Professional Liability Insurance 3

[SoFloJoe]

Hi Everyone,

I am having a headache getting a professional liability policy. I had one for an entire year and this year they decided to exit the market so I got dropped, I am in Florida BTW and I heard alot of carriers are exiting the market for whatever reason. I had no claims and had my business (design build) for almost 10 years without any major claims, but only had my prof liability for 1 year (I got my PE early 2019). My broker is trying to find another policy but they are coming in double what I paid last year. I paid roughly $4,000 and had under $100k worth of work. This year I projected $50k and they want close to $10,000. They are saying this is the minimum.

What are you guys experiencing?

I am also considering not even having professional liability at this point if it is going to cost 20% of revenues. What are your thoughts out there? I am not sure what to do at this point.

Thanks everyone!

 

[EZBuilding]

Joe,

Sorry I don't have any information, but am commenting to state that this seems absurd.

Are you a member of ASCE? I recall that they help link Engineers with Insurance providers.

What deductible are they asking for with that policy?

 

[Eric C.]

I do know that professional liability insurance can be procured for significantly less than the $10,000. I have just purchased a policy in the last couple of months using revenue projections similar to yours and my cost is much lower than that. I found my new carrier from a list of carriers on the NSPE website. Not sure if you need to be an NSPE member to see this list or not.

I admit I don't know what effect your location would have on your ability to get coverage. That, I suppose, would be a question for each individual insurance company. However, when applying I had to answer a few questions about the type of work I am involved in and two specific questions that stood out to me were 1) Am I or have I been performing Construction Management work and 2) Am I or have I been performing any Design/Build work. It could be that there is an issue with your doing and having done Design/Build work. Again, that would be a question for each individual insurance company.

As to your last question, I have been licensed for 25 years and have ALWAYS been covered by professional liability insurance either in my own name or under a company policy. I wouldn't design nor stamp anything without it. The potential risk is too great for my taste.

 

[Ron]

The key to your issue is your practice...design-build. Many carriers are hesitant on this. I am in Florida and our fees range from about 1.3 to 1.5 million a year. Our PLI for $1 million coverage is about $12,000 a year. I have paid as high as $25k for the same coverage back in 2006/2007. It has declined since then, partly because of our liability exposure measures, partly because of our "no claims" history. We don't do design-build. Mostly forensics.

Try Admiral Insurance or Schinnerer.

 

[SoFloJoe]

Thanks everyone. To clarify, I was design build. As of last year we stopped construction activity so my PL was and is only for design, inspections and project management (as owner rep for quality control).

I also provide architectural, MEP & Structural services but mainly for single family and interior renovations for condos and commercial.

Good idea about reaching out to ASCE, I did not think of doing that. I just filled out their application. Hopefully something better will come through.

Thanks again!

 

[Eric C.]

I believe the word "condominium" throws up red flags with insurance companies, too. Then again, what doesn't throw up red flags with insurance companies? Maybe if we limited our practices to driveway culverts

Might try Berkley Design Professionals Insurance as well.

 

[Ron]

Yes, condominiums are red flags. We clearly have shown for 15 years on our applications that a lot of our work is on condominiums; however, most of what we do is failure investigations on condos. Apparently they figure that's lower liability than doing original design on condos....and they are right.

It is fairly rare for a design professional to get tagged with a high percentage of the claim for design and construction defects. We have been involved in over $100 million in settled claims for design and construction defects in the last 15 years. Only a few of those have gone to trial and most settle for something less than it would cost to correct all the defective conditions. In those, the design professionals generally account for somewhere between 5 and 15 percent of the settlement, depending on their level of insurance and how much their design contributed to the defective conditions. Contractors are always responsible for more of the issues than the design professional.

 

[kipfoot]

It could be that the design build history is a deal breaker for the insurance company, but I'd say that you could try another broker and possibly come up with other, less expensive, options. I've never tried to go without insurance, in part because I don't have the constitution for it.

The broker I have personal experience with is in the light blue shirt on this contacts page:

https://www.hallandcompany.com/contact.php

 

[glass99]

Ron: your insurance is dirt cheap! Basic structural engineering is usually around ~3% but you are paying 1%. We pay around 4%, though its probably related to the weird glass stuff we do (we are claim free since inception).

ASCE really means Pearl insurance brokers from Illinois. They aren't bad. Different brokers are hooked up with different carriers. I only got one really responsive bid this year, and it was from Admiral.

 

[Ron]

@glass99.....Yep, I know. I'm incredibly thankful! My first agent wasn't concerned about my costs, just his commission so I paid around $25k for $1million on fees of less than a million. My current agent, who has been my agent for over 10 years, has done a terrific job of getting me a better deal. Two years ago my carrier reduced my premium by about a thousand a year. Meanwhile, my worker's comp kept going up. (never a claim though). Go figure.

