Some of the language I have seen in agreements between companies and
independent designers makes me think that they spend a lot of time covering
their own liabilities... but they probably have much more to loose... What
do designers and contract engineers really need to think about when engaging
in business... I mean you might have your entire household at risk in some
cases isn't that possible? Or is this really not an issue for a small
company or individual contractor at all?

For example... here's just a little of the 'legalese' I have seen...

*****

5.      CONTRACTOR REPRESENTATIONS AND WARRANTIES.  Contractor hereby
represents and warrants that (a) the Client Work Product will be an original
work of Contractor and any third parties will have executed assignment of
rights reasonably acceptable to Client; (b) neither the Client Work Product
nor any element thereof will infringe the Proprietary Rights of any third
party; (c) neither the Client Work Product nor any element thereof will be
subject to any restrictions or to any mortgages, liens, pledges, security
interests, encumbrances or encroachments; (d) Contractor will not grant,
directly or indirectly, any rights or interest whatsoever in the Client Work
Product to third parties; (e) Contractor has full right and power to enter
into and perform this Agreement without the consent of any third party; (f)
Contractor will take all necessary precautions to prevent injury to any
persons (including employees of Client) or damage to property (including
Client's property) during the term of this Agreement; and (g) should Client
permit Contractor to use any of Client's equipment, tools, or facilities
during the term of this Agreement, such permission shall be gratuitous and
Contractor shall be responsible for any injury to any person (including
death) or damage to property (including Client's property) arising out of
use of such equipment, tools or facilities, whether or not such claim is
based upon its condition or on the alleged negligence of Client in
permitting its use.

6.      INDEMNIFICATION.  Contractor will indemnify and hold harmless
Client, its officers, directors, employees, sub-licensees, customers and
agents from any and all claims, losses, liabilities, damages, expenses and
costs (including attorneys' fees and court costs) which result from a breach
or alleged breach of any representation or warranty of Contractor (a
"Claim") set forth in Section 5 of this Agreement, provided that Client
gives Contractor written notice of any such Claim and Contractor has the
right to participate in the defense of any such Claim at its expense.  From
the date of written notice from Client to Contractor of any such Claim,
Client shall have the right to withhold from any payments due Contractor
under this Agreement the amount of any defense costs, plus additional
reasonable amounts as security for Contractor's obligations under this
Section 6.

9.5     Legal Fees.  If any dispute arises between the parties with respect
to the matters covered by this Agreement which leads to a proceeding to
resolve such dispute, the prevailing party in such proceeding shall be
entitled to receive its reasonable attorneys' fees, expert witness fees and
out-of-pocket costs incurred in connection with such proceeding, in addition
to any other relief it may be awarded.

9.6     Injunctive Relief.  A breach of any of the promises or agreements
contained in this Agreement may result in irreparable and continuing damage
to Client for which there may be no adequate remedy at law, and Client is
therefore entitled to seek injunctive relief as well as such other and
further relief as may be appropriate.

*****

Pretty heady stuff... eh? Makes my head spin... :-/

Best regards,


Bill Brooks - KG6VVP
PCB Design Engineer , C.I.D.+, C.I.I.
Tel: (760)597-1500 Ext 3772 Fax: (760)597-1510
e-mail:[log in to unmask]
http://www.dtwc.com
http://pcbwizards.com


-----Original Message-----
From: Abd ulRahman Lomax [mailto:[log in to unmask]]
Sent: Friday, April 01, 2005 10:37 AM
To: DXP Technical Forum
Subject: Re: [dxp] Question To PCB Designers On Liability

At 03:28 PM 3/31/2005, Harry Selfridge wrote:
>We looked at this several years ago, and were advised by an attorney that
>any agreement we could cook up wouldn't prevent a lawsuit if someone was
>intent on filing.  He also told us that, if a suit were to be filed, the
>biggest threats were the cost of litigation, diversion from our daily
>business during litigation, and damage to our reputation.  We were advised
>that the best way to protect yourself is to structure your business in a
>way that makes any substantial financial recovery unlikely.

The cost of this might be more than the value of the benefit. Yes, if there
is a reasonable possibility of a lawsuit, that might be a good idea, and
the time to do it is *before* an actual situation arises. Acts, which
remove assets with an intention of avoiding responsibility for a tort, can
be reversed, and, I'm not sure, might even be criminal in some cases.

