BILL ANALYSIS Ó ----------------------------------------------------------------------- |Hearing Date:April 15, 2013 |Bill No:SB | | |679 | ----------------------------------------------------------------------- SENATE COMMITTEE ON BUSINESS, PROFESSIONS AND ECONOMIC DEVELOPMENT Senator Curren D. Price, Jr., Chair Bill No: SB 679Author:Berryhill As Amended:April 8, 2013 Fiscal:Yes SUBJECT: Licensees: reporting requirements. SUMMARY: Revises the threshold for a licensed engineer or land surveyor to report a civil action judgment, settlement, arbitration award, or administrative action to the Board for Professional Engineers, Land Surveyors and Geologists from "$50,000 or more" to "more than $50,000;" requires a licensed engineer or land surveyor to report to the Board any civil action judgment or binding arbitration award or administrative action of $25,000 or greater. Existing law: 1)Licenses and regulates professional engineers, land surveyors, geologists and geophysicists by the Board for Professional Engineers, Land Surveyors, and Geologists (Board) within the Department of Consumer Affairs. 2)Requires an engineering licensee to report to the Board in writing the occurrence of any of the following events within 90 days of the date the licensee has knowledge of the event: (Business and Professions Code (BPC) § 6770) a) The conviction of any felony. b) The conviction of any other crime (misdemeanor) substantially related to the qualifications, functions, and duties of a licensed engineer. c) Any civil action judgment, settlement, arbitration award, or administrative action resulting in a judgment, settlement, or SB 679 Page 2 arbitration award against the licensee in any action alleging fraud, deceit, misrepresentation, breach or violation of contract, negligence, incompetence, or recklessness by the licensee in the practice of professional engineering if the judgment, settlement, or arbitration award is $50,000 or greater. 3)Provides that failure of a licensee to report to the Board in the time and manner required shall be grounds for disciplinary action. (BPC § 6770 (e)) 4)Requires a court that renders a conviction or judgment against an engineer to report that fact to the Board within 30 days and furnish a copy of the conviction or judgment and any accompanying orders or opinions of the court. (BPC § 6770.1) 5)Requires an insurer that provides professional liability insurance to an engineer or a state or local government agency that self-insures an engineer to report to the Board when payment of a civil action judgment, settlement, or arbitration award of $50,000 or greater, against licensed engineer has been made. (BPC § 6770.2) 6)Requires a land surveyor licensee to report to the Board in writing the occurrence of any of the following events within 90 days of the date the licensee has knowledge of the event: (BPC § 8776) a) The conviction of any felony. b) The conviction of any other crime (misdemeanor) substantially related to the qualifications, functions, and duties of a land surveyor. c) Any civil action judgment, settlement, arbitration award, or administrative action resulting in a judgment, settlement, or arbitration award against the licensee in any action alleging fraud, deceit, misrepresentation, breach or violation of contract, negligence, incompetence, or recklessness by the licensee in the practice of professional engineering if the judgment, settlement, or arbitration award is $50,000 or greater. 7)Provides that failure of a licensee to report to the Board in the time and manner required shall be grounds for disciplinary action. (BPC § 8776 (e)) 8)Requires a court that renders a conviction or judgment against a land surveyor to report that fact to the Board within 30 days and furnish SB 679 Page 3 a copy of the conviction or judgment and any accompanying orders or opinions of the court. (BPC § 8776.1) 9)Requires an insurer that provides professional liability insurance to a land surveyor or a state or local government agency that self-insures a land surveyor to report to the Board when payment of a civil action judgment, settlement, or arbitration award of $50,000 or greater, against licensed land surveyor has been made. (BPC § 8776.2) This bill: 1)Revises those provisions above to instead require a licensed professional engineer or a licensed land surveyor to report to the Board any disciplinary action, or any civil action settlement or administrative action resulting in a settlement against the licensee of greater than $50,000. 2)Requires a licensed professional engineer or a licensed land surveyor to report to the Board any civil action judgment or binding arbitration award or administrative action resulting in a judgment or binding arbitration award against the licensee, if the amount or value is $25,000 or greater. 3)Requires a court that entered a settlement against a licensed professional engineer or a licensed land surveyor for more than $50,000 or a conviction or judgment of more than $25,000 to report that fact to the Board and provide a copy of the settlement and any orders or opinions accompanying the settlement. 