Liability Insurance 6

[JStructsteel]

A current Contractor wants to be listed as additionally insured on my liability insurance. How do you guys handle that?

 

[Ron247]

One thing I ask is if they are going to make me additionally insured on their insurance in return. There is some cost associated with this I understand from my carrier. If I give it, it is annually and my insurance tells me how much I need to add to my costs. I then add it to their bill, it is not free. I am running into this more and more. This issue is definitely worth this thread on the "Engineer Business Practices and Issues" forum.

I had one client who had a new Comptroller send me an annual contract that stated "if he gets sued because of an error I made, I would pay all his legals fees and any judgement against him". In essence, I messed up the design but he installed what I drew. I did not find a similar clause for me that stated 'if I designed it correctly and he installed it wrong, he would pay all my legal fees and judgments. I was promptly told they would not give me that clause. I quit working for them that day.

 

[JAE]

I would ask your insurance rep. Your insurance is specifically written to cover you and your direct clients based on your type of projects, your roles in those projects, your exposure to various types of risk, etc.

If you suddenly tag on a contractor as a covered "client" then your insurance carrier could possibly have a legal way to "walk away" from covering you if you violate a provision against volunteering your coverage to someone who is not an engineering firm but an actual builder....completely different risk conditions.

Having said that, they may be OK with this but you should check.

 

[IRstuff]

Does the premium effectively include tail coverage?

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[glass99]

There is some cost associated with this I understand from my carrier

I have never been charged extra for an additional insured. Maybe they charge me more at renewal time or something but if I change carriers they would have no way of knowing.

I don't even really know what "additional insured" means in real life. I have never heard of it actually having any consequences.

 

[SteelPE]

I always thought “additional insured” allowed someone practice engineering and be covered by your insurance. I have had contractors ask this question repeatedly. I have asked my insurance company who refuses to add them. I hhave asked two separate companies with the same reply.... “you can’t add someone who is not a registered professional engineer”. They may be lying to me, but I don’t care, I tell the GC no.

 

[Ron]

When you add an additional insured, you are insuring an unknown entity. This is why many professional liability carriers do not like this process. Avoid it. The contractor is typically covered by its commercial general liability policy for its own foibles (except construction defects). When you provide them as an additional insured, it allows them access to your policy for issues that they might be liable for (construction defects).

You are providing professional liability insurance for your client. The contractor is not your client. Don't extend coverage to them. This would give them access to you directly without having to go through due process. If you screw up, the client can sueChe you. That has nothing to do with the contractor. They can make a third party claim against you if they feel that your screw up harmed them; however, if you do an additional insured allowance to them, they might be a first party claimant....which you don't want.

Check with your carrier and your attorney....I'm just an engineer!

 

[glass99]

Ron: An engineer's Errors and Omissions insurance would cover the engineer for an mistake in their calculations, but how would an another party really be able to claim against an engineer's policy? If I add a contractor to the list of insureds, and I make a calculation mistake leading to a beam falling down I will get sued. In real life I will get sued to the limit of my insurance to cover whatever the damage is (leaving nothing for anyone else), and everyone else will get sued as well to the help pitch in . Also in reality, if the contractor did get a piece of my insurance payout (though I am struggling to see who they would get an actual payout for themselves as opposed to correcting the damage), it would still be limited by my policy amount. Is there an order of preference for payouts? Like client first, additional insureds second?

How would a contractor be able to access an engineers E+O insurance for a construction defects? E+O means mistakes the engineer made. I mean I know the whole things is a fuzzy mess, but in principle at least.

Another reality for me is that when its a requirement that certain people are additional insureds, its really hard to do negotiate around, especially on big bureaucratic projects. A house or something would be a different story.

I sort of understand abstractly about additional insured, but reality is my concern. Have you ever seen an actual claim of this type?

 

[Ron247]

It would be nice if there was someone in the insurance business to enlighten us on this topic. This sounds like a simple statement contractors and others have heard to do such as "Make sure they make you an additionally insured" but in reality, it could have several different outcomes depending on your role and your insurance. General liability versus E&O for example. Or SubContractor versus Engineer.

As stated, I have had this request and do not do it unless my insurance carrier gives me an amount that I then charge my customer. They in turn, do not want to pay the additional money so I do not add them. While this is going on, I have no real idea what it entails. I do know it is similar to the clause I mentioned in an earlier post. They want you to shield them, but do not intend to shield you.