The question is the level of risk. Since I have never heard of a such a
lawsuit, I'd have to assume that the risk is very, very low.

>   His exact words were "a lawyer won't participate in a suit against you
> unless he expects reward for his efforts."   The last piece of advice was
> to get an Errors and Omissions (E&O) Insurance Policy to cover costs in
> case we did get sued by a pro-bono zealot.

There are two issues here: one is whether or not the risk is high enough to
justify the cost of the insurance (and it could be argued that it almost
never is, so the asset protection strategies might be more beneficial from
a game theory point of view); the second is the effect that insurance has
on how attractive you become as a target. If the potential plaintiff finds
out that you have insurance that might pay for his recovery, then there is
a much higher likelihood that he will actually sue. It could be said that
the primary cause of high malpractice insurance costs is insurance. With
insurance, defendants are more likely to be sued, as well as to settle,
even when the claim is not strong, thus increasing the average return to
plaintiffs, thus increasing insurance costs, and so the cycle runs, we
don't know where it ends....

However, any lawsuit for a designer's error would have to get past a huge
obstacle: where there is a design engineer providing design work to a
printed circuit designer, the standard in the industry is that the engineer
(or the engineer's company) is responsible for insuring the suitability of
the work, which would include its safety. If I provide a design to a
customer, the engineer accepts it, and it blows up when plugged in and
takes out a technician's eye (ouch!), the actionable error would be the
engineer's. Not mine, ordinarily.

However, if the designer or fab house or other involved party should have
reasonably expected such consequential damage, then, indeed, there might be
some shared liability. Once again, if the designer has insurance, it
becomes much more likely that a lawyer would go after the designer. But
since the designer ordinarily expects -- and has a right to expect -- that
the customer will check the work before exposing anyone to the possibility
of loss, it would be very hard to establish liability. As a designer, I
need only exercise ordinary diligence, and, as pointed out, I often simply
don't know enough to even have an opinion about safety.

>Almost all the big insurance companies issue E&O policies.  Shop around a
>bit to get the best price.  In the end, it helps with peace of mind.

I'd say that there are much higher risks present in our lives and
businesses. If a printed circuit designer is staying up at night worrying
about the possibility of being sued because of a design error, perhaps
appropriate medication would be a cheaper solution.

(If you are going to worry about design errors, just worry about the errors
themselves, and do what you can reasonably do to prevent them from being
sent to the customer; doing this will minimize the possibility of any
lawsuit much better than will insurance. As pointed out, the cost of a
lawsuit is not just the attorney's fees and a judgement, but also the time
lost defending a suit and the possible loss of reputation -- and insurance
is not going to compensate you for that, if I'm correct.)

Now if you are the *engineer*, then the situation may well be different.
You are actually designing the product, choosing components, etc. Still,
there would be two forms of protection superior to insurance: first of all,
think about possible risks to the public and find ways to reduce them, and
second, function as a corporation, so that the corporation is legally
responsible and the maximum risk of loss is the corporation, not your house
and every asset they can find. Protected under the corporate shield, you
would be personally responsible only for gross negligence. And potential
plaintiffs would be very unlikely to expect that you are insured....

>You should talk to a lawyer you trust for advice.  The couple of hundred
>he charges for ten minutes of his time (just kidding - almost) can get
>your specific concerns answered.  If he gives you advice different from
>the advice we got, we would be very interested in his opinion.

Save your money, I'd say. Until and unless we have at least *one* example
of a successful lawsuit against a printed circuit designer, you (and the
profession) is better off without the insurance.

Note that lawyers have a built-in conflict of interest here. If the lawyer
tells you to buy insurance, not only is *he* maximally protected against
*you* suing him for an omission, but he -- or his profession as a whole --
also is more likely to benefit from legal fees if you *are* sued, and the
insurance makes it more likely that you will be sued.

The answer you get from a professional like a lawyer may depend a great
deal upon what questions are asked. Was the lawyer asked "How likely is it
that I would be sued for such and such," then the answer might be very
useful. But if the question is, "How can I protect myself from being sued,"
the lawyer will cheerfully tell you, even if the risk is very, very low.

I also have an answer to the original question which I will post separately.

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