Schinnerer's RM Blog - case study tag

Library Claims

Thu, 29 Mar 2012 11:51:00 GMT

Library project claims tend to be less severe than claims stemming from other project types. From 2001 through 2010, the highest frequency (55%) and severity (76%) for library claims involved delays and extras. The following is an example of a library claim:

An architect was hired by a university to design a new library with a construction value of $40 million. The university used an intensive value analysis process to reduce the construction contract to $38 million. The project experienced substantial delays and cost overruns that increased the project to an eventual cost of $48.5 million. The contractor filed a claim against the university for $3 million for delays and extra costs. The university negotiated directly with the contractor and then looked to the design team for $1.6 million, alleging that the plans contained numerous design errors, and that the design team failed to respond to RFIs and submittals in a timely fashion. The claim settled for $400,000, with the architect paying two-thirds and the mechanical/electrical subconsultant paying the remaining one-third. In addition the architect paid expenses of $39,000.

For more information including risk management advice, please see our entire library claims study (access limited to current policyholders and brokers only). This study was updated with current statistics in September 2011.

Land/Site Development Claims

Thu, 16 Feb 2012 12:39:00 GMT

Land/site development claims can be risky for civil engineers and land surveyors. The average indemnity payment of a site development claim from 2001 to 2010 was more than $108,000. The following is an example of a site development claim:

A civil engineer provided design services for a residential subdivision. His responsibilities included grading and storm drain design, a parcel map, and design of surface improvements, including a parking area. The issue in this claim was a geo-grid retaining wall system that moved and cracked because of a deep-seated, ancient landslide below the wall. The civil engineer showed the horizontal and vertical location of the wall, but he did not design the wall, provide structural calculations, or stake the location of the wall.

The engineer who designed the wall settled for $900,000. Other parties also settled, resulting in a combined settlement of $3,775,000. Although the actual cost to repair the wall was estimated at only $1,600,000, the estimated cost to stabilize the landslide exceeded $9 million and the alleged economic damages were $24 million. The claim involving the civil engineer was settled in mediation for $500,000. Although the civil engineer believed he had done nothing wrong, had he gone to trial his exposure would have far exceeded his available insurance limits; expenses were $150,000.

For more information including risk management advice, please see our entire land/site development claims study (access limited to current policyholders and brokers only). This study was updated with current statistics in September 2011.

Correctional Facility Claims

Tue, 17 Jan 2012 15:32:00 GMT

Claims involving correctional facilities represent a small percentage of the total number of claims in the Schinnerer and CNA program. However, the cost of these claims can be severe. From 2000 to 2009 the average indemnity payment was $203,286. The following is an example of a correctional facility claim:

An architect provided design and contract administration services for renovations and additions to a county jail project involving multiple prime contractors. The number of prime contracts made communication and coordination difficult. Several contractors filed delay claims. The prime contractor for the electrical and security systems filed suit against multiple parties alleging a 13-month delay that resulted in $1.8 million in extra costs. The client had issued an 82-day weather-related time extension, but the electrical contractor refused to accept the extension. Allegations against the architect included failure to coordinate and delays in approving shop drawings despite contractual commitments to do so within 10 days. The architect settled for $455,000 and paid $53,000 in expenses.

Correctional facilities projects are publicly funded. Contractor selection on public projects is generally based on competitive bidding. When working on a public project, firms should be aware of a low bid contractor’s tendency to submit claims for delays and extras.

For more information, please see our entire correctional facility claims study (access limited to current policyholders and brokers only).