected from similarly situated professionals." 1 However, an owner is traditionally held to a higher standard when providing those plans to a contractor. Unlike the design professional's professional standard of care obligation, the owner's design defect risk implies a warranty that the design is perfect and adequate in all respects.2 As a result, an owner of a traditional design-bid-build project may be liable to the contractor for design defects, while not having recourse against the A/E who performed those services in a manner consistent with generally accepted standards of care.

For instance, a geotechnical engineer may conduct subsurface investigations according to generally accepted standards of care and skill while not uncovering subsurface and/or environmental conditions. In traditional design-bid-build project delivery, the owner would be responsible for the additional costs associated with these changed conditions. Neither the contractor nor the A/E would be responsible.

In design-build project delivery, design defect risk may be assumed by the D/B responsible for delivering an "end product." To a degree, shift in design defect risk is fundamental to the "single point of responsibility" concept of design-build project delivery. However, this risk should be shifted in a fair and reasonable fashion. D/Bs must be particularly careful not to imply or express warranties or guarantees that may be in excess of "generally accepted standards of care." Contract language such as the "highest standard of care" should be avoided when referring to code conformance, construction costs, or performance.

The D/B must understand the design defect risk it is assuming in the contract, and this risk must be managed responsibly. In the above example, a D/B could easily assume responsibility for differing subsurface and/or environmental conditions. In this case, the D/B may not have recourse against the geotechnical engineer; and regardless, the engineer would not have the insurance coverage. Legal counsel should carefully review all contract language relating to risk allocation, change orders, differing site conditions, rights-of-way, and utility relocation. D/Bs should understand and manage the additional exposures they assume in design-build contracts. These can include implied or express warranties, efficiency guarantees and long-term maintenance responsibilities.

D/Bs should also anticipate the possibility that design issues could directly affect the collection of construction progress payments for work performed. In addition, design-related delays could lead to liquidated damages assessments, increased interest expense, and escalation of material and subcontractor prices. Ultimately, D/Bs should have the financial strength to absorb what risk they cannot insure.

Insurance products for managing design risk

Commercial general liability (CGL) and umbrella/excess policies specifically exclude coverage for claims arising out of professional services including engineering, architectural and surveying services. As a result, D/Bs must rely on E&O policies specifically designed to protect the insured against liability arising from negligence, errors and omissions in rendering those professional services. Unfortunately, these policies have severe limitations.

Design deficiencies are often latent, and losses can occur or be discovered many years after project completion. The insurance industry commonly refers to these types of potential losses as "long-tail liabilities." In fact, only 85% of total claims on E&O policies are reported within five years of project completion. On average, 15% are reported more than five years after project completion, and 2% are reported more than ten years after project completion. As a significant loss exposure with long-tail liability, insurers are generally providing effective professional liability coverage on a "claims-made" basis.3 This means that the policy will cover only insured losses that are claimed during the policy period, or during the "extended reporting period" (tail) purchased for the policy. Claims made after the policy expires are not covered--even if the loss occurred during the policy period.

Coverage can be obtained on either an annual basis or a project-specific basis. Annual (practice) policies have one-year policy periods and provide coverage for all projects of an insured under a single aggregate limit. These policies must be renewed annually. Alternatively, project-specific policies provide coverage dedicated to a specific project and have a policy period equivalent to the life of that particular project. Extended-reporting periods can be purchased for both types of policies.

Primary E&O coverage vs. subcontractor indemnification

D/Bs are often inclined to rely heavily upon indemnification from independent A/Es providing professional services to their projects. The protection an A/E's E&O policy provides is often over-estimated. As a result, D/Bs frequently choose to forgo primary E&O coverage, or they choose to obtain only "catastrophic" coverage with large SIRs satisfied by the A/E's practice policy. Although subcontractor indemnification is always recommended, D/Bs are also advised to maintain primary coverage under their own E&O policy.

