Claims Retrospective: Arbitrary Deadlines as a Scare Tactic
A common scare tactic by claimants’ attorneys is to send a demand or claim letter that includes an arbitrarily set deadline by which a response “must” be provided.
For example, an engineer receives a vague letter accusing him or her of various errors and/or omissions in his or her services or work product, stating the claimant has suffered significant damages and then demanding a response two days later.
While there may be occasions when the deadline set by the claimant’s counsel is actually meaningful (e.g., if repairs or remediation which could lead to spoliation of evidence are scheduled to begin imminently), the vast majority of these deadlines are arbitrarily set by the claimant’s counsel. Why? Because the claimant’s counsel is hoping an engineer will panic and agree to some course of action, or admit to liability, without having thoroughly investigated the consequences. An engineer should avoid making a hasty and poorly reasoned response to such a letter.
Instead, an engineer should promptly provide notice of any demand or claim letter to his or her insurance carrier and highlight the stated deadline. Keep in mind, under most professional liability insurance policies, the insured engineer cannot incur claims expenses, admit liability, or consent to a settlement without the express written consent of the insurer. Accordingly, a hasty and ill-conceived response to a demand or claim letter could jeopardize an engineer’s coverage if it runs afoul of the policy’s provisions. Moreover, whatever an engineer says in the response letter could later be used against him or her in subsequent litigation or arbitration.
One helpful approach to letters with seemingly arbitrary deadlines is to ask: What will happen if I do not respond by the deadline? If there is no clear answer to the question, then it is likely nothing will happen if a response is not provided by the deadline.
If the letter specifically states the claimant will file a lawsuit or initiate arbitration if the deadline is not met, it is important to keep in mind that, in most situations, the claimant can file a lawsuit or initiate an arbitration regardless of a response. Further, such letters are often vague as to the Insured’s alleged error and resulting damages, so it is often impossible to provide a meaningful response. How can an engineer provide a response if he or she does not know the problem?
Even if the claimant’s theory of liability and damages are described in detail in the letter, it is certainly unlikely that the best response will be to immediately give up, accept liability, and agree to pay. It is also unlikely that a response denying liability and refusing to pay will make the matter disappear. Therefore, litigation or arbitration may be inevitable, regardless of the timing of the response.
Alternatively, such letters are often used simply as a fishing expedition to see which parties might engage in pre-litigation settlement discussions. In these instances, the claimant may have no intention of filing suit against all of the parties to whom letters were sent. Again, litigation or arbitration may be unlikely regardless of the timing of a response.
There are cases where a deadline is not arbitrary. For example, if significant actual costs will be incurred on a project if something is not accomplished by the deadline, or destructive testing will be done and/or evidence lost if an engineer does not respond by the deadline. In these cases, a speedy response may be necessary. However, it is still important to immediately report the matter to his or her professional liability carrier and highlight the deadline, even if it is impractical to wait for a response from the carrier before proceeding to mitigate the damages involved. The act of reporting the matter to the insurance carrier, along with the deadline, will aid in preserving an engineer’s coverage.
