1. Insurance for Commissioning Professionals RISKS AND SOLUTIONS Presented by: Diane Mika AVP Loss Prevention & Client Education XL INSURANCE DESIGN PROFESSIONAL GROUP

2. © 2010, X.L. America, Inc. All rights reserved. Page 2 _ 12-Oct-15 About Today You’ll get answers to the following questions: − Why do commissioning professionals need professional liability insurance? − Who is XL Insurance? − What is the nature of professional liability risk in today’s marketplace? − How can I manage that risk?

3. QUESTION 1 Why do commissioning professionals need professional liability insurance?

4. © 2010, X.L. America, Inc. All rights reserved. Page 4 _ 12-Oct-15 Professional Liability Insurance 101 − Applies to professionals − Provide services − Have knowledge, training and expertise − Operate under the “standard of care” − Covers negligent acts, errors and omissions − Assist in dispute resolution − Handle claims − Pay damages

5. © 2010, X.L. America, Inc. All rights reserved. Page 5 _ 12-Oct-15 Why Cx Professionals Need PL Insurance − Licensed − Provide professional services − Bound by the standard of care − Negligent performance could result in economic loss − Likely to be named in the event of a claim − Such damages would only be covered by professional liability insurance     

6. QUESTION 2 Who is XL Insurance?

7. XL Insurance Global provider of intelligent risk solutions, delivered with integrity and supported by market-leading analysis and financial security © 2010, X.L. America, Inc. All rights reserved.

8. Design Professional group Offers innovative professional liability insurance programs for architects and engineers, with specialized programs to minimize professional liability risks through insurance, proactive loss prevention techniques and expert claims service © 2010, X.L. America, Inc. All rights reserved.

9. © 2010, X.L. America, Inc. All rights reserved. Page 9 _ 12-Oct-15 XL INSURANCE’S DESIGN PROFESSIONAL GROUP Loss Prevention & Client Education − Dedicated to the design professions − Analyze claims data − Provide fact-based risk and project management education − Reduce the cost of loss

10. QUESTIONS 3 & 4 What is the nature of risk in today’s marketplace? How can I manage that risk?

11. © 2010, X.L. America, Inc. All rights reserved. Page 11 _ 12-Oct-15 Avoid –Project evaluation –Client selection –Go/No-Go decision Transfer –Contract –Insurance Assume –Deductible –Self- insurance Control –Loss prevention –Risk management Risk Management Fundamentals

12. © 2010, X.L. America, Inc. All rights reserved. Page 12 _ 12-Oct-15 *Assumes 5% after tax profit Why Worry About This Stuff Cost of problemRevenue needed to offset problem cost* − $1,000- $20,000 (400 Staff hours) − $10,000- $200,000 (4,000 Staff hours) − $50,000- $1MM (20,000 Staff hours)

13. © 2010, X.L. America, Inc. All rights reserved. Page 13 _ 12-Oct-15 RISK DRIVERS Identifying Where the Risks Lie − Technical Error and/or omission of a technical nature which resulted in a loss prevention file or claim − Non-technical Breakdown in project or practice management processes which contribute to a loss prevention file or claim being made

14. © 2010, X.L. America, Inc. All rights reserved. Page 14 _ 12-Oct-15 RISK DRIVERS Top 4 Non-Technical Causes of Loss Percentage of Claims Affected

15. © 2010, X.L. America, Inc. All rights reserved. Page 15 _ 12-Oct-15 RISK DRIVERS Negotiation and Contract Issues

16. © 2010, X.L. America, Inc. All rights reserved. Page 16 _ 12-Oct-15 RISK DRIVERS Negotiation and Contract Solutions − Evaluate project risks − Begin with your agreement − Align scope with client needs/drivers − Establish a review process − Always use a written agreement

17. © 2010, X.L. America, Inc. All rights reserved. Page 17 _ 12-Oct-15 RISK DRIVERS Client Selection Issues

18. RISK DRIVERS Client Selection Solutions − Use a new client intake and review process − Evaluate your existing clients − Manage client expectations: − Clarify roles, responsibilities and expectations − Be prepared to spend more time educating an unsophisticated client − Document, Document, Document − Stick to your scope © 2010, X.L. America, Inc. All rights reserved.

