The First Sign of Trouble: The Importance of Resolving Problems Early

by Jeffrey Cavignac, CPCU, ARM, RPLU, CRIS, MLIS – President, Cavignac & Associates
A professional liability claim can devastate a firm’s profit and in some cases destroy a firm entirely. Taking steps to reduce the frequency and severity of a professional liability claim not only makes good business sense, it could mean the difference between survival and failure.Talk to any claims adjuster and they will tell you that the sooner a potential problem is identified and dealt with, the less expensive it will be. Whenever a problem situation is identified, it should be discussed with your insurance broker who will usually tie in the insurance company’s claims adjuster. But what are some of the early warning signs that there may be a problem? What should your staff be on the lookout for?

Difficult Now? Wait Until Later

If the client is difficult during project onset and contract formation (when you are on good terms), it will only get worse on the back end if there is a problem.

When You Are Plan B

It is a red flag when you are asked to replace another consultant. While there are certainly legitimate reasons to replace a consultant, you want to make sure you are not walking into a minefield.

Underfunded and Tight Time Frames

When a project goes south and owners lose money, they look for others to share their pain. Often that finger is pointed squarely at the Design Professional!

RFI Hell

An inordinate amount of Requests for Information (RFIs) could mean the contractor is papering the file for a claim against you. This is especially prevalent on low bid public work.

Running Out of Money

OK, you accepted that underfunded project and now the owner is running out of money and cutting corners; alarms should go off in your head.  Meet with the owner to discuss any concerns and make sure you document everything.

Radio Silence

Your calls are not being returned, your relationship seems to have gone south and you are not being kept informed. Meet with the client and make sure your suspicions are not correct!

AR Over 90

There are only two reasons a client doesn’t pay you. They don’t have the money or they are not happy with your work. Neither is good. Figure out the reason, remind the client of the payment terms in your contract, but be proactive!

There is no downside to discussing potential problems with your insurance broker. If necessary the claim will be turned in, if not the discussion will be documented.  In either case your insurability is maintained.  It is critical to deal with problems earlier than later.