Insurance coverage for part time desiogn work? 2

[sema79]

Hi everyone,
I am a P.E. working full time at a good company that will allow me to work on the side provided it doesn't interfere with my regular work.
I recently have been contacted by a rigging contractor to design and certify spreader beams in my free time. I have experience doing this and have no issues with the design phase of such a project. My concern is that in a situation like this I would like to be insured enough to cover any issue that may arise. I don't plan to make a bad design but I know sometimes engineers get sued and must defend themselves even if they are not at fault. I would like to protect myself from such a situation. To further complicate the matter I am not sure yet if I will get enough work to even pay for the insurance. My question is what type of insurance and how much coverage would you get in a situation like this? There is the possibility of getting more jobs from him and other companies he works with. Also I have been wanting to do side work for sometime and this may be the oppurtunity to start.
I have talked to an insurance company that said I would need a "professional package" since I would be designing. They only offer insurance for consulting. I have always worked at companies that call themselves consultants but we always designed as well. The comapny I currently work at full time is a "consulting firm" that turns out engineered design drawings everyday. Is the "consulting firm" just a name or does it really have a legal meaning that I am unaware of?
I'm sorry if my post seems kind of rambled. I haven't had to deal with professional liability insurance because it was always provided by my employer. I just don't want to get myself into some kind of trouble that comes back on me and my family. Any advice is appreciated. Especially if someone here has had similar experiences. How would/did you approach this situation?

 

[BAretired]

I don't believe in moonlighting and would not want my employees to engage in it because it cannot help but interfere with your regular work.

You can take out professional liability insurance or you can run the risk of taking any losses yourself. Lots of small engineering firms operate without insurance but obviously they are taking a risk by so doing.

Some engineers limit their professional liability to the amount of the fee, usually by agreement in writing with their client. I have never done this personally, but I know others who have. Whether or not it is legal may depend on your national, provincial or state laws.

BA

 

[TLHS]

You can likely indemnify to some degree against a liability to the client, but it's not going to help you with third parties that sue you. The client may agree not to sue you because something breaks, but the worker that it lands on can, at least in Canada, still go after you for a tort claim.

 

[fegenbush]

The specific type of insurance is E&O (errors and omissions). There are some specialty engineering firms that deal in engineering liability insurance. A search engine with the key phrases will result in some meaningful brokers of this type of policy. Mine is dealt with as a percentage of gross, so it can be quite costly. Depending on your locality, Consulting Engineer may be a legally protected term. I recommend checking out the statutes to ensure compliance.

 

[Ron]

Just because an engineering firm states that it is a consulting firm, does not change its function or its liability exposure. When you apply for E&O insurance (professional liability insurance), you will have to state the type of work you do or intend to do and how much of your GROSS revenue will be derived from such work. The insuror will then rate your coverage and base the rate upon what you do.

The areas of practice that they do not like (doesn't mean you won't get insured, just means your rate will be higher) are:

Geotechnical
Structural design
Anything to do with mold
Anything to do with condominiums
Work for only one or two clients

For single practitioner with limited practice, assuming you are in the US, you can probably get $500,000 coverage for about $5000 to $7500 per year.

 

[hokie66]

I agree with BAretired about moonlighting. If your company is loyal to you, be loyal to them by bringing this work to the company. If the client doesn't want to pay the company's rate (which includes the cost of insurance), then the work is not worth having. E&O insurance...too complex and expensive for a little bit of work.

 

[sema79]

BAretired, hokie66;

My current employer only deals with precast concrete. This is something that they have no desire to move into. I was given permission to moonlight as long as it was outside of the precast industry and didn't hurt my performance at work. Other engineers at this company have similar side jobs. My involvement moonlighting would be on a level of working in the evening and weekends. I'm pretty good about restricting myself to pay attention to full time work during regular business hours. After regular business hours I can juggle items as to their importance at the time. Of course my full time employer always comes first.

TLHS,

This is exactly why I want insurance. If an accident happens, lawyers get involved and engineers often have to be defended to prove they weren't at fault. It's the cost of attorney fees in such a situation that I really need the insurance for.

Thanks everyone for their comments. Please keep them coming!

 

[BAretired]

So what happens when you get a phone call during working hours saying "we have an emergency situation which needs your immediate attention"? Do you drop everything and go to the site? Or do you tell your client, "sorry but I can't look at your problem until after 5:00 p.m. when I finish work."

BA

 

[RockEngineer]

ASCE offers professional liability insurance program specifically designed for people who are already covered under their regular job and do work on the side. It is reasonably priced. I have used it for years. Even when you add in the ASCE annual membership dues it is far less than anything else I have found on the market.

 

[RockEngineer]

I've been doing engineering as a side business since about 1990. I carry $250,000 per project professional liability through ASCE (American Society of Civil Engineers). I do residential and log home engineering and tell my clients up front it is my side business and what the time frame is. If they don't like the time limitations they are free to go elsewhewre. Very few problems in over 20 years. It paid for 4 kids extras through college and other things. It's better than flipping burgers or selling insurance on the side. When I retire I go from working 2 jobs to working one job. Working 2 jobs can get old after a while so you have to create balance.

Good luck.

 

[ztengguy]

Im with Sema79. I dont take on 'side work' that will be requiring my time 24/7. Most of my work is 1-2 hours, maybe a beam design, inspection, or something that requiring my full time participation.

If the emergency call comes in, sometimes calls dont get answered, no different than if the emergency call came in at 4:01 on friday, I would not know anything about it till Monday.

