BILL ANALYSIS Ó ----------------------------------------------------------------- |SENATE RULES COMMITTEE | SB 679| |Office of Senate Floor Analyses | | |1020 N Street, Suite 524 | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ----------------------------------------------------------------- THIRD READING Bill No: SB 679 Author: Berryhill (R) Amended: 4/8/13 Vote: 21 SENATE BUSINESS, PROF. & ECON. DEVELOP. COMM. : 10-0, 4/15/13 AYES: Price, Emmerson, Block, Corbett, Galgiani, Hernandez, Hill, Padilla, Wyland, Yee SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8 SUBJECT : Licensees: reporting requirements engineers or land surveyors SOURCE : California Geotechnical Engineering Association DIGEST : This bill 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 (Board) from "$50,000 or more" to "more than $50,000;" and 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. ANALYSIS : Existing law: 1. Requires an engineering or land surveyor licensee to report CONTINUED SB 679 Page 2 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: 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 or 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. 2. Provides that failure of a licensee to report to the Board in the time and manner required shall be grounds for disciplinary action. 3. Requires a court that renders a conviction or judgment against an engineer or land surveyor 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. 4. Requires an insurer that provides professional liability insurance to an engineer or land surveyor or a state or local government agency that self-insures an engineer or land surveyor to report to the Board when payment of a civil action judgment, settlement, or arbitration award of $50,000 or greater, against a licensed engineer has been made. 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. CONTINUED SB 679 Page 3 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. Background In 2000, as a part of the Joint Legislative Sunset Review Committee's (JLSRC) review of the Board, SB 2030 (Figueroa, 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 CONTINUED SB 679 Page 4 attorneys and reporting requirements for 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. FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes Local: No SUPPORT : (Verified 4/30/13) California Geotechnical Engineering Association (source) ARGUMENTS IN SUPPORT : According to the author's office, existing 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's office, 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's office indicates that the Board's disciplinary process can take several years and cause the CONTINUED SB 679 Page 5 engineer a great amount of stress while they are under scrutiny, even where their conduct was in reality faultless. The bill's sponsor, California Geotechnical Engineering Association (CalGeo), writes that an unfortunate result of the existing law is that nuisance 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. MW:d 5/1/13 Senate Floor Analyses SUPPORT/OPPOSITION: SEE ABOVE **** END **** CONTINUED