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!

 

[XR250]

I choose not to carry general liability or workman's comp.

 

[bookowski]

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.

I'm curious about examples where an engineer's personal assets get targeted. I've not seen any examples of this and can't think of any. It's a fear we all have, but over time I've come to think that we are actually at very low risk for personal exposure. Even in the hyatt collapse case, I don't think the eor had any substantial financial penalty. As to most eor's not having assets worth going after I disagree. Most day to day engineers in an office may not, but anyone running an office and signing off as eor or an established sole proprietor typically are doing quite well. I can think of several examples that I've been close enough to know some details where very large mistakes and payouts had minimal impact on day to day operations and zero on the eor.

 

[StrEng007]

As long as you were not significantly involved in the project, the other owner professionals are shielded from liability.

How does it work for licensed PEs who are performing work under the direct guidance of the firms principal engineer, who is also licensed and sealing the work?

 

[XR250]

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.

I have been told by an attorney that if you are an incorporated one-man shop, then the corporate veil is easier to pierce. Also, you can be sued personally.

 

[LOTE]

I have been told by an attorney that if you are an incorporated one-man shop, then the corporate veil is easier to pierce.

This is what I have been told too. If you own the business, are the only employee/worker, and are sued, the judge will rule that the corporation only exists to provide you, the individual, asset protection and the judge will not view you as substantially different from your corporation. The judge will rule you and the corporation as one in the same without needing to pierce the corporate veil.

Now, if you have employees/contractors, can justify that the corporation is used extensively for tax purposes, etc. then this distances you from being one in the same with your corporation. I'm not a lawyer, but I have learned that corporations are over-sold with asset protection for the one-man shop.

The reason that individual does not often end up paying out individually in these big lawsuits is their bankrupt-able net worth is pennies compared to the rest of the suit, and not worth pursuing. In Florida, for instance, your entire personal residence, 401K, IRAs, life insurance, and some personal assets are except from the claims of creditors. When the suing attorney evaluates what is accessible to pay the settlement, they have to take the fire-sale auction value of your car, office equipment, etc. which continues to depreciate every day the lawsuit continues. So they are generally left with investment real estate (again the fire-sale value, not the fair market value) and your taxable brokerage value, which is likely not much in comparison to your overall net worth. And as someone else mentioned, if you own these assets with other individuals (i.e. your spouse or business partners), it is also harder for creditors to access. This is why the individual is typically thrown out of the settlement: not enough money to make it worth it, too hard to quantify, and too hard to pursue.

 

[phamENG]

StrEng007 - if you knew there was a problem or should have known there was a problem, you could be in trouble. But again, it's rare.

NSPE has a pretty good write up on the potential risks: NSPE: Liability of Employed Engineers

 

[StrEng007]

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

What type of structural work do you focus on?

 

[phamENG]

At the time? Mostly commercial and government. Now? Residential and light commercial.