BILL ANALYSIS Ó
SB 679
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Date of Hearing: June 11, 2013
ASSEMBLY COMMITTEE ON BUSINESS, PROFESSIONS AND CONSUMER
PROTECTION
Richard S. Gordon, Chair
SB 679 (Berryhill) - As Amended: April 8, 2013
SENATE VOTE : 32-0
SUBJECT : Licensees: reporting requirements.
SUMMARY : Revises the monetary threshold amounts above which a
licensed engineer or land surveyor must report a settlement,
judgment, or arbitration made against him or her to the Board
for Professional Engineers, Land Surveyors, and Geologists
(Board). Specifically, this bill :
1)Revises the minimum amounts for which a licensed engineer or
land surveyor must report to the Board a settlement, judgment,
or arbitration award arising from a civil or administrative
action alleging fraud, deceit, misrepresentation, breach or
violation of contract, negligence, incompetence, or
recklessness, as follows:
a) For settlements, from $50,000 or more, to greater than
$50,000; and,
b) For judgment and binding arbitration awards, from
$50,000 or more, to $25,000 or greater.
2)Clarifies that a court must report settlements made against a
licensed engineer and land surveyor to the Board, as
specified.
3)Revises the threshold from $50,000 or greater, to greater than
$50,000 for reporting a judgment, settlement, or arbitration
award to the Board by an insurer who provides professional
liability insurance to, or a state or local government agency
that self-insures, a licensed engineer or land surveyor for an
award resulting from an allegation of fraud, deceit,
misrepresentation, breach or violation of contract,
negligence, incompetence, or recklessness.
4)Clarifies that the arbitration awards that must be reported to
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the Board are binding arbitration awards.
5)Makes other various technical and clarifying amendments.
EXISTING LAW :
1)Provides for the licensure and regulation of professional
engineers, land surveyors, geologists and geophysicists by the
Board within the Department of Consumer Affairs. (Business and
Professions Code (BPC) Section 6700 et seq.; BPC 8700 et seq.)
2)Requires a licensed engineer or land surveyor to report to the
Board in writing within 90 days of the date the licensee has
knowledge of any of the following events:
a) The conviction of any felony;
b) The conviction of any other crime substantially related
to the qualifications, functions, and duties of a licensed
engineer or land surveyor; or,
c) Any civil action judgment, settlement, or arbitration
award made against a licensee in any action alleging fraud,
deceit, misrepresentation, contract breach or violation,
negligence, incompetence, or recklessness if the amount is
$50,000 or greater. (BPC 6770; BPC 8776)
3)Provides that failure of a licensed engineer or land surveyor
to report to the Board in the time and manner required shall
be grounds for disciplinary action. (BPC 6770(e); BPC 8776(e))
4)Requires a court that renders a conviction or judgment against
a licensed 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. (BPC 6770.1; BPC 8776.1)
5)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
judgment, settlement, or arbitration award $50,000 or greater,
against a licensed engineer or land surveyor has been made.
(BPC 6770.2; BPC 8776.2)
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FISCAL EFFECT : Unknown
COMMENTS :
1)Purpose of this bill . This bill would lower the minimum
reporting amount for judgments and binding arbitration awards
for unprofessional conduct against a licensed engineer or land
surveyor from $50,000 or more to $25,000 or more, thereby
theoretically increasing the reporting of judgments and
arbitration awards. Conversely, it would also change the
reporting threshold for settlements from $50,000 or more to
greater than $50,000 in order to prevent $50,000 settlements
from being reported to the Board. The author contends that
this change would help avoid unnecessary administrative review
of settlements by the Board. This bill is sponsored by the
California Geotechnical Engineering Association.
2)Author's statement . According to the author, "This bill would
adjust the monetary amount of a judgment, settlement, or
arbitration award required to be reported by a professional
engineer to the Board.
"Current law requires in all cases where there is a settlement
or adjudication of a lawsuit against an engineer [in which]
the amount equals or exceeds $50,000, [that] the engineer must
be referred to the Board [?]. The problem is that most
engineering malpractice coverage has a $50,000 deductible, so
an insurer will often settle a case for that amount to avoid
incurring a more expensive cost of defense, even if there is
no actual culpability or fault on the part of the engineer.
The disciplinary process can take several years and cause the
engineer a great amount of stress while they are under
scrutiny, even when their conduct was, in reality, faultless."
3)Board referrals and disciplinary review . SB 1549 (Figueroa)
Chapter 691, Statutes of 2004, established the current
requirements 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. The Board can use the reported
information to perform a cursory review, or if necessary,
initiate a more formal investigation of an engineer or land
surveyor to determine whether enforcement action against the
licensee is appropriate. The information reported to the Board
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is not publicly disclosed and is for internal use only.