19. © 2010, X.L. America, Inc. All rights reserved. Page 19 _ 12-Oct-15 RISK DRIVERS Project Team Capabilities - Issues

20. © 2010, X.L. America, Inc. All rights reserved. Page 20 _ 12-Oct-15 TOP AND BOTTOM PROJECT MANAGERS Leadership

21. © 2010, X.L. America, Inc. All rights reserved. Page 21 _ 12-Oct-15 TOP AND BOTTOM PROJECT MANAGERS Interpersonal Skills

22. © 2010, X.L. America, Inc. All rights reserved. Page 22 _ 12-Oct-15 TOP AND BOTTOM PROJECT MANAGERS Problem Solving/Decision Making

23. © 2010, X.L. America, Inc. All rights reserved. Page 23 _ 12-Oct-15 RISK DRIVERS Project Team Capabilities - Solutions − Identify and cultivate qualified project managers and team managers − Develop and manage qualified team members − Match the project team with the needs of your client and project − Recognize that you have to face these risk drivers in your team—and in the design team on the project

24. © 2010, X.L. America, Inc. All rights reserved. Page 24 _ 12-Oct-15 RISK DRIVERS Communication Issues

25. RISK DRIVERS Communication Solutions − Scope of services − Must be clearly understood by client − Any changes must be documented − Establish procedures to identify/address conflicts − Know the early warning signs − Designate a primary contact within your firm for notification of issues/conflicts − Institute a procedure to resolve issues at appropriate levels of authority − Give direction as to what to do when a problem arises − Treat communications seriously © 2010, X.L. America, Inc. All rights reserved.

26. © 2010, X.L. America, Inc. All rights reserved. Page 26 _ 12-Oct-15 PDSDCDPRCAOPDD Time Effort/Effect PD: Pre-design SD: Schematic design DD: Design development CD: Construction documentation PR: Procurement CA: Construction Administration OP: Operation Graphic originated by Patrick MacLeamy, AIA / HOK Ability to impact cost and functional capabilities 1 1 Cost of design changes 2 2 Preferred design process 4 4 Moving the Curve Forward (CURT) 3 Traditional design process 3

27. Technical Statistics Mechanical/Electrical/Process Engineers

28. © 2010, X.L. America, Inc. All rights reserved. Page 28 _ 12-Oct-15 MEP ENGINEERS Who Sues Mech/Elec/Proc Engineers?

29. © 2010, X.L. America, Inc. All rights reserved. Page 29 _ 12-Oct-15 MEP ENGINEERS Types of Damages

30. © 2010, X.L. America, Inc. All rights reserved. Page 30 _ 12-Oct-15 MEP ENGINEERS Claim Trigger

31. © 2010, X.L. America, Inc. All rights reserved. Page 31 _ 12-Oct-15 MEP ENGINEERS Frequency & Severity (by project type)

32. © 2010, X.L. America, Inc. All rights reserved. Page 32 _ 12-Oct-15 MEP ENGINEERS Elements Most Often Involved

33. © 2010, X.L. America, Inc. All rights reserved. Page 33 _ 12-Oct-15 Risk Management Cycle Client Selection Contracts Match Capabilities CommunicationIncreased Profit Internal Investment Projects Staff Revenue Improved Quality Improved Project Management

34. © 2010, X.L. America, Inc. All rights reserved. Page 34 _ 12-Oct-15 What Direction Will Your Firm Take? − How does your firm measure up? − Where are your firm’s weaknesses? − Are any practice or project management weaknesses exposing your organization to excessive risk? − Contact the Design Professional group of XL Insurance, and take advantage of our A/E industry expertise

35. © 2010, X.L. America, Inc. All rights reserved. Page 35 _ 12-Oct-15 Notices & Disclaimers − "XL Insurance" is a registered trademark of XL Capital Ltd. XL Insurance is the global brand used by member insurers of the XL Capital Ltd group of companies. In the US, the XL Insurance companies are: Greenwich Insurance Company, Indian Harbor Insurance Company, XL Insurance America, Inc., XL Insurance Company of New York, Inc., XL Select Insurance Company, and XL Specialty Insurance Company. Not all of the insurers do business in all jurisdictions nor is coverage available in all jurisdictions. − The information contained herein is intended for informational purposes only. Insurance coverage in any particular case will depend upon the type of policy in effect, the terms, conditions and exclusions in any such policy, and the facts of each unique situation. No representation is made that any specific insurance coverage would apply in the circumstances outlined herein. Please refer to the individual policy forms for specific coverage details.

36. Questions? Diane Mika 831-657-2568 Diane.Mika@xlgroup.com