Claims Retrospective: The Threat to File a Licensing Complaint as a Claim or Potential Claim
It is not unusual for a client or others involved with a project to threaten to file a licensing proceeding when they are dissatisfied with the engineer’s services, especially if they feel the engineer has not been sufficiently responsive to their complaints. While most engineers recognize the gravity of such threats, as licensing complaints have the potential to lead to suspension or revocation of the engineer’s license and thus can threaten the engineer’s very livelihood, engineers do not always recognize such threats as claims or potential claims that should be reported to their professional liability insurance carriers.
If accompanied by a demand for money or professional services as well as allegations of an act, error, or omission in the engineer’s professional services, a threat to file a licensing complaint against the engineer will constitute a claim under most professional liability insurance policies. The engineer must timely report same to its insurance carrier to obtain coverage under the applicable policy.
A failure to report the threat, or claim, may jeopardize the engineer’s coverage, as most professional liability insurance policies are claims made and reported policies requiring the insured engineer to report the claim within a certain time period in order to obtain coverage. Some policies require the insured to report the claim within the policy period while others have much shorter deadlines for reporting, such as 30 or 60 days from the date when the claim is first made or received by the insured engineer. The professional liability insurance policies insured via the ASCE program and Pearl Insurance require the insured engineer to report a claim within 60 days after it is first made.
Typically, a threat to file a licensing complaint against a particular engineer is accompanied by an allegation of an act, error, or omission by said engineer. Indeed, without such an alleged act, error, or omission by the engineer, there would be no reason to make a complaint. Likewise, the threat is often accompanied by a demand that the engineer correct or perform some services or pay the complainant money and thus constitutes a claim.
However, sometimes, threats to file a licensing complaint do not include any such demands. If there is no such demand, the threat may still constitute a potential claim, or an act, error, or omission, whether actual or just alleged, which might reasonably be expected to give rise to a claim against the insured engineer. If an engineer reports a potential claim under a given policy, then any future claim will relate back and attach to the policy under which notification of the potential claim was provided. This will occur as long as the actual claim asserted arises out of the same alleged wrongful acts as the potential claim and coverage would then be evaluated as if such a claim had been made on the original date of the notification.
Indeed, when a licensing proceeding is reported under an ASCE policy, the matter is typically recognized and acknowledged as a potential claim.1
Therefore, engineers should report any threats they receive involving the possibility of a licensing complaint being filed against them to their professional liability insurer. These threats will likely constitute claims or potential claims, so timely reporting will be the best way to ensure the potential for coverage is preserved. Further, the insurer can then assess whether the insured engineer would benefit from early appointment of defense counsel or retention of expert(s) to assist them with the developing situation.
1The professional liability insurance policies issued to member engineers through the American Society of Civil Engineers via Pearl Insurance provide for reimbursement of defense fees and costs in defending against a licensing proceeding.