4)Requires an insurer that provides professional liability insurance to a professional engineer or to a land surveyor or a state or local government agency that self-insures a professional engineer or a land surveyor to report to the Board when payment of a civil action judgment, settlement, or arbitration award of more than $50,000, against a licensee has been made. FISCAL EFFECT: Unknown. This bill has been keyed "fiscal" by Legislative Counsel. COMMENTS: 1.Purpose. This bill is Sponsored by the California Geotechnical Engineering Association (Sponsor) to adjust the monetary amount of a judgment, settlement, or arbitration award required to be reported by a professional engineer or land surveyor to the Board of SB 679 Page 4 professional Engineers and Land Surveyors. According to the Author, current law requires in all cases where there is a settlement or adjudication of a lawsuit against an engineer where the amount equals or exceeds $50,000, the engineer must be referred to the Board for a disciplinary review. The problem is, according to the Author, that most engineering malpractice coverage has a $50,000 deductible, so an insurer will often settle a case for that amount to avoid their own potential of incurring a more expensive cost of defense, even if there is no actual culpability or fault on the part of the engineer. The Author indicates that the Board's disciplinary process can take several years and cause the engineer a great amount of stress while they are under scrutiny, even where their conduct was in reality faultless. The solution proposed by the Sponsor is to adjust the referral amount threshold slightly, from $50,000 to that of any amount greater than $50,000 in settlement cases, and to provide additional consumer protection by reducing the referral amount to $25,000 in cases which went to verdict and fault was found by a jury, judge or arbitration. This change would remove those engineers from disciplinary scrutiny where the settlement was simply to protect an insurer's financial interest, but would increase the public protection in those cases where there is actual fault, according to the Sponsor. 2.Background. In 2000, as a part of the Joint Legislative Sunset Review Committee's (JLSRC) review of the Board, SB 2030 (Chapter 1006, Statutes of 2000) mandated that an independent research group conduct an in-depth analysis of the Professional Engineer's Licensing Act. The California State University at Sacramento, Institute for Social Research (ISR) was hired and oversight was provided by the DCA; the report was completed in November 2002. A task force was appointed by the Board to review the report, take public comments regarding the report and make recommendations to the Board. Among the findings of the ISR report, the report concluded that, similar to medicine, but on a larger scale, engineering activities have the potential for significant harm to large numbers of people. However engineering lacks a reporting system analogous to that for the practice of medicine. Mandated reporting would provide information on the potential for harm in exempt industries, and among unregulated disciplines and licensed engineers. The JLSRC stated that, similar reporting requirements regarding civil judgments and malpractice settlements exist for architects, landscape architects and attorneys and reporting requirements for SB 679 Page 5 civil actions, were required for certified public accountants. All health-related boards require reporting of civil judgments, settlements and arbitration awards including those which regulated physicians, podiatrists, osteopaths, marriage and family counselors, dentists, psychologists, chiropractors, registered nurses, vocational nurses, optometrists, and veterinarians. Ultimately the JLSRC recommended establishing a requirement for licensees and insurers to report a civil action settlement or arbitration award to the Board. Subsequently, the requirement for engineers and land surveyors to report settlements or judgments of $50,000 or more to the Board was established by SB 1549 (Figueroa, Chapter 691, Statutes of 2004) as a result of the 2003 Sunset Review of the Board. The bill required, a licensee to report to the Board within 90 days the conviction of any felony, and the conviction of the licensee of any other crime substantially related to the qualifications and work of the licensee, and any civil action judgment, settlement, arbitration award or administrative action against a licensee relating to the practice of professional engineering or land surveying in the amount of $50,000 or greater. 3.Related Legislation. SB 207 (Canella) modifies the requirement that the Board disclose information on the Internet about its registrants and licensees to exclude disclosing the address of record of a licensee. SB 207 is set for hearing in this Committee on April 15. SB 152 (Roth) repeals the provision for a temporary authorization to practice engineering, geology or geophysics in California; requires a geologist or geophysicist to use a written contract when providing geological or geophysical services. SB 152 was heard in this Committee on April 1, 2013, and passed 8-1. SB 1549 (Figueroa, Chapter 691, Statutes of 2004) established the current requirement for engineers and land surveyors to report to the Board any civil action judgment, settlement, arbitration award or administrative action against a licensee relating to the practice of professional engineering or land surveying in the amount of $50,000 or greater. 4.Arguments in Support. The Sponsors of the bill, California Geotechnical Engineering Association (CalGeo) writes in support that an unfortunate result of the current law is that nuisance SB 679 Page 6 settlements where there is no finding of fault, and there is no liability found, are settled for the exact amount of $50,000 because that coincides with the most common deductible for errors and omissions coverage in insurance policies for this profession. In addition, CalGeo writes, in cases where a trial or binding arbitration finds actual negligence on the part of the professional for a lesser amount, some of those cases escape review due to the current referral level. Ultimately, CalGeo believes that the bill will ensure additional scrutiny in cases where it is justified, and correct the current unintended problem where a nuisance or a suit settlement happens to be exactly $50,000. SUPPORT AND OPPOSITION: Support: California Geotechnical Engineering Association (CalGeo) Opposition: None received as of April 9, 2013 Consultant:G. V. Ayers