 

[glass99]

@SloFloJoe: The other thing to remember is that if you have a gap in your coverage your insurance will not cover any risks prior to the gap, even if your gap is only one day. Find a new broker!

 

[SoFloJoe]

Thanks everyone for your responses. I wanted to update you on where I am so far.

So I did contact the ASCE broker and they came back with a much more reasonable quote about $3,800 but it does not include coverage for prior acts. I forwarded this to my current broker they were able to get prior acts covered but wants $9,500. The price gap is crazy! Maybe it is because I am an ASCE member? They did classify things differently so hopefully we can match the classification. I am tempted to go with the new policy and I guess to forgo the gap coverage basically rendering my coverage of 2019 a waste of $$.

I have not done anything to high in liability during 2019, but I have several on going projects signed just the past few weeks (during time I had coverage). So I am not sure how this works, if I did have an issue (low chance) from an active project would it be covered? Maybe I should issue revisions for these signed after my new insurance just in case? Has anyone done this? What are your thoughts?

I am not sure what to do at the moment. Hopefully I will get something back from my current broker that is more reasonable.

 

[EZBuilding]

Thanks for the update. Would you be willing to share what deductible you have been quoted?

 

[SoFloJoe]

Thanks for reminding me I did not even look...

On the new one w/ Pearl (ASCE)
Each claim: $5k
Aggregate: $15k
Privacy Breach: $1k

Old original policy doesn't say clearly, the word "deductible" is not even used searched the entire PDF. But says $5,000 retention, whatever that means.

 

[SteelPE]

SoFloJoe,

Did you ask Pearl to update their policy for prior acts? I worked with an old engineer years ago. He started his own policy in 1995 (I was still in high school). I began working with him out of college and eventually was sealing plans for the work I did with him. He passed away in 2011 and I continued on as I was already on his policy. Our policy was with CNA through Schinnerer. I never really gave much thought to the policy as they never really jumped with the premiums. Then one year they wanted a 70% increase in the premiums with a 3 year commitment. I tried going through another broker but was "locked out" by Schinnerer (I think this can happen when they solicit policies on your behalf). I ended up going through ASCE and they ended up reducing my premium by 50% (not increasing it by 70%).

In the end I went with ASCE.... and I have prior acts all the way back to 1995. I am not an insurance buff so I don't quite know how good it is. If I recall, All I had to do was to submit paper work to them showing coverage all the way back to 1995 and they added it to the policy.

 

[glass99]

I think "prior acts" is the wrong term. My insurance says "Retroactive date" which means that it covers you from the time I have been continuously insured, which is generally enough. If you are asking for "prior acts" starting from before you are insured, in can imagine that is a wonky request resulting in big numbers.

Its also a very complicated and fragmented insurance market, which explains part of the variability. ASCE/Pearl buy insurance through a wholesaler, not direct from the carrier, plus individual carriers are taking ever more narrow slices of the market.

 

[SoFloJoe]

Thanks. Yes I did request it and they said that due to the gap it would not be possible to do it retroactively. But they said they will look into it. I have both brokers now trying to work it. So I guess we will see what happens. So frustrating.

 

[SteelPE]

So, is there an actual gap in your coverage? As in, you first obtained insurance on 4/2019 and it ended on 4/2020 and you haven't had insurance for a short period of time (being a day or longer)? I remember that being a huge issue with they insurance company. It's part of the reason I start reaching out to my carrier 2 months before my policies are due. This allows be to have enough time to solicit other companies if they decide to increase my rates by 70%.

 

[SoFloJoe]

Yep, I have a gap of 1 week now. My broker was taking his time, and I kept reminding him each week for a month before it was expiring and he assured me that it wouldn't be an issue to renew. My broker couldn't get quotes in until less than 24hrs before my insurance was to expire last week and the quotes were triple what I was paying and I lost it. I could not even afford the down payment.

Since then I started this post and reached out to the ASCE carrier which gave me a much better quote but wouldn't cover anything prior. I have definitely learned my lesson from this experience. I should have reached out to other brokers then just in case. I now know this, lesson learned.

But thankfully I did not do any major work last year so thinking I should just start with a new policy and start from scratch. According to the ASCE rep the wording in the policy (from the other broker) to cover the gap isn't even correct and may not even cover it. He maybe misinforming me. But I do not know what or whom to believe anymore.

 

[Ron]

Only get tail coverage back to your statute of repose for your state. There's no point in going farther, since that is the point at which claims are stopped against you. Each state has a different statute of repose....mine is 10 years, but others go as low as a few years.