Professional Insurance . . . Getting started

[SandCounter]

I am currently in an industry facing a downturn. While many are being laid off, others are jumping ship. I feel a commitment to see my position through to the end but have a fear of showing a gap in my employment when my day comes. I decided to do all of the paper work, fees, submissions, licensing to start my own firm (sole proprietor) to keep in my back pocket so I can do consulting right out of the gate (Phase 1). Now, with my firm on the books, I am trying to figure out the best way to start out (Phase 2).

Insurance is my biggest question at this point. I understand that while professional E&O insurance is costly, it is an imperative. I also understand that it can be a process to initiate. I am trying to plan how to approach it and could use advice. Particularly, how to balance shouldering the cost of sufficient coverage with potentially scant cliental for the first several months. Here are some thoughts, but I would like constructive input:

[ul]
[li]Start off offering only drafting, with the understanding the client is responsible for the engineering.[/li]
[li]Offer only low risk (if there is such a thing) services (could use suggestions on what this might be).[/li]
[li]Scrutineering, that is evaluating other's designs against manufacturer spec sheets and application manuals.[/li]
[/ul]

All of this understanding that my goal is to do it right and be insured once the workload can sustain the cost. Thanks in advance for any input.

 

[zdas04]

I'm also an ME (in Oil & Gas). To do work for any Oil & Gas producers you have to sign a Master Service Agreement (MSA) that usually specifies the minimum insurance that you have to carry to do work for them. If it wasn't for those contracts I would have let my insurance lapse in year 2, but it is the price of admission to my industry.

If you are mostly working with engineering firms then you might not find yourself with that contractual minimum insurance. The two times I've gotten paid by engineering firms they didn't require it. You can protect yourself nearly as well by being picky about clients as by having insurance.

I understand that if I was a GeoTech or Structural Engineer working from a Yellow Pages add my attitude would be very very different. I just don't find mainstream industrial clients to be that big a risk of a lawsuit.

David Simpson, PE
MuleShoe Engineering

In questions of science, the authority of a thousand is not worth the humble reasoning of a single individual. Galileo Galilei, Italian Physicist

 

[SandCounter]

David,

Thank you for taking the time to answer my questions.

 

[Terratek]

For different reasons, I too have registered a company with the SOS and board of engineers for near future implementation. The question of E&O insurance is one that has been discussed a lot on these forums. Based on considering all the different factors, I've decided to follow the advice to "work without insurance until it prevents me from getting work". I plan to provide engineering services to municipalities eventually, so I know insurance has a placeholder sometime in my future. It is more a question of when rather than if.

 

[brandonbw]

I would call around on insurance and get some quotes. It probably won't be very much at the beginning as you won't have any or much work to go by. Another thing is if you have a car. I would also check your car insurance if you want to turn it into a business car. Car insurance could bring some issues as Uber and that stuff becomes the new normal.

B+W Engineering and Design | Los Angeles Civil Engineer and Structural Engineer

http://civilengineer.la

 

[SteelPE]

While I understand that Mech is a different world, I'm not sure I would have the stomach to go w/o insurance as a Geotech, but maybe you guys are different too.

I was kind of forced into my own business when my company went out of business in 2012. In this instance I had to dig into my savings to pay for the insurance. I would say that if you can't afford the insurance then maybe you shouldn't be looking into going out on your own, after all, insurance is just a drop in the bucket.

 

[Terratek]

Brandon,

This topic has been batted back and forth many a time in many forums. Each to their own. I've considered and reconsidered and might reconsider again. Keep coming up with the same conclusion I shared. It's not just a matter of being able to afford it. It's also a matter of getting value out of what you spend you money on. Have you had to use your insurance yet?

 

[SteelPE]

Well, I would rather have insurance and not need it than need insurance and not have it.... but that's just me.

 

[zdas04]

You hear about pointless lawsuits every day, and home owners outraged over not getting a $10k answer for their $50 are the worst. If I had to deal with the public in any form I'd have insurance. I only have industrial clients so the risk is lower (most of my clients wouldn't bother going after a $10k judgement that might be a big deal to a homeowner). But for me the problem is that my clients require it. If insurance wasn't the price of admission I would have stopped that $20k/year bleed a long time ago in my situation with my clients.

David Simpson, PE
MuleShoe Engineering

In questions of science, the authority of a thousand is not worth the humble reasoning of a single individual. Galileo Galilei, Italian Physicist