BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                  SB 679
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          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,  








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          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  








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            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  








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          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  








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          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 










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