Key Engineering Exposures and Risks
Building industry professionals, including Engineering Design / Engineering Consulting Services providers play a pivotal role in the construction of safe, fit-for-purpose and compliant buildings. Therefore, professional Indemnity is one of the most important insurance lines for this profession. The extent of the cover, excess, retroactive date, geographical coverage and the exclusions are just some of the components to take into account. Major sources of claims include:
- Failure to properly establish customer requirements;
- Incorrect or inadequate consulting advice, project design or specification (e.g. defects in designs / failure to rectify defects in designs etc)
- Failure to properly take into account engineering design work and building regulations, energy codes, electrical codes, fire and safety aspects, council planning requirements, environmental legislation or regulations etc;
- Inadequate supervision and project management where the engineer perform such functions;
- Inappropriate and or incorrect certification;
- Errors in engineering design or calculations resulting in the failure of projects/cost increases/catastrophic accidents/operational errors in system and machinery;
- Errors in selection/recommendation of materials (e.g. non-conforming/non-compliant materials)
- Inadequate inspection and reporting of structures/machinery/systems etc;
- Errors in project budget and cost control, reinstatement cost assessments etc;
- Errors in the issuing of certificates (e.g. electrical or mechanical safety certificates etc);
- Breach of contract conditions / contractual obligations;
- Exceeding the scope of engagement;
- Failure to conduct a full engineering assessment in accordance with relevant guidelines;
- Failure to recognise and warn some of the building materials proposed for use on the building/s, they do not comply with the relevant building standards
- Breach of copyright.
Key underwriting information includes the types of work undertaken, the extent to which current and future advice on selection of materials, contract administration /project management work undertaken, major contracts and scale of such contracts, level of technology use, staff experience and qualifications, the use of subcontractors, adequacy of staff numbers etc. Important loss control measures include the use of approved specifications and the hiring of consultants to perform tasks for which the insured lacks experience.
Good elements of control include:
- A structural review done during the design phase allows for mistakes to be corrected and designs to be redrawn if necessary;
- Engaging the services of a third party to conduct a structural review before a project enters the construction phase;
- Strict supervision of less experienced staff members and the diligent review of their work;
- Ensuring that the firm does not take on more work than can be handled properly which subjects employees to unreasonable time pressures;
- Ensuring that the firm never takes on projects for which they are unqualified or have insufficient experience;
- Careful selection of the client. Speculators and developers who do not retain ownership of a property may desire to keep costs to a bare minimum to maximize profits and this can lead to problems with construction quality. Likewise, working for financially unstable clients may present an exposure for design professionals. Such clients are more likely to claim for a design defect when they start to run out of money or the project hits a problem, or may skimp on material quality. If the client is billed, and pays, regularly, then this is a positive sign, and such billing arrangements may help in weeding out problem clients early;
- Good communications between all parties involved in the project.
The underwriter will be interested in all of the above elements of risk control, and how these are achieved in the business under consideration.
A key element of control is in the area of client engagement and scoping of the work to be undertaken and good record keeping. In this regard:
- A clear understanding of the task and services provided may prevent future disputes. Key issues include the clear scoping of the consultants responsibilities and service, the consultants professional and ethical obligations and a clear understanding that results are not warranted or guaranteed;
- Contracts should be clearly and accurately drafted;
- Regular communication with the client will be, and should be, ongoing and confirmed in writing. In particular, all changes and purchase orders should be signed by the client and the consultant. Other information that should be communicated clearly includes: construction progress reports; procedures relating to drawings; consultations between the parties about changes, potential risks, and construction problems; and instructions to contractors and consultants.
- All conversations, instructions, decisions made at meetings, and other verbal communications with other parties should also be documented in writing.
- All letters, fax transmissions, memoranda, progress reports, photographs, and other records must be kept on file for each project, and the files carefully maintained.
- Important technical documents, such as design renderings, blueprints, specifications, and contracts, should also be kept carefully.
Below are examples of why implementing a Cyber Liability policy may be beneficial for an Engineering Firm:
- Heavy dependency on digital technology/integrated IT systems;
- Security/privacy breach - presence of large volumes of sensitive personal and cooperate data;
- Data breach – laptops/data sticks being left on various places, emails sent in error, sensitive documents not being properly shredded, back-up hard drives being lost;
- External hacking attacks, internal negligence, deliberate acts, system glitches etc.;
- Electronic data/software loss and replacement cost following a cyber-attack;
- Electronic media liability - including invasion of privacy, libel or slander, infringement of copyright, title, slogan, trademark or service names including domain names, false advertising etc.;
- Business interruption/increased in cost of working following a cyber-attack;
- Businesses held to ransom before systems are released;
- Cyber-threat from interconnected supply chain business partners/outsourced services providers;
- Internal control and other issues – e.g. non-segregation of sensitive data, inadequate user access control/password protection, outdated POS software applications, absence of up to date antivirus software/firewalls, unencrypted data/information/lack of end-to-end encryption;
- Possible presence of older devices/computer systems with outdated operating systems and unsupported software;
- Inadequate training for employees on data security/privacy/cyber risk. No or inadequate background checks conducted on employees/various service providers/suppliers etc.;
- Compliance and control issues - possible lapses on policies, procedures and protocols on cyber security and related matters (if applicable);
- Cyber threat relating to - Bring your own devices (BYOD), download and install personal, or unauthorised software, use of USB or other media devices etc;
- Extra expenses following a cyber incident including forensic investigation costs, crisis management expenses, notification and monitoring expenses, remediation/other extra expenses;
- Brand and reputational damage following a cyber-attack/data breach;
- Security lapses in company web-sites – cyber threat to own hardware and software; cyber threat to visitors of the website;
- Lack of security measures including a combination of technology (e.g. IT security) and physical security at the premises;
Why Hunter Broking Group?
Engineering Insurance Broker Brisbane:
Hunter Broking Group can assist in protecting Engineers, Surveyors and Project Manages. We have access to industry specific insurers that enables us to assist with Professional Indemnity Insurance and Engineering Equipment Insurance at a competitive price. As an Engineer, you require protection not only to your client, but also to contractors, future purchasers of the building or construction and anyone injured due to an alleged deficiency in your work. Your Engineering Business is unique, however regardless of your area of specialisation, occupational health and safety risks also need to be protected.
Hunter Broking Group look after a wide range of engineering professions, including:
- Mechanical Engineering
- Electrical Engineering
- Heating & Ventilation Engineering
- Acoustical Engineering
- Chemical Engineering
- Traffic Engineering
- Hydraulic Engineering
- Civil Engineering
- Structural Engineering
- Environmental Engineering
- Mining Engineering
Our brokerage has extensive experience with a vast array of engineering professions and engineering businesses. We have access to insurance products and risks such as:
- Business Insurance
- Building, Contents & Stock Insurance
- Machinery Insurance
- Engineering Equipment Insurance
- Business Interruption Insurance
- Cyber Liability Insurance
- Professional Indemnity Insurance
- Public & Products Liability Insurance
- Directors & Officers Liability Insurance
Engineering equipment insurance is a core focus for our advisors, whether we are looking after small lathes or industrial engineering equipment such as horizontal borers, Hunter Broking Group have the experience to provide the appropriate advice for your size and risk exposures.
Our experienced brokers can help you get the most appropriate insurance cover by assessing your specific needs and recommending the best value insurance solution for your business, whilst still maintaining the highest standard of cover.