E & O Liability Insurance? 1

[jheidt2543]

Liability insurance seems to be a necessary evil in this day and age. When premiums are due you feel you are paying too much, when a lawyer calls you don’t have enough coverage! I am wondering how other engineers are handling the problems associated with qualifying for insurance, selecting an amount of coverage and selecting a deductible amount. Is there a plan that offers basic coverage and can be increased on a per job basis? Can you get coverage on a per job basis? If you are a one man firm, what do you do? Have you had any luck with clients actually SIGNING a limit of liability clause in your contract for services?

 

[Watermelon]

Do I feel I am paying too much? Don't know. But it is always a hassle trying to find the money. So yes, the premium is very high.

When a lawyer calls do I have enough coverage? Who knows. I asked once how to determine what would be an appropriate amount of coverage, given the nature of my work. The insurance company told me to carry the minimum, that way I would not become a major target in a lawsuit. When lawyers gather to discuss commencing an action, the FIRST item on the agenda is "Who has the deepest pockets?"

What deductible amount should you select? It's your choice, and your decision.

Can you get coverage on a per job basis? Yes, but you'd better check with your particular insurance company.

If you are a one man firm what do you do? I am a one man firm and I pay, pay, pay. You must build it into your overhead. That's one reason why engineers must charge $100 per hour. (My rate is less than this.) Another note concerning one-man operations: I cannot prove this, but I believe the insurance companies frown upon such operations. The first reason: who is checking your work? The second reason: Many expensive lawsuits are the result of one-man or small operations. (Expensive in relation to the premium which they can extract from such firms.) So the insurance companies do not want to encourage any engineer to hang out his shingle.

Have I had any luck with clients signing a limit-of-liability clause. Nope. I've never heard of such a thing. In some places, you can operate without insurance as long as you tell your client (in writing) that you have no insurance. Then he has to say (in writing) I understand you have no insurance and I authorize you to proceed. It is my personal opinion this avenue is for numbskulls.

 

[PLarsen]

I have CNA insurance for AEC Professional Liability. CNA offers Small Firm Professional Liability - A&E Firms with annual billings up to $500K

The AEC Design Liability Program is an open brokerage program available through our partner, Managing General Underwriter/Administrator:

Victor O. Schinnerer & Company, Inc.
2 Wisconsin Circle
Chevy Chase, Maryland 20815
301-961-9800
301-951-5444 (fax)

http://www.schinnerer.com

or for more AEC information

http://www.planetaec.com

 

[PEinc]

I was a one man firm but now my P.E. daughter also works with me. I obtained Professional Liability insurance after I lost a job for not having the insurance. Originally, I had insurance through DPIC but switched this year to Kemper when DPIC's rate significantly increased. Neither firm cared that I was a one man firm. They care more with what type of work you do and what is your claims history. I currently carry a $2 million limit for less than $8000 per year.

Every proposal I send out has a Limit of Liability Clause in it. Out of almost 500 projects, only a handful of clients have either not accepted my LOL or have requested an increase in the LOL limit. Usually, they sign it without any questions. LOL does not apply to third party claims.

 

[PEinc]

Sorry for the stupid laughing faces above. I typed in L-O-L for limt of liability and, instead, the smiley faces appeared.

 

[meca]

jheidt2543,

I am struggling with these same questions right now. I ran across a comparison of different insurance companies on the NSPE site. Here is a link.

http://www.nspe.org/liability/SurveyResults2002.pdf

 

[jheidt2543]

Thanks for the really timely and thought provoking responses. This is a great site for questions like this. It is nice to know I'm not the only one wrestling with this problem ("misery likes company"?). Meca, I checked the NSPE info and I will be checking ASCE's site too.

 

[PEinc]

I had considered ASCE's professional liability insurance but decided it was not as good as DPIC's program. A colleague got ASCE insurance but later dropped it in favor of DPIC which had more helpful benefits such as a continuing education program, 10% (max.) premium credits for participating in their education program, 25% (max.) premium credits for using a limit of liability clause, and a contract guide. ASCE also required the deductible to be paid as soon as a claim was filed. I'd still have DPIC if the premium hadn't recently increased significantly. Kemper just gave me a guaranteed premium for three years. My Kemper premium is about the same as my old DPIC premiums were AFTER receiving my credits. Considering the volatile state of the insurance industry, I thought Kemper with its three year fixed premium was a good deal. I don't expect insurance to become cheaper in the next three years, especially considering the losses associated with 9/11.

Shop around. My broker handled insurance from more than one firm.