I dont get paid overtime at full time job, but still do it. Does that take away from my first 40 hours? It only dilutes my per hour wage, thus a call taken during the day also wont bother me.

 

[ATSE]

Rigging work is interesting and challenging. However, rigging work is far different than beam sizing for a small commercial project. 99% of the time, rigging operations go well. The 1% can have a huge downside consequences to the contractor and engineer involved, regardless of fault.
When there is a problem, the engineer will never walk away clean. Best case you will get a permanent black eye. Worst case you will lose everything, not to mention the physical harm to people and property.
I have never seen a robust written operation-specific rigging plan that would satisfy "cross-examination." Most contractors say it costs too much, and riggers don't read anything unless forced to do so.
If you continue to do this work or any other engineering work, you need an indemnification agreement with the contractor you are working for, or don't do it. Everyone is friendly until an accident happens.

 

[bookowski]

I know a lot of people that are purposely not carrying insurance because they feel that it invites lawsuits. I can see the logic and I've seen a lot of cases where everyone with insurance gets dragged in regardless of how disconnected they are from the issues.

sema - I say go for it. I've been moonlighting for a long time and like Rock said it has paid for many things that I would not otherwise have been able to afford. I always tell people the situation in the first conversation that we have and have never had any issues with time conflicts. Personally I think I also learned more in moonlighting projects than my day job. When it's your project alone you tend to give it more care and worry about it, I've done a lot of extra research for side projects that I would not have done as part of my day job.

 

[RockEngineer]

I have my current position because I gained a lot of knowledge from my outside work I would never have gained from my normal job. My bosses know my broad background and bring things to me that are out of the norm and other engineers don't have the broad background for. It depends on your job and what you want. I didn't want management, I liked the engineering technical work, so I had to look at other ways to earn what I needed/wanted. Sometimes staying with the technical aspects can limit your progress or earning power but I do what I love. "If you love what you do, you never work a day in your life"

I may take an occational call at my job but few of my clients know how to contact me other than home business number. Like Bookowski, I work enough unpaid time at my regular job to more than make up for an occational short phone call, but you have to be able to keep the jobs separate. It's not for everyone.

 

[dhengr]

Ron gave you a list of some of the most loved engineering practices by insurance companies. He left out doing rigging design and rigging equipment design for rigging contractors. While I don’t mean to tar all riggers with the same brush, at times this work can be kinda fast and loose. Gotta get er placed yet today, and these are the only slings or shackles we have in the trailer. Oh, hell, go for it, they use a FoS of 4 or 5 rating those frayed wire ropes anyway. Others have commented along these lines. It is interesting work and some contractors are better than others to work with.

BA and Hokie gave you several good reasons why Consulting Offices tend not to like their engineering employees doing moonlighting. Another that I am aware of is the fear that the employer might tangentially be brought into a case, as your employer, even though they were not involved. And, it goes something like this..., We knew you were his employer, and with your good name, we trusted him to do the engineering. Then the employer spends considerable time extricating themselves as a third party, and is very happy for the experience. With your employer’s permission and the vast difference in what you would be doing, the above scenario might be fairly remote.

Maybe you should talk to a couple insurance carriers or agents and see what they would write for you on this kind of work, and see what the cost would be. $500,000 sounds like a lot of money until you start involving a bunch of attorneys and a trip to court. There is actually an argument which goes something like... if you don’t have much, they can’t get much, and might not sue you, when there are other insured, deep pocket participants involved. Hey, what about the shackle pin manufacturer, they got money, and will contribute something to a settlement.

 

[focuseng]

Side stepping the argument about "should" or "should not" you will need to consider how to limit your person and family to exposure. My advice:
#1) Set up a company: LLC or something, anything. Create a "corporate veil" for yourself and your funds. This is easier to do than say!
#2) Act like the company. A corp veil doesn't do any good if the lawyer proved your company was nothing more than your personal checking account. I am only talking financial here, which let's face it, is the issue.
#3) Legally you may need to register your new company as an Engineering Corporation in order to operate in you state. I spoke with my state licensing office once about this as a small LLC or sole proprieter, did I need this? I Didn't get a firm answer but in the spirit of items #1 & 2, the right thing is get licensed. Then no question and you reinforce #1.
#4) Get Liability insurance. Several good companies/ brokers out there. As a part timer, your options are limited to the insurance companies who are available. Good industry broker will help you here. Depending on the industry risk and annual sales I would expect you to see something like $1500 - $4000/yr premiums for someone pulling less than $20,000/yr in billings. Premiums are based on project/past revenue. ASCE has a program like someone mentioned but I found them to be on the expensive side.
#5) Get a business checking account. See items 1 & 2.
#6) Get a lawyer. They can help with #1 for a very modest fee. They can be your friend and you want to get to know them before you have any problems. I know lawyers get a bad rep sometimes but it will be a valuable asset to have a good relationship with someone you like and trust before you are against a wall. Also help you look over contracts (the insurance brokers like to help with this too - LOL clauses are their specialty). They can even review your current employment contract to make sure you really are OK to do side work. Sometimes they are small biz too - As a small biz and legal experience with setting up companies, they are a good source of advice. They also know people with $$ and may help you get clients.
#7) Respect and protect the Primary Employer in all actions. It seems like you know this but it is a matter of Ethics for your professional society, state licensing, and to your employer. Remember you could loose all three and that would be the biggest loss to your financial well being and so forget about getting sued for errors and omissions.

All this may take some TIME and MONEY. I do think it is worth it. YMMV and there are many routes to get there.

MAP