I bet if you ask the person requesting what this means, they probably do not know. I looked on the internet and it appears the endorsement wording is what matters a lot.

I know of 2 things from the insurance world they look for on houses. These are simple things to ask/check but they have no real rational about how to apply the knowledge.
[ul]
[li]"Make sure the house has at least a 100 amp breaker serving inside." This is actually from really old houses that did not have 100 total amps serving inside. In modern systems, the larger amperage demand items are in the exterior box and anywhere from a 60 amp to 90 amp breaker serves inside. That violates their rule but the rule is actually for houses wired in the distance past. I have had several insurance companies not want to insure a new house for this reason even though the wiring meets modern electrical codes. In short, they do not know how to apply the knowledge.[/li]
[li]"Make sure if there is more than 3 steps, they have a handrail." I had a concrete stair in my yard that followed the slope of the ground. The ground was about a 7:11 slope. There was no handrail because you never got above the ground at all.[/li]
[/ul]

 

[gte447f]

I have been told by my insurance broker that additional insured is available for general liability but is simply not available for professional liability, full stop. Usually whoever asks for additional insured status does not understand the distinction. I will add them as additional insured for my GL policy but not my PL policy. I send them the insurance certs and they are satisfied and that is that, I don't hear anything else about it. If they happen to notice that the additional insured status does not apply to the PL policy and ask for me to change it, I simply tell them, "it's not going to happen, it's not an available option from the carrier, PL insurance doesn't work that way", and they are forced to accept it. I have not had anyone challenge it or prove otherwise, or walk away from a contract because of it.

On principle, I don't like the idea of additional insured for GL either, but I add them routinely.

 

[TehMightyEngineer]

I just send them this link:

http://www.cavignac.com/publication...nsured-on-your-professional-liability-policy/

Basically they shouldn't want to be an additional insured unless they're also involved in the design work as a partner.

Ian Riley, PE, SE
Professional Engineer (ME, NH, VT, CT, MA, FL, CO) Structural Engineer (IL, HI)

 

[glass99]

@tehmightengineer: Thanks for posting that link - its one of the few sources that actually address this topic. BUT I still don't understand. They have a bunch of secondary stuff about clients staff moonlighting etc, but the crux of it seems to be that a client can't sue you if they are an additional insured - that would seem to be an advantage from an engineer's point of view.

@Ron + gte447f+ everyone: I have just had an aha moment - I reread some old additional insured certificates and I realized I have only been adding clients for GL but not PL. Kind of important!

 

[glass99]

It would be nice if there was someone in the insurance business to enlighten us on this topic.

Yes it would lovely, but my experience is that the brokers are sales focused and not super knowledgeable. I was recently surprised to learn that my ASCE endorsed broker does not even buy my insurance directly from the carrier, but gets it from a wholesaler instead. We therefore have a game of Chinese whispers.

 

[TehMightyEngineer]

that would seem to be an advantage from an engineer's point of view.

Oh it totally is; if you want to, your client pays for the cost difference, and your insurance provider will let you, then my understanding is that this is a benefit to you. However, if they do have design professionals on staff then it's definitely NOT in your interest as you'll likely share liability on your policy for their design engineers now.

The short version is it's too much of a hassle to try to game this IMO and it's definitely not doing any favors to your client to do this. Basically one of the things engineers are paid for is giving their clients good advice. I'd hate to see engineers doing the exact opposite of that.

Ian Riley, PE, SE
Professional Engineer (ME, NH, VT, CT, MA, FL, CO) Structural Engineer (IL, HI)

 

[phamENG]

the crux of it seems to be that a client can't sue you if they are an additional insured

That's not how I read it. I read it as this: the insurance company won't pay your client if they are listed as an additional insured. Unless part of the agreement to add them as an additional insured also indemnifies you, which as everyone has said never happens, you can still be sued.

Is it true that most people won't go after you if you don't have insurance because it's "not worth it?" Sure. But that doesn't mean they can't. So if your client does get listed, and you get named on a lawsuit by your client, then you may just be up a creek if the decision comes down against you. Especially if the client walked into it thinking they had a couple million coming their way. May be a long shot, but seems just terrifying enough to guard against.

 

[Craig_H]

it seems to be that a client can't sue you if they are an additional insured

I can attest to this being true (at least in Canada), having gone through a similar situation recently:

We cannot add the contractor and owner as an additional insured on the E&O (we can for the CGL). Adding them on the E&O will actually preclude coverage.