Liability insurance for structural engineer doing small side jobs 4

[LDSENG]

I have a fulltime job doing industrial structural building design. I have had some requests for small projects (decks, barn, small building addition). I am wanted to do a few of these small jobs on the side but am not sure what I would need to do to protect myself. Do I need liability insurance? Do I need to form a business? Or can I just practice on my own.

Any advice would be greatly appreciated.

Thanks!

 

[Heaviside1925]

I guess my first question is how risk averse are you? It doesn't sound like you are taking huge liabilities with the small job you mentioned but are you okay with paying out of pocket for a lawyer if you are sued? Assuming you are an Illinois licensed SE? Would these small jobs be stamped designs? Would you be working directly for individuals, or would you be contracted by a contactor or design and build firm? Since Illinois has many home-rule municipalities, do you know what specific ordinances / requirements you might be dealing with under the local AHJs? I have attached what many Illinois local AHJs use as guidance. Not sure if it will be helpful or not and my questions may not be pertinent and if so, feel free to disregard.

 

[SWComposites]

This has been discussed many times in the Engineer Business Practices and Issues forum.

 

[LDSENG]

Not Illinois licensed, I would be practicing in Missouri, where I am a licensed PE. I would be working for individuals most likely. Most interest is personal homes but have someone interested in doing a small building addition to his retail business. I am familiar with a lot of the local AHJ's.

Thanks again!

 

[Tomfh]

What if they have a big party on the deck and it collapses and a someone dies, and you’re the uninsured engineer who signed off on it.

Get some moonlighting insurance.

 

[LDSENG]

Thanks for the advice. Any advice on where to start looking for insurance (companies, agents) and how much it might cost?

And can I get insured as an individual, or would I need to start a business?

 

[phamENG]

As SWComposites mentioned, this has been discussed at length - use the search the bar.

In short:

1) You need to sit down with an attorney familiar with practicing in this area (construction and engineering) and with at least one insurance broker and discuss what your real risks and liabilities will be. There are pros and cons all the combinations, and you need professionals to help guide you to select the best arrangement to meet your goals and suit your circumstances.

2) You need to have a discussion with your employer and get permission to moonlight. If you don't, and they find out, they could fire you. It's not just about not competing with them, it's the fact that if there's even an appearance of you using any of their resources to do your side job, or any suggestion that they are even remotely involved, they can be sued. It's happened before. So they may want to have their lawyer/insurer write up a clause for you to put in your contracts making it very clear that they have no part in it or a contract for you to sign agreeing not to use company resources in your side work.

3) Where to look? Not the discount outfits on the internet, that's for sure. Makes you feel good, but lots of complaints from people when they actually need the coverage. I'm a fan of McGriff - they are a nationwide broker and a quick check shows they have offices in St. Louis, Kansas City, and Fayetteville, AKAR. That's who I went through when I first started up my moonlighting business. Budget about 4 or 5% of expected gross revenue. Should be less than that, but that should be a safe budget. You can also look at ASCE's list of member services - they have an in house E&O Insurance.

 

[Heaviside1925]

St. Louis, Kansas City, and Fayetteville, AK.

Assuming you meant AR

https://www.youtube.com/watch?v=dLECCmKnrys

 

[phamENG]

Ha. Sure did.

 

[lexpatrie]

try Hiscox.

And you can practice as a sole proprietor, generally speaking, just be aware that if you aren't incorporated ("correctly"), if your liability goes above your insurance, it may get into your personal assets. If you have signed agreements they can assist, I presume, with that issue. Not that I would know.

If you are incorporated, there's the whole certificate of authority stuff to get through, but it's not that difficult (as I recall, for Missouri).

 

[jhnblgr]

Incorporating only protects you if you have another employee that is stamping plans, but any work that you did you will bear 100% liability no matter what business model you choose.

Get quotes on insurance and be prepared to provide a resume of work and breakdown of jobs done by type and cost.

 

[lexpatrie]

Sorry Jhn. I don't think you understand the question, or understand the topic. This isn't about "professional liability" in the State board sense, negligence, incompetence, practicing without a license, etc.

It's about financial liability in the event of a design error or omission. "O&E" insurance, in other words.

The entire foundation of American jurisprudence regarding incorporation is (broadly speaking) founded on the idea of shielding personal assets from liability by the actions of a company. Maybe watch Painkiller on Netflix.

 

[jhnblgr]

In previous threads here the only financial protection a business would provide where you caused injury or damage in a general liability sense. But as the engineer in charge, you personally can be held financially accountable along with the business.

 

[LOTE]

You have a business the moment you agree to receive money for a good or service, period. Legal entities are there for additional tax/legal benefits.

To add on to what jhnblr said, when you are a sole owner and worker of an LLC, there is virtually no legal protection of any kind. When you have multiple owners and/or employees/contractors, then the LLC can provide legal/asset protection with well written contracts. This legal/asset protection does not apply for E&O since you could still be sued personally, which is why you need good E&O insurance.

I started with ASCE (pearl insurance) as my broker and have no complaints.

The other reason to use an LLC is for tax purposes when you elect to be taxed as an Scorp, establish an accountable plan, etc.

