The Facts

Engineering Inc. had an ongoing relationship with a county to perform engineering services. As part of this relationship, Engineering Inc. was hired to gather information and submit an application for emergency grant funding from the state and Federal Emergency Management Agency (FEMA) for county residents who suffered flood damage. Due to their ongoing relationship, and the rush nature of the project, Engineering Inc. and the county did not have a written agreement in place for the services.¹ The county accused Engineering Inc. of not completing the report in a timely manner and filed suit on behalf of the affected residents claiming $10 million in damages.

While the county relieved the firm of all other duties, Engineering Inc. was allowed to complete the grant for the project. The grant was completed and submitted to the state and FEMA, and the county and residents were authorized grant money. Defense counsel requested that the suit be dismissed since the grant was received and no damages were incurred.

The county refused to release Engineering Inc. from the lawsuit arguing that additional time was needed to determine whether Engineering Inc.’s tardy report and application resulted in lower grant awards to county residents. Additional research was conducted to compare the current and prior grant awards to determine if the percentages of awards to applicants were the same in previous years.

The Result

The firm was ultimately released from the suit for a nominal payment; however, defense costs totaled $250,000.²

Risk Factors

Risk Factor #1

Written contracts are essential when performing professional services. A well written contract can help avoid claims by clearly outlining the responsibilities.

Risk Factor #2

Defense costs may be higher than indemnity therefore, it is important to review your coverage limits to ensure potential defense costs are factored in.