This bill seeks to adjust the reporting threshold in settlement
cases by $0.01, from $50,000 to greater than $50,000, in order
to avoid triggering review of licensees who settle for the
amount of their insurance deductible (which the sponsor
contends is often $50,000). The sponsor argues that
increasing the reporting amount for settlements will allow
Board staff to focus their time on bigger cases.
4)Recent settlement data . From 2008-2012, licensees reported
112 actions to the Board in which a settlement, judgment, or
arbitration award involving the licensee were $50,000 or more.
The overwhelming majority of reported actions were
settlements, out of which only five were exactly $50,000. One
of these resulted in a formal accusation by the Board to
revoke or suspend the license. All other settlements were
significantly greater than $50,000 and the reporting of these
settlements to the Board would be unaffected by this bill. Of
the 112 reports to the Board mentioned above, only two were
arbitration awards.
5)Differential treatment of settlements and
judgments/arbitration awards . This bill would apply a
different threshold to the reporting of settlements to the
Board than to judgments and arbitration awards. This bill
lowers the minimum reporting amount for judgments and binding
arbitration awards from $50,000 to $25,000, thereby increasing
reporting for judgments and arbitration awards.
The sponsor believes that this change would allow the Board to
dedicate more resources towards reviewing licensees who have
been subject to civil action or arbitration - cases which went
to verdict and fault was found by a jury, judge, or arbitrator
- versus licensees who have financially settled a dispute
without proceeding to trial or admitting any wrongdoing.
6)Liability insurance . Many licensed engineers and land
surveyors voluntarily decide to purchase general liability
coverage to indemnify themselves against potential liability
that may arise from a project, even though they are not
statutorily required to do so.
The sponsor contends that many cases "are settled for the exact
amount of $50,000 because that [amount] coincides with the
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most common deductible for errors and omissions coverage in
insurance policies for [the] profession," often without a
finding of fault.
According to the sponsor, this bill would prevent reports to
the Board for settlements in the exact amount of $50,000
because it is a common deductible amount that is frequently
used in settlements where there is no admission of wrongdoing.
Of course, the threshold itself simply triggers reporting of
the award; it does not automatically mean culpability.
Even if an engineer, land surveyor, court, or insurer must
report certain settlements, judgments, and arbitration awards
to the Board, the Board is not statutorily required to take
action against an engineer or land surveyor; existing law
merely authorizes the Board to review a case.
7)Questions for the Committee . Given that there were only five
known instances over five years in which settlement amounts
were exactly $50,000, of which only one instance resulted in
disciplinary action, the Committee may wish to inquire of the
author or sponsor as to whether or not there is any evidence
that the Board's staff resources are significantly burdened by
the receipt of $50,000 settlement reports required under
current law, and whether or not the Board believes there to be
value in receiving such reports.
8)Suggested Committee amendments . Under current law, the
reporting amounts for settlements, judgments, and arbitration
awards to the Board are the same among engineers, land
surveyors, courts, and insurers. According to the author, the
current version of this bill mistakenly did not conform the
reporting amounts required of insurers with those of the
engineers, land surveyors, and courts. The Committee
recommends rectifying that error by requiring insurers to
report to the Board judgments, settlements and binding
arbitration awards in any amount:
On page 4, strike lines 30-31 inclusive, and in line 32
strike "($50,000)"
On page 4, line 39 strike "in which the amount" and strike
line 40
On page 5, strike line 1, and in line 2 strike "($50,000)"
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On page 7, strike lines 1-2 inclusive, and in line 3 strike
"($50,000)"
On page 7, line 10 strike "in which the amount" and strike
lines 11-12 inclusive, and in line 13, strike "($50,000)"
9)Previous legislation . 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.
10)Arguments in support . According to the sponsor, the
California Geotechnical Engineering Association, "Current law,
enacted in 2007, requires that any settlement, arbitration or
adjudication for $50,000 or more that results from litigation
involving an engineer be reported to the Board for
disciplinary license review.
"Unfortunately, as an unforeseen result, in the case of
nuisance settlements where there is no finding of fault, but
the cost of defense exceeds $50,000, many cases with no
liability are settled for the exact amount of $50,000 because
that [amount] coincides with the most common deductible for
errors and omissions coverage in insurance policies for this
profession.
"Additionally, 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."
11)Double-referral . This bill is double-referred to the
Assembly Judiciary Committee, and will be referred there
should it be passed out of this Committee.
REGISTERED SUPPORT / OPPOSITION :
Support
California Geotechnical Engineering Association (sponsor)
Opposition
SB 679
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None on file.
Analysis Prepared by : Joanna Gin / B.,P. & C.P. / (916)
319-3301