For doing side work, get an E&O policy, skip the LLC. If this is purely a moonlighting thing, telll your employer. If you plan for this to turn into your full time gig, you may not want to tell your employer. The worst they can do is accelerate you taking your business full time... Definitely make sure you don't use any company assets from your employer.

 

[human909]

Some reasonable advice already here. However, does it really make sense from a costs-risks-rewards perspective to be working full time and be doing "a few jobs on the side"?

I presume most of the people commenting here are in the USA/North America and that the economics and legal aspects do vary from where I practice. However, from where I sit a few jobs on the side barely makes economic sense once you take into account the risks and costs you are taking on.

I say this form my perspective as somebody who has recently ramped up a part time business (LLC). It started off as 1.5 days a week and is now 3 days a week with 3 days of salaried (6 days total). I don't want to maintain a 6 day work week, over time I plan to shave a day off one of the positions. The overheads alone can bite significantly into revenues. Insurance generally being the big one, but accounting and other business expenses are there as a not insignificant fixed cost.

Sure a couple extra jobs on the side is tempting but think about what you are risking or what overhead you need to take on to avoid that risk.

Assuming you meant ARwink

https://www.youtube.com/watch?v=dLECCmKnrys

That was pretty much off TOPIC. But I had a good laugh and gave you a pink star.

 

[XR250]

I went commando for almost 15 years. I spoke with an attorney and in my state (NC - USA), he told me that any assets I held in conjunction with my wife were shielded as long as she does not work for the business. Fortunately, I never had to find out. I have been with McGriff for years (as Pham suggested).

 

[lexpatrie]

No. Jhnblgr.

Those previous threads are simply wrong.

One might attempt in a lawsuit to "pierce the corporate veil", but generally speaking a person's private assets are shielded from legal judgement if the corporation is properly formed. There are things you can do, unknowingly, to compromise that, but generally this is a significant obstacle for your average lawsuit. NOT THAT I'M AN ATTORNEY. You might sell personal assets as the owner if you felt a personal obligation to pay some kind of judgement against a corporation you own, but generally, this is not a requirement.

Corporations, by the way, are generally obligated to defend their employees when they are doing their work for the employer lawfully. e.g. somebody embezzles from your company, you aren't obligated to provide them an attorney on that front.

Why exactly would O&E insurance exist if it doesn't do anything? Hmmm? Why would a large corporation like, say, Siemens, have it? Why would General Re exist?

XR250 - sole proprietor or were you incorporated to some extent?

There are also about forty different corporate structures, full on incorporation, professional association, professional service corporation, etc, etc, etc, which are open to professionals that are not open, say, to an automobile manufacturer.

Further, to clarify yet another misconception. General liability is most commonly held for stores with physical locations as the public can enter them and get injured. It is "slip and fall" insurance, to some degree. If you never have any clients inside your house, there's no physical store. This is a bit of an argument I got into with somebody back when, where they insisted (as a sole proprietor independent contractor) I maintain GL, and worker's comp (I have no employees and am NOT incorporated), name them as a third party insured, and I declined. They eventually "left" the company and I continue to do work with them, unabated.

To quote Jay-Z......



Listing people randomly on your insurance as third-party has effects. Not on the cost of the insurance.

 

[jhnblgr]

Read this article:

https://blog.asceinsurance.com/Blog...ys-protect-licensed-engineers-from-liability/

 

[XR250]

XR250 - sole proprietor or were you incorporated to some extent?

Sole proprietor

 

[phamENG]

I'm not a lawyer, so take this with however much or little salt as you'd like:

There are several types of liability to be concerned about. The two primary ones for us are Professional Liability and General Liability. Professional Liability refers to your liability for professional errors in judgement or mistakes in executing the tasks for which you are licensed or the omission of the same. General Liability refers to pretty much everything else.

Forget to carry the 2 and tell them to use a W8 instead of a W18? Professional Liability.
Drop a measuring tape from some scaffolding and put a worker in the hospital? General Liability.
Turn off the shear wall layer and plot your drawings and it doesn't get caught until the final inspection? Professional Liability.
T-bone a minivan on the way to a meeting? General Liability.
Store personal information for your clients and get hacked and their information gets stolen resulting in real or perceived harm? General Liability.

Most employees are shielded from general liability if doing work legally and in good faith for their employer. Most employees are also shielded from professional liability, so long as they are not the professional responsible for the work. This is why professional corporations exist. Your partner screws the pooch and a building collapses? As long as you were not significantly involved in the project, the other owner professionals are shielded from liability. But a professional always has some skin the game. You seal it, you can be named personally.

Now, are very many engineers being sued like this? No. Or, if they are, they either quietly get removed from the suit or they get out without having to pay much if anything. Why? Most engineers don't have a house in the Hamptons or a yacht to liquidate. Once the other side finds out you have a 2 story in a modest neighborhood and a 401k, it's not really worth chasing. That, and most suits get settled. As long as there is insurance to pay out, they'll take it and move on. There are instances where this didn't happen, though - I may try to find them.

After consulting with my attorney, this is why I refused to seal any projects unless my employer agreed to indemnify me in writing.