One myth is to propose an amendment to their agreement that reduces the total amount of consideration due to them. Another bad idea is to have the professional pay the additional costs to the contractor or suppliers directly.

The proper remedy is to place the professional and his/her surety or professional liability insurance carrier, the one that provided the E&O policy, on written, formal notice about the problem. and inform them that you expect to recover any and all damages or extra costs directly related to their negligence. This can be accomplished by a letter to the professional with a copy to the insurance company and to its agent for service of process.

Immediately thereafter you will be contacted by the surety who will try to resolve the issue. If no contact is made with you within five working days, a telephone call or visit to the surety's office is not only appropriate, but highly recommended. You will be negotiating from a very strong position, especially if the contract language can withstand any legal challenges. Attorneys have a habit of mucking up the works, but normal E&O policy administration favors resolution of the issues. Especially when there is a good faith dispute. In some cases, the E&O carrier will bring in the general liability carrier to pick up its portion of any responsibility.

Do not rush to settle, but make sure you respond to all requests for information, and involve your legal counsel early in the problem.

© 1998 by Donald L. Woods, All Rights Reserved