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Business Insurance
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Errors & Omissions Risks in Designs or Plans
(Ontario Arborist, September 2007)
Arboriculture services often include, even as an incidental service only, consultation for the preparation of designs and plans that requires expert review, inspection, sampling, research, advice, opinion and other knowledge based skills, both from within the business as well as outside sources such as a soil test from a laboratory or cabling and bracing input from an engineer. The gathered information might simply be put into a report for use by others or can instead be used internally to assist in determining an appropriate course of action for the project at hand.
Errors or omissions in designs or plans can cause damage, injury or even consequential financial suffering such as project delays, costs of corrective action, reduction in real estate value, etc.
As a hired specialist, an arborist has a legal duty to provide reasonable care and diligence when performing its services. If the intellectual expertise is flawed, there is potential for liability should the mistake cause injury, damage or harm.
Managing the Risk
Reducing the likelihood that an error or omission will occur is foremost. This is best done by ensuring that important details are gathered from and by those best qualified, having the most awareness, experience and education with the matters at hand. Available experts within your business might be limited, however outside assistance may be readily available. Consult with other arborists, architects, engineers, contractors, suppliers and even your ‘friendly’ competitors. Remember, it is ‘omission’ that occurs more often than ‘error,’ due simply from a lack of knowledge. It is ‘what you don’t know that you don’t know,’ which is the most problematic. Often ‘experts’ will move a project along, completely unaware of concerns and believing all to be appropriately in order in circumstances where a specialist would have noticed and attended to the matter accordingly.
Know that ultimately your business is vicariously responsible for the services it renders. As such, it is important to recognize that outsourcing tasks to others does not fully absolve potential liability. However when others are depended on there are ways in which the subcontracting relationship can be established and managed that can increase your security such as:
Do Your Homework. Hire only those truly qualified to perform the services you are subcontracting. Check the company or individuals references, request copies of their accreditation documents and keep these on file for an extended period. If someday you are legally challenged, you may need to provide evidence as to why you selected the expertise delivered.
Use Contracts! Enter into written agreements that clearly describe the work. Include an indemnification clause as a covenant confirming that the subcontractor agrees to accept financial responsibility if the work they perform gets you named in a liability suit. Obtain proof of valid insurance as a means of confirming affordability. After all, a subcontractor that agrees to indemnify you is advantageous only if they actually have available the funds (or potential funds) to do so.
Take a Pass. Sometimes it is best to avoid work that is ‘beyond your scope of expertise’ by encouraging the client to get the help they need directly from others without you acting as a contractor or project manager. As a ‘quarterback,’ you have responsibility for all players on the field of play. If the client is not averse to handling additional relationships, let them. This will enable you to focus on your own service capabilities without straying into uncharted waters with the ultimate responsibility.
Insuring the Risk
Regardless of your skill, experience, qualifications, diligence and attention, mistakes occur from time to time – we are human. However, even if no liability is eventually determined against you, a lawsuit itself will be costly as errors and omissions allegations can be very expensive to defend. Specializing lawyers, expert testimony and consultant reports will be necessary to put forth a strong case on your behalf. In fact, a leading Canadian insurer of errors and omissions insurance advises that it costs an average of $40,000 to win a case. Of course, if negligence is found and compensatory damages are awarded, you could be faced with substantial monetary amounts being owed depending on the nature of the case and extent of harm.
Most arboriculture services carry general liability insurance to protect against bodily injury or property damage resulting from incidental business activity such as tripping the little old lady while out to make your bank deposit or a workmanship accident perhaps as dramatic as dropping a limb on a person or property while felling a tree. However it is important to recognize and appreciate that general liability insurance protects only against bodily injury or property damage. Coverage provided by general liability insurance for financial harm is very limited and must be a direct result of injury or damage such as lost sales when a business premise is closed following damage caused during felling work. However, under a general liability policy, the cost of many ‘pure’ financial losses such as undue delay, site preparation and remediation (if replacement is even possible), reduction in real estate value and reduced amenities are not insured. Additionally, general liability policies will have an exclusion that forgoes the coverage applicable to bodily injury or property damage if this results from services rendered (paid or not) involving designs, plans, reports, opinions, advice, recommendations, testing, inspection, etc. These areas where it is the intellectual information that caused harm rather than a workmanship accident are risks requiring errors and omissions insurance.
Arranging errors & omissions coverage should be done carefully and with the assistance of insurance professionals who will take the time to understand the unique nuances of arboriculture to ensure that the protection is appropriately thorough by addressing your full operations. Your services may encompass a wide range of involvements including hazard tree assessments, remediation plans, designs of quasi-engineered cabling and bracing support systems, contributing to environmental impact reports, managing preservation during construction projects, preparing specifications of installation materials including the selection of tree species and many other areas of ‘expertise.’ These operations need to be thoroughly reviewed and understood.
he old adage that what looks like a duck, walks like a duck and talks like a duck, must be a duck isn’t always true. While this rule does hold true in many respects of life and business, a common confusion that will be of interest to arborists involves the definition of towable equipment versus genuine trailers in accordance to the laws governing use of our roadways.
Often it is discovered that trailers are insured as equipment or equipment is insured as trailers. Without being properly assigned, the coverage received and premium required can adversely and seriously be affected to the detriment of the arborist.
Although seemingly simple, identifying what is and what is not a trailer can sometimes be tricky. Manufacturers of towable equipment often design their products in an effort to accommodate the varying needs of the markets in which they will sell their wares. For example, a company such as Rayco produces a towable chipper (model RC12) with a lighting system and license plate holder in addition of course to having wheels and a hitching system. With these features, it looks like a trailer and often is insured like a trailer. However, in Ontario (check the law in your province) it is not legally defined as a trailer and if insured as a trailer, the arborist will lose the benefit of a premium savings and better coverage that is available if insurance was instead arranged as an item of contractor’s equipment as part of a business policy rather than as a vehicle unit on an automobile policy.
What differentiates a trailer from towable equipment actually has nothing to do with the manufactured set-up such as lights or a frame for a license plate. In Ontario (check your own laws in other areas), the Highway Traffic Act defines a trailer as follows: “trailer” means a vehicle that is at any time drawn upon a highway by a motor vehicle, except … any device or apparatus not designed to transport persons or property.
On review and consideration of the definition, it will quickly be recognized that towable equipment such as chippers, etc., are not trailers as they are not designed to transport persons or property. As they are not ‘trailers,’ they do not need to be insured as trailers but instead can receive the same insurance treatment used for equipment that travels to and from job sites – a contractor’s equipment floater. The contractor’s equipment floater will usually have features that provide better protection than automobile insurance offers including provisions for replacement cost protection and other coverage benefits.
In review of the definition, it is important to bear in mind the key word – designed. If a float trailer subsequently has an apparatus installed (i.e. sprayer), it is still a trailer. The law refers to how it was ‘designed’ (originally), not how it is being used.
— Scott McEachern, Program Executive, TREESURE provided by: Hugh Wood Canada Ltd., smceachern@hwcanada.com
Last Modified: Tuesday, September 18, 2007
Design and maintenance by NPC
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