An A/E's E&O policy will cover only that contractual liability that would exist in the absence of the indemnification agreement--the negligence-based liability of the A/E. Unfortunately, the legal responsibility of the design-build entity may exceed that of any provider of design services. D/Bs can pick up additional professional liability for negligent design activity, negligent supervision of design, negligent supervision of construction, and implied warranties.

D/Bs may also be held to a higher "standard of care" than the generally accepted standard of care required of A/Es. As a result, a D/B may be subject to professional liability claims that would never trigger coverage under the A/E's policy. For instance, an A/E's E&O carrier may deny coverage for professional liability claims when a D/B does preliminary design work, with or without in-house professionals, before subcontracting with the A/E. The courts have found that without early inclusion of the A/Es in the pre-bid design phase, they cannot be responsible for that design work. In fact, claims may be denied on the sole basis that the D/B has in-house architects/engineers. Although they may not be stamping plans, these professionals are "knowledgeable and should have known better," courts have found.

The relationships between A/Es, contractors and project owners are rapidly changing, and the legal ramifications are still unclear. As a result, the D/B's contingent liability is nebulous, and an A/E's indemnity is as precarious as the underlying legal environment. Primary coverage under a project-specific E&O policy is at the core of any responsible design risk management program for D/Bs.

There are three more reasons why a D/B should not over-rely on an A/E's E&O policy. First, an A/E's E&O carrier generally will not afford a defense to the D/B, even though that insurer may ultimately indemnify the D/B for losses due to the A/E's negligence. Second, a D/B cannot be sure the A/E firm will "out live" the design exposures. Third, A/Es generally maintain practice policies to cover all risk and claims made during a policy period. Without dedicated coverage under a project-specific policy, a D/B cannot be reasonably assured that the coverage will be renewed annually, or that the limits will not be exhausted by claims on unrelated projects. It also should be noted that some A/E E&O policies have a standard exclusion for claims relating to design-build projects; such policies would require a special modification to maintain coverage for the design-build project.

03p57.gif Dedicated coverage vs. practice policies

Some D/Bs will be inclined to secure primary E&O coverage under annual (practice) policies. Annual policies present two problems. First, these policies do not provide dedicated coverage limits. Since catastrophic E&O losses can arise long after project completion, losses on long-completed and unrelated projects can quickly exhaust coverage leaving a D/B dangerously exposed. Second, it is difficult to assure an owner, surety or other creditors that these annual policies will be renewed in each of the many years following project completion. With an annual policy, there is no assurance that coverage for completed projects will not lapse sometime in the future. D/Bs are advised to maintain dedicated coverage under a project-specific policy with a prepaid extended reporting period (tail coverage).

Dovetailing CGL and E&O coverage

The standard CGL exclusion for contractor's professional liability is subject to broad interpretation by the courts. Historically, the CGL covered exposures relating to the contractor's design of "construction means and methods." However, in Harbor Insurance Co. v. OMNI Construction, Inc., 912 F2d 1520 (DC Cir 1990), the court interpreted the incidental design of shoring by a foundation subcontractor as a "professional service" excluded from coverage. As a result, the contractors' incidental design activity, inherent in their normal construction activity, may now be excluded from coverage under the CGL. This could include many activities common to contractors such as design of sheeting, shoring and other falsework. Unfortunately, E&O policies are not standardized, and some carriers may not pick up this coverage.

Some CGL carriers will clarify their coverage through the use of the Insurance Services Office (ISO) "Limited Exclusion-Contractors-Professional Liability" (CG D1 14 10 14) endorsement. This endorsement modifies the standard professional liability exclusion of the CGL to allow coverage for incidental design exposure inherent in normal construction activity. D/Bs should be cognizant of where their CGL coverage ends and where their E&O coverage begins. To prevent coverage gaps, risk managers should attempt to "dovetail" the coverage of these two policies. Integrated risk coverage, where a single insurance carrier provides CGL, E&O and other types of coverage, is specifically designed for this purpose.

