Can engineers be held liable to third parties?

Due to an engineer’s vast responsibility on projects, are there many situations that can go wrong, due to mistakes and negligent errors as an engineer, or the employees working for his company.

The following services, but not limited to, are provided by engineers:

  •  Civil
  • Structural
  • Information Technologies
  • Mechanical
  • Mining Consultancy
  • Electrical
  • Soil & foundations consultancy
  • Heating and ventilation services
  • Project management

Any project, big or small, can result in a multi- million rand legal liability claim due to financial losses, harm or damages, suffered by the third party caused by errors and omissions as an engineer, or the company.

The Grayston bridge collapse over the M1 in Johannesburg October 2015 was the big debate whether the engineer or the construction contractor involved, would be held liable. The financial liability in such an incident can expand far beyond only the construction damage of the bridge. Two motorists lost their lives and 10 people were hospitalised.
In an incident, the engineering company’s reputation and share price (if listed on the stock exchange market) can be negatively affected as well.
Anyone can make a mistake therefore it is vital to consider taking out professional indemnity cover in order to be protected against liability following from negligent mistakes.

Examples of professional indemnity claims in respect of engineers

1. Inaccurate specifications for an electricity supply to site contractors. This can lead to additional costs for alterations and for the use of a temporary generator
2. A geo-technical engineer negligently failed to detect unstable sub-surface conditions and as a result the embankment collapsed
3. Refurbishment proved inadequate following negligent miscalculations during the designing of heating system in a factory. Extra units were required. The engineers and contractors involved were sued for breaches ofbuilding regulations
4. A contract was terminated citing delays due to design inadequacies during the refurbishment of a noise test factory. Complete refurbishment was required in order to comply with Pressure Equipment Regulations

Why Professional Indemnity Cover?

Professional indemnity (PI) policy is the answer to unforeseen financial losses caused by negligent errors and omissions.
It is designed to protect professionals such as engineers against unforeseeable and unexpected errors whilst providing
advice to their clients. In some instances, engineers are required by their clients to have professional indemnity in force
when tendering for business. In this case, they are forced to take up a PI policy for the duration of the project or as
stipulated in the tender documents. However, it is important to understand that PI is more than a paper that you include
in tender submission.

A PI policy covers the engineer against the following risk risks:

1. negligent errors and omissions
2. negligent wrongful or inadequate advice to clients
3. negligent breach of contract and breach of respective warranty
4. breach of statute and regulations
5. Defamation including libel and slander injuria and negligent breach of confidentiality
6. Legal defence costs
7. Loss of documents
8. Any additional costs incurred in trying to mitigate or preventing a loss that is likely to occur.

Benefit of having a PI cover

1. It protects engineers against third part financial losses arising from negligent errors and omissions when
rendering their services
2. Peace of mind. A third party claim can cause financial distress. Imagine a case where an engineer has to pay a
PI claim from working capital which is meant to pay overhead and operating expenses such as wages and
salaries, rates and rentals or even buying new equipment. PI claims can be substantial and can disrupt
operations because capital will be used to settle a third party liability claim and related legal costs, as well as
tarnishing the engineer’s good will and reputation.
3. There is provision for any legal defence costs. An engineer can be sued even if he is not liable. This means
that the defendant will incur costs in defending the matter. The PI policy provides cover for such legal costs.
4. Engineers can be sued individually or joint and severally with sub-contractors or with other joint-venture
companies.

RS Brokers offer professional indemnity cover and various liability products for all professionals such as accountants,
architects and surveyors among others.

For more information contact us: 012 880 2145, renthea@rsbrokers.co.za, www.rsbrokers.co.z