By: Mark C. Kriss, Esq.
NYSSPE Legislative Counsel
The State of New York and the State of Vermont share the distinction of being the only states in the United States which require Professional Engineers (and Registered Architects) to be perpetually responsible for projects they design, potentially for decades after they retire. All other states have statutes of repose which would, when applicable, require dismissal of a design liability case due to the passage of time after completion of a project.
For example, a state with a 7-year statute of repose would require dismissal of a design liability case against an engineer if the plaintiff’s injury or death occurred more than 7 years after completion of a project. (A statute of repose should not be confused with a statute of limitations which is a distinct timeframe running from the date of plaintiff’s injury or death itself. New York does have a three-year statute of limitations, but again, the statute of limitation’s clock does not start to run until a party is injured or killed. Obviously, this could happen decades after a project is completed.)
The forty-eight states which have adopted a statute of repose recognize that after completion of a project the design professional has no control over (i) the use of the property, or (ii) the re-use of the property, or (iii) the maintenance of the property, and that after a building or other improvement has performed satisfactory for a given number of years an injured party must look to others in control of the property for recovery respecting his or her loss. (Further, it is an extremely rare case where a latent design defect is the primary cause for a failure and the universe of defense costs associated with these claims are staggering compared to the universe of recoveries from these types of claims.)
In New York, in instances where a professional engineer retires and his or her firm is dissolved, or otherwise no longer continues in business, the absence of a true statute of repose raises significant risk for the retiring engineer. Even if a firm continues in business the risk that it may be dissolved in the near future, otherwise ceases to operate, or discontinues the purchase of professional liability insurance, raises identical concerns. (These risks apply to both the self-employed and the employee engineer since both are liable for their professional work product in an individual capacity.) In the event of a claim, even a non-meritorious claim, the retired professional engineer may be called upon to pay defense costs, and should a latent design defect be proven the licensee would also be responsible for the payment of damages.
Professional liability insurance is available for ongoing engineering firms and in instances where a firm no longer continues to operate tail-coverage can be purchased only for a limited number of years, typically three years. Upon the termination of coverage a professional must face both the threat of the payment of defense costs and the potential for the payment of damages.
Notwithstanding the fact that all but two states have a true statutes of repose on the books, the prospects for adoption of a similar measure in New York are not strong despite efforts by NYSSPE, ACEC & AIA New York. The trial lawyers’ associations (representing plaintiffs), continue to exercise a strong political presence in New York State.
In light of the absence of a statute of repose in New York consideration should be given to the use of a trust for assets which otherwise are held in the name of the retiring licensee. The transfer of assets, including, without limitation, a family residence or investment account, to a trust is also useful for Medicaid planning purposes. Typically, such trusts protect the assets which are placed into the trust for the benefit of both the retiring engineer and his or her family. Access to the trust income and principal can largely be maintained. If you have questions regarding the use of such trusts please contact Mark Kriss counsel to NYSSPE at (518) 449-2037 (x207) (firstname.lastname@example.org), or your family attorney to discuss your own circumstances and the suitability of a trust.
The foregoing has been prepared for general information purposes only. This article addresses the potential liability facing retiring professional engineers in New York, particularly in light of the absence of a statute of repose in the state, and is intended to raise awareness about the issue and the possible use of a trust as a self-help option. The information presented is not specific legal advice, is subject to change without notice, and does not create an attorney-client relationship.
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