MINIMUM STANDARDS FOR E&O INSURANCE SPECIFICATIONS

The convolution of design responsibilities and construction responsibilities under a single contract creates a complicated design liability issue for design-build contractors and their creditors. It is in the interest of all parties to facilitate and promote responsible risk management, and owners can directly influence design risk management through the errors and omissions (E&O) insurance specifications in the contract. By demanding appropriate minimum standards for E&O insurance coverage, owners can prevent irresponsible risk management among competing D/Bs. This will attract a more qualified and responsible group of D/Bs with greater support from their sureties.

Unfortunately, many design-build contracts do not promulgate appropriate minimum standards for E&O insurance coverage. As a result, competitive market forces often force D/Bs to look for cheaper alternatives to the cost of dedicated coverage limits and prepaid tail coverage.

Contract specifications for E&O insurance should be precise and comprehensive. From an owner's standpoint and a creditor's standpoint, coverage for long-term exposures can be assured only through primary coverage under project-specific policies with extended-reporting periods purchased and paid for up front. Prepaid coverage tails are important since a D/B cannot reasonably guarantee a creditor that extended reporting periods will be purchased in each of the many years following project completion. The appropriate coverage tail depends on many variables including the risk factors of the project and the solidity of the applicable statute of repose. In most cases, it is advisable to obtain a tail of coverage that will meet the applicable statute of repose.

E&O coverage also should be retroactive to the beginning of the pre-bid design activities. These policies should provide "first dollar" coverage with reasonable limits, deductibles or SIRs. Since professional liability is generally excluded under most excess liability policies, the policy limit should be adequate, on its own, relative to the professional exposure to consequential damages on the project. Alternatively, lower limits can be augmented by excess E&O coverage. Normal deductibles for a primary E&O policy are approximately 0.1% of the total construction value of the contract or 1.0% of the total design fees associated with the contract.

Since there are no standard E&O insurance policies, the owner should carefully examine each proposed policy including the insuring agreement, exclusions, definitions, limits and conditions. The policy should be primary to all other valid and collectible insurance, and the insurer should not be allowed to cancel the policy unilaterally under any circumstances. Furthermore, bankruptcy or insolvency of the insured should not relieve the insurer of its obligation under the policy. Coverage should include cost overruns, time delays and liquidated damages associated with design negligence, error or omission. When applicable, pollution liability should not be excluded from coverage. The policy also should provide coverage for defense costs, which are often sizable on professional liability claims. CGL and E&O policy language should be examined to assure an acceptable "dovetail" of coverage between these two policies. Finally, a strong Best rating should be required of all E&O insurers since they are insuring long-tail liabilities.

The additional exposures assumed by the D/B should be well understood, and the E&O policies should address these exposures to the extent possible. For instance, some policies will pick up coverage for implied warranties, and in some instances, express warrantees in the contract. If the D/B is picking up onerous design defect risk that is uninsurable, the D/B and its A/Es should have the financial strength to absorb the potential losses.

It is in the interest of all parties to demand appropriate minimum standards in the E&O insurance specifications of the contract. Ultimately, each E&O policy should be carefully reviewed by professional liability specialists and should be specifically accepted or declined by the project owner before contract award. Only through the promotion of responsible design risk management can the full potential of design-build project delivery be realized.

DIRECT PROFESSIONAL LIABILITY TO THE APPROPRIATE RISK FINANCING TOOL

A major concern relating to design-build contracts is that professional liability for design may be assumed under the performance bond guarantee. A performance bond guarantees the underlying construction contract. In a design-build contract, the owner is buying an "end product"--including the design! As a result, the bond also may be construed to cover guarantees and warranties that the project will perform as intended and without design flaws.

This notion was supported in a 1992 Louisiana lawsuit involving a bonded design-build supermarket. Flaws in the slab required its demolition and reconstruction. Despite finding the flaws to be 100% attributable to design deficiencies, the court found the surety liable under the performance bond. In this case, the bond not only guaranteed construction performance, but it also "insured" the owner against negligence, errors and omissions in design! This is of grave concern to sureties and their corporate and personal indemnitors--particularly in light of the facts that bond liability has an extremely high cap (limit) usually equivalent to the full contract price of the project, and losses associated with design flaws could conceivably exceed that cap!

