Insurance for specific project

[JStructsteel]

Got a potential project wanting 1,000,000 E/O coverage for it. It’s a 1.2 mil project based on estimates.
Having trouble getting a project specific policy, so was told I could just up my regular policy that high, and pay the balance to bring me up.
That exceeds a lot of what I do cost wise. Would be overkill I think for most projects.

How long would I need to keep that coverage to cover the project? In a year or two if I dropped back down, is that an issue?
Thanks

 

[phamENG]

Depends on the contract. Best to take it up with a lawyer, but I'd guess if it doesn't specify a time frame it would need to be at least the length of the statutes of limitation for liability. In other words, if you can still be held liable in a lawsuit, you need to still have it. That's at least the prudent way to look at it. Not sure if that holds water, legally, though.

 

[KootK]

Yeah, an astute client will ask for the higher coverage to be maintained for a while.

I asked my insurer a similar question last month. They said that it would also be a bit of red flag on their end if I were to be raising and lowering my coverage over short intervals of time. That, because they would rightly assume that I was ducking premiums on outstanding liabilities that probably deserved the higher coverage.

 

[XR250]

I think 1M is the minimum I would carry (which is what i carry). That does not go too far if there are injuries etc.

 

[glass99]

$1mm is still not that much insurance. Normally when I get asked for higher amounts its $5mm, and $1mm is the minimum I would have under any circumstances.

I have gotten project specific policies (aka "SJX's") in the past but lately have given up because they are approximately the same cost as increasing the limit on the whole practice. SJX's are super inefficient that way. They are also a huge pain in the butt to track with paperwork.

Your client should specify how long they want you to carry the higher limit for. My clients in the past have asked for about 3 years.

One more point of advice: ask for the client to pay for the additional insurance, even if it is an upgrade to your whole practice. In every instance that it has come up I have successfully done so (maybe 5 times over the years).

 

[XR250]

On the subject of insurance, I inquired about the cost of a tail policy and it turns out my carrier will only provide one for 3 years despite the statute of limitations is 6 years.

 

[XR250]

Honestly, I would turn down work from anyone wanting more insurance than I carry. Seems like they are looking for someone to sue before the project even starts. Even if the project is 1.2M, what are the chances that an error on your part would be more than a few hundred K?

 

[glass99]

@XR250: Can you even get insurance for less than $1mm covered amount? I don't think that asking for $1mm is predatory as much as just a practical minimum.

If its a $1.2mm project your liability should be way less than $1mm. We recently did some facade engineering for a $1bb airport terminal where we had to get $5mm PL. I think the most anyone had on the job was ~$10mm (the architect I think).

Its also smart to include liability limits in your agreement. Even if you go get $1mm insurance for the job you can write in liability limits of say $250k and realistically get them to sign off (I have done exactly that many times). The insurance requirement is usually bureaucratically driven by some in house insurance consultant, but the project managers don't really care and want to get a good/cost effective engineer way more than they want to stick you for liability.

 

[human909]

I was going to ask the same thing about the size of the insurance. But E/O insurance is different from PI insurance at least in some localities so I wasn't going to jump to conclusions.

I've had to up mine to $5 mil for dealing with one company. I'll probably even consider $5mil/$10mil aggregate for my next renewal. And I'm not even full time on this insurance policy!

 

[lexpatrie]

Why would you ask the Client how long to maintain it, this is a statue of repose or statute of limitations issue, generally that's 6 years, ten years, in that range. New York, AFAIK has NO limit like this.

The client isn't interested in protecting you, here, they are interested in getting a big juicy settlement if something goes wrong they can credibly blame on you and force a settlement. Doesn't have anything to do with risk control on your end.

And you can do stuff unknowingly to extend it, i.e estoppel.

I had one project I entertained it on, and it was a historical designation pair of apartments where somebody somehow "cut" a parking garage under the thing without a permit. They went with a bigger firm (I presume) which was fine with me.

The best part was writing the proposal. That was the part I liked. I said I'd procure project specific insurance as it was beyond reasonable limits for my insurance. This was before CTS collapsed, by the way... (also, I think I said I'd maintain it for 10 years and the cost would be added to the project as an expense, if that soured the deal, I'm fine with that. I'm literally one guy).

 

[JStructsteel]

Thanks all. I can increase my premium to 1 mil and probably get at least 3 years from the client in fees. I only do smaller residential and commercial jobs, usually around 300-400K.

I think I can make 1 mil work and have a good insurance even for what I little I do.

 

[jhnblgr]

Walk away this has red flags. I had this happen and the client wanted me to cover their cars that would be parked in the structure. Their accountant was the point of contact who in the end terminated my contract with the owner. I had already provided a design and drawings to them so I wanted to be paid for the requested effort. The owner refused at first and I told them if their final plans used concepts of my design I would take legal action. Got paid for the work I had done to that point and learned my lesson. I had a similar incident with an Architect. My recommendation know red flags and walkway.

 

[XR250]

You also may want to amend the contract to say you will make "reasonable attemps" to keep the insurance for the specified period.
You could become uninsurable in which case you would technically be in breach of contract.
I suppose project specific insurance may be pre-paid for the entire contract period?