Contract Commitment to Carry Insurance fro a Definite Length of Time 1

[flgulfcoasteng]

I wanted to hear about the experiences of others when handling a client's request that the contract include a lengthy time commitment to carry insurance past the end of a project. Specifically, a request to carry General Liability and Professional Liability / E&O Insurance for 10 years? It may not be a big deal unless you want to change limits later, go “bare”, or sell/merge/partner etc.

And now for my venting… Is this standard practice? I’m a bit annoyed that there appears to be more and more restrictive insurance requirements and contract language pairing up with lower fees.

 

[Ron]

fgce....not standard, but I've seen it before. Don't sign such a provision....in fact, check with your carrier as it might be precluded from your policy. Though I'm sure they would like for you to continue to pay for your insurance, they don't want to be on the hook any longer than necessary.

There's a chance that the provision relates to our state's statute of repose. It is 10 years.

If for some reason you dropped your insurance in a few years, you would then be in breach of contract, which is much easier to prove than professional liability.

 

[zdas04]

I had a philosophically similar event last week (a big engineering firm was asking me to sign a non-compete clause that included working for their client directly or through any other firm if the big firm didn't get the contract they were bidding on), I said "sure, but I would need to be compensated for it." Well compensated. We're still negotiating, but I think we'll settle on an adequate number.

Same way with the insurance. I'd say, "ten years is fine, as long as you send me a check every year to pay the premiums, you miss a payment and the insurance can lapse without breach".

David

 

[Ron]

Good point, David. Hadn't thought about the compensation side, just the liabilty side!

Ron

 

[Ron]

ps...can't type either...."liability"!!

 

[flgulfcoasteng]

Update: I talked with thee other enginerring company principals who had essentially the same response as this forumn. The client was not flexible on the terms so I excused myself / company from consideration. In addition there were other contract provisions that I considered out of the ordinary. Another local engineer ended up signing the contract without objections.

 

[Ron]

fgce...way to go. Sometimes you just have to walk away. Unfortunately, there's someone out there who will do it, honestly or not, and move on.

I run into situations routinely where I would not sign a provision of a contract, yet XYZ engineer will do it and consider it risk management. To me, it hurts the profession for such ill-informed engineers to be doing work. Chances are if they don't understand basic contract liability, they have no clue as to professional liability, and perhaps have less competence as engineers in general...I know that's a broad brush, but it gets borne out in litigation all the time.

 

[zdas04]

I got a contract from a client a while back and simply refused to sign it. The Supply Chain Management (a term that I hold in significant disgust) guy called and asked why I sent it back with REJECTED written across it. I told him that the provisions would cost me more than my gross billings. The next day their attorney called me and was really suprized when I told him that anyone willing to sign that mess would have no intention of living up to it. He was shocked. The job went to another firm and they are currently in court over the new guy not fullfilling ANY of the contract terms. Some contracts should not be negotiated, just tossed.

David