Difference between bonds and insurance

So why do sureties not simply assume losses in their underwriting? To answer this question, we should first clarify the distinction between suretyship and other types of insurance. Bond premiums are a relatively small fee for underwriting a contractor and providing certain guarantees to third parties. Sureties underwrite the contractor's financial wherewithal, organizational capacity and character to determine whether the contractor can meet the proposed obligations. They also determine whether the contractor has the personal and corporate worth to make the surety whole again should the surety have to "step in" to protect a third party from loss. Surety is underwritten on the basis that, although claims will be paid to third parties, no losses should be incurred since contractors (corporately) and their principals (personally) indemnify and ultimately make the surety whole again. Alternatively, insurance is a "loss sharing" mechanism where relatively large premiums reflect a policy's share of expected future losses from that class of business.

Surety bond premiums are extremely inadequate to assume losses and defense costs associated with professional liability exposures. To do so would require the marriage of surety and insurance obligations. The insurance obligation would require an extraordinarily large loss-sharing premium comparable to an E&O insurance policy with a limit equivalent to the full contract price of the design-build project! Convoluting these obligations would also preclude the use of those insurance limitations E&O underwriters currently find necessary for the long-term survival of their industry. Furthermore, since surety bonds by definition do not provide protection to the principal (the D/B), long-tail design liabilities would ultimately fall upon, and could quickly bankrupt, the D/B and personal indemnitors to the surety--often without reliable limitations of time.

Exclude design performance from the performance bond guarantee

Most A/Es are unfamiliar with surety because, under the traditional design-bid-build system, A/Es are never required to provide performance bonds for their professional services to owners. It is understood that design services are not conducive to surety, and that professional liability is better addressed with E&O insurance. So why are project owners apt to require design services to be bonded under the design-build project delivery system? Unfortunately, this requirement is usually made by default--standard bond requirements prevail despite the convolution of design and construction responsibilities in the underlying contract. Design services are not conducive to surety, and this fundamental truth should be addressed in design-build programs.

The performance bond is an inappropriate vehicle for E&O risk financing, and it is in the interest of all parties to direct these liabilities to the appropriate risk-financing tool--the E&O insurance policy carefully delineated in the contract specifications. This is achieved by specifically excluding design performance, errors and omissions in design, and warranty of design from the performance bond guarantee through language in the performance bond or the underlying design-build contract. Furthermore, the design-build contract should make a clear distinction between the contract price for design services and the contract price for construction services, and the penal sum of the performance bond should be based upon the construction portion only. In this fashion, owners are able to secure their usual surety guarantees for construction performance while protecting themselves from design negligence, errors and omissions through well thought-out E&O insurance specifications. The following is an example of this type of provision:

"The bond does not cover any responsibility for negligence, errors or omissions in design, or warranty of design. Coverage under the bond is limited to only the construction phase and post construction phase of the contract. The bond premium is based only upon the value of the construction and post-construction phase of the contract, and not upon the design aspect of the contract."4

SUMMARY

Unmanageable professional liability exposures have been the hidden cost of design-build project delivery. All parties should seek a fair and competitive design-build program that is onerous to none. The true cost of responsible risk management must be accepted and promoted through fair risk allocation and the delineation of appropriate minimum standards in E&O insurance specifications of design-build contracts. These minimum standards should include primary coverage under project-specific policies with prepaid coverage tails that properly mirror the long-tail nature of the exposures. Professional liability must then be directed to that insurance by specifically excluding design performance from the performance bond guarantee.

Alternatives for reducing E&O insurance costs

Project owners can reduce E&O insurance costs by limiting contractually, to varying degrees, the D/B's potential design liability to the owner. Four alternatives are summarized below. However, it should be recognized that the owner is achieving these savings only by limiting its rights against the D/B for professional liability and, thereby, giving up the associated protection those rights provide. Furthermore, the enforceability of the first three alternatives is predicated upon the laws of the applicable jurisdiction. All parties are strongly advised to review any such alternatives with their legal and insurance professionals. Ideally, each party will make informed decisions on risk allocation that will be fair and prudent for all parties, and onerous to none.

