BILL ANALYSIS Ó SB 679 Page 1 Date of Hearing: July 2, 2013 ASSEMBLY COMMITTEE ON JUDICIARY Bob Wieckowski, Chair SB 679 (Berryhill) - As Amended: June 12, 2013 PROPOSED CONSENT SENATE VOTE : 32-0 SUBJECT : PROFESSIONAL ENGINEERS: Reporting Requirements KEY ISSUE : should california law be amended to reduce the likelihood that engineers will be subject to POTENTIAL disciplinary review as a result of a Lawsuit that finds no fault against them? FISCAL EFFECT : As currently in print this bill is keyed fiscal. SYNOPSIS This non-controversial bill, sponsored by the California Geotechnical Association, seeks to reduce some disclosure triggers in the disciplinary review process of the Board of Professional Engineers, Land Surveyors and Geologists ("Board"). Current law regarding professional engineers requires reporting to the Board in all cases where there is a settlement or adjudication of a lawsuit against an engineer equaling or exceeding $50,000. According to the sponsor, "an unfortunate result of this 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." The sponsor claims this triggers the unnecessary possibility of disciplinary Board review. The bill addresses this perceived problem by modestly increasing the dollar threshold which triggers reports to the Board. The bill also provides a bit greater consumer protection by lowering the reporting standard to $25,000 for any settlement resulting from a finding of fault before a jury, judge or arbitrator. There is no known opposition. SUMMARY : Revises the monetary threshold amounts above which a licensed engineer or land surveyor must report a settlement, SB 679 Page 2 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 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 SB 679 Page 3 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.) COMMENTS : This non-controversial bill, sponsored by the California Geotechnical Engineering Association, seeks to 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. Conversely, it would also 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. The author states that this change will help avoid unnecessary administrative review of settlements by the Board while at the same time strengthen the SB 679 Page 4 trigger when fault determinations should lead to reports to the Board. In support, the author states: 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. Background : 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 is not publicly disclosed and is for internal use only. Changes by This Bill : 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. 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. 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 SB 679 Page 5 reported actions were settlements, out of which only five were reportedly 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 reportedly arbitration awards. 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 will 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. PRIOR RELATED 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. REGISTERED SUPPORT / OPPOSITION : Support California Geotechnical Engineering Association (sponsor) American Council of Engineering Companies of Northern California California Land Surveyors Association Opposition None on file Analysis Prepared by : Drew Liebert / JUD. / (916) 319-2334 SB 679 Page 6