Alternative #1: Cap design liability to the extent of recoverable insurance

The project owner may opt to require a lower level of E&O insurance coverage--in effect, self-insuring a portion of the design defect risk. For instance, an owner may view annual (practice) policies as adequate coverage since that is what the owner has always lived with under the traditional design-bid-build project delivery system. This is perfectly acceptable provided the owner does not force the D/B to assume those uninsured exposures by virtue of not requiring project-specific E&O coverage in the contract specifications. Instead, the owner should utilize a contract provision that will simply limit the D/B's professional liability to the amount of insurance proceeds recoverable from all applicable policies held by the owner, D/B and A/Es. An example of such a contract provision follows:

"To the fullest extent permitted by law, the total liability in the aggregate, of Design-Builder, and Design-Builder's officers, directors, employees, agents, and independent professional associates, to Client and any one claiming by, through or under Client, for any and all injuries, claims, losses, expenses, or damages whatsoever arising out of or in any way related to Design-Builder's engineering, architectural or surveying services in the Design-Builder's capacity as an engineer, architect or surveyor, shall be limited to the amount of insurance proceeds recoverable under the applicable errors & omissions policies for this project."

Of course, this provision affects only the D/B's potential professional liability to the project owner. It does not affect the D/B's susceptibility to third-party suits relating to personal injury, property damage or economic loss that may be a proximate result of the D/B's negligence. However, the provision can be used, without onerous implications on the D/B, if combined with less stringent E&O insurance specifications and the standard exclusion of design performance under the performance bond guarantee.

In recognition of the complex design risk management issues faced by D/Bs, owners also may choose to utilize this provision with the stringent E&O specifications summarized earlier. In this fashion, the provision simply adds an enticement to the contract by providing a "safety net" to D/Bs for possible coverage gaps.

Alternative #2: Release D/B from design liability at project completion

If permitted by the laws in the project owner's jurisdiction, the owner may opt to reduce E&O insurance costs by utilizing a contract provision that releases the D/B from design liability upon, or at some point after, project completion. This provision could be useful when the statute of repose does not provide an adequate "back stop" for design liability. If applicable, the D/B could simultaneously assign the owner any rights or remedies the owner may have against A/Es who provided professional services to the project--provided the A/E subcontracts do not prohibit the assignment of rights. In this instance, the owner would be self-insuring the D/B's long-tail professional liability that would not otherwise be covered under the A/Es' E&O policies.

This type of provision would not affect the D/B's susceptibility to third-party suits, nor would it affect the D/B's professional liability during the project's life. However, the provision can be used, without onerous implications on the D/B, if combined with the standard E&O insurance specification (but with a substantially shorter coverage tail) and the standard exclusion of design performance under the performance bond guarantee. Under this approach, the D/B would be advised to pick up tail coverage for third-party suits under a practice policy.

Alternative #3: Release D/B from design liability through skip-over provision

A project owner may opt to release the D/B from design liability up front through the use of a "skip-over" provision. This provision establishes that design liability will "skip over" the D/B and fall directly upon independent A/Es who performed the design services on the project. The skip-over provision is an attempt to reduce E&O insurance costs by directing design risk in a fashion more similar to the traditional design-bid-build system. In exchange for releasing the D/B from design liability, the project owner receives an assignment of any rights the D/B may have against the A/Es--provided the A/E subcontracts do not prohibit the assignment of rights. Through the use of the skip-over provision, the project owner is choosing to self-insure the D/B's professional liability that would not otherwise be covered under the A/Es' E&O policies. An example of a skip-over provision follows:

"In consideration of Contractor's entering into the Agreement, Owner hereby agrees that Contractor, or the Contractor's surety, shall not be liable or responsible in any manner whatsoever for any claims, damages, errors or omissions arising out of the professional services to be performed by the Engineer (as defined in the agreement) or other design professionals under the Agreement, whether through indemnity or otherwise. Owner hereby agrees that Owner shall not look to Contractor, or Contractor's surety, for recourse as to any such claims, errors, damages or omission and Owner's sole recourse shall be against the Engineer or other design professional performing such professional services. Contractor agrees to fully cooperate with Owner in pursuing its rights hereunder and under the Agreement including, WITHOUT LIMITATION, (i) bringing any legal action necessary to enforce Owner's or Contractor's rights against the Engineer or other design professional, OR (ii) assignment to Owner of any rights or remedies Contractor may have against the Engineer or other design professional relating to any such claims, damages, errors or omissions.

03p62.gif "Other than recourse with respect to claims, damages, errors and omissions relating to the Engineer or other design professionals arising out of the professional services to be performed under the Agreement, this agreement shall not constitute a waiver of any other remedy which Owner may have against Contractor for an other failure of Contractor to perform in accordance with the Agreement or any other agreement or contract between Owner and Contractor."5

Once again, it is important to note that D/Bs still will be susceptible to third-party suits relating to personal injury or property damage that may be a proximate result of their negligence. However, this provision can be used, without onerous implications to the D/B, if combined with less stringent contract specifications that provide for more limited E&O coverage such as that provided by practice policies.

Alternative #4: Separate prime contracts for design and construction

Through a "teaming" of construction professionals and A/Es utilizing separate prime contracts, many of the benefits of "true" design-build construction can still be fully realized. It is not uncommon for a construction firm and an A/E firm to "team up" and market their services for a particular project on a dual prime contract basis. The benefits from a design risk management standpoint are obvious. Although the use of separate prime contracts is a substantial departure from the design-build concept, strong efficiencies can be realized by "teaming," and substantial cost savings can be realized in design risk management. If drafting a formal teaming agreement, contractors and A/Es should be careful not to inadvertently create joint and several liability through language that may be construed to create a joint venture.

Conclusion

The surety industry can responsibly support and embrace design-build project delivery when it is applied in a format that supports prudent design risk management. Design risk can be managed responsibly provided that risk allocation is fair and manageable, and appropriate minimum standards are promulgated in the E&O insurance specifications of the contract. Prudence requires a minimum standard that includes primary coverage under a project-specific policy with a prepaid coverage tail that properly mirrors the long-term nature of the exposures. Professional liability must then be directed to that insurance by specifically excluding design performance from the performance bond guarantee. The surety industry can support risk-shifting techniques only when applied fairly by informed parties without sacrifice to prudent risk management. *

The author

Mark V. Niemeyer underwrites contract surety for Safeco Insurance Company and chairs the Subcommittee on Design-Build for the Surety Association of America. He began his career in 1985 as a field superintendent for a regional construction firm. He joined Chubb & Son's surety department in 1989, and SAFECO in 1993. He earned an MBA from the University of Pittsburgh, Katz Graduate School of Business, is a Chartered Property Casualty Underwriter and an Associate in Fidelity & Surety Bonding. He is an active member of the Surety Association of America, the CPCU Society, AGC, ABC, NUCA, ARTBA, and Construction Financial Managers Association.

Footnotes

1 The Supreme Judicial Court of Massachusetts in Klein v. Catalano, 386 Mass. 701, 437 N.E.2d 514 (1982).

2 D.J. Hatem, "Risk Allocation for Design Adequacy in Construction Means/Methods," The CA/T Professional Liability Report, Volume 1-No. 2, January 1996, pp. 5-7.

3 Occurrence policies with sunset provisions also may be available. For the purposes of this writing, this type of policy can be viewed as an equivalent to a project-specific policy with a prepaid extended reporting period (tail).

4 Richard T. Bostwick, "Design-Build from the Surety's Perspective," SuretyScope, Spring 1996.

5 J. William Ernstrom.


©COPYRIGHT: The Rough Notes Magazine, 1998