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!

 

[SteelPE]

I would be absolutely livid with my broker if that happened to me and would probably pull all of my insurance with them (if you have any additional insurance with them).

I don't understand the part where he couldn't get proposals until 24 hours before it lapsed. I might call shenanigans on that. I'm not a broker so I don't know if that is true. When my insurance jumped 70% I tried to go to another broker and they told me they couldn't get anyone to quite me because they had been "locked out" by the original broker (maybe it was the 24 hour issue you were having). That always seemed odd to me. What's to prevent the broker from gouging you if you can't solicit premiums from other brokers?

In regards to the tail..... watch out. My old broker quoted me a 7 year tail (the longest they would provide) for 270% of a yearly premium. I am also not sure how that works out with your current ongoing gap.

 

[SoFloJoe]

Yes I am but what can I do at this point. It is my own fault for trusting them.

I am about to pull the trigger on the new policy and hope this gap doesn't come back to bite me in the future.

Anyone know any legal recourse I could have? Or at least have something recorded so that in the future if I have an issue I can refer back to it?

Thanks again everyone. I hope you guys reading this now and in the future can learn from my mistake and avoid this. If you do not have a policy in place at least 3 weeks before the termination date, get another broker and get more quotes!

 

[Ron]

@SoFloJoe.....don't worry too much about the gap. Attorneys don't chase people...they chase insurance.

 

[ldeem]

I switched to PEARL/ASCE a few years ago. I have never had a claim so I don't have any knowledge of their performance in that area. What I did find is the PEARL brokers change every year and it is very hit or miss on their customer service. Some have been great and others difficult to get a response from. As you learned the hard way it is a big problem if your policy lapses. One year with Peral I had to keep hounding the broker to get my renewal quote issued and he ended up sending it like the day the previous policy expired. So I had to pay the premium over the phone via credit card. I can vividly remember because I was on my way to a site visit and sitting on the side of the road trying to get this taken care of.

 

[SteelPE]

Ideem, I suppose you also were hit with a CC processing fee then too.

How long have you been with Pearl? I have been with them for 4 years and I have always dealt with the same guys. Getting certificate of insurances became quite easy once I realized there was a portal to get them done somewhat quickly.

 

[ldeem]

SteelPE, they waived the CC fee since they took so long to get me an invoice.

I have a few major clients so I don't often need to get certificates but I will look into that if the case comes up.

I am starting my third year with them - every year someone different but I am one man shop so maybe larger groups get more dedicated service.

 

[RRiver]

Joe,

I'm late to this and only came across it because of searching the listed disciplines of the participants on the forum. When I first started in the automotive industry I was working with compliance and it was during the early years of what compliance has grown to become. Something that few people realize is economics is a primary focus of regulation compliance and for that reason I pursued an MS in economics. Since then I have kept on top of the major journals and periodicals on the topic. I liked it. When it comes to what's going on with liability insurance cannot be over emphasized. To identify the industry as currently in a state of chaos is an understatement. It's primarily because of global warming and allow me to highlight what IIRC was a 2016 legal case in Illinois.

The case involved a civil engineering firm doing both design and construction. I'm sorry I don't remember the specifics of what happened beyond it had to do with pollution and water but why I remember this has nothing to do with what happened to bring this all about.

When the civil authorities started legal action against the firm and their insurance company both of them pursued, in the courts, to have the case dropped claiming the design more than met the state regulations as they were defined. The court agreed and excused the insurance company because the policy covered the standards required by state law but they didn't excuse the engineering firm.

The civil authorities were not suing the firm for any failure to meet the required standards but was suing them because they claimed as professionals in their industry they should be aware of the shortcomings or inadequacies of the existing standards because of the effects of global warming.

To cut to the chase, the civil authority won their case. The firm was held liable. At the same time the primary individuals controlling the civil jurisdiction were of a persuasion with a strong public reputation for their opinion that global warming is what today is called "fake news."

I'm sorry to say, at the moment I don't the word the insurance industry has for situations like this but it's something like "untermed." That's not it but I think you the idea. Basically it means a situation that is actuarily undefined and unsettled. The insurance industry has been trying for a while now to get the government to develop through legislation a universal and legal definition to global warming so they have a framework to work from. Currently everything is on a case by case basis determined by the local or regional legal jurisdictions. Again I'm sorry for not remembering the numbers but the insurance industry offered to the article the aggregate 1960 to 1980, 1980 to 2000 and 2000 to the year of the article costs to the insurance industries due to "natural disasters" to argue the trend is not unusual, it's abnormal and exceeds "natural." I don't remember the numbers but I do remember "WOW." The numbers were also given by specific countries and worldwide.

Since you live in Florida I'm guessing how all of this impacts you is measurably greater than many if not most other regions. I understand your anger with the insurance industry but I also think it's fair to say they are being scapegoated by the inaction of the necessary political processes at the expense of you and the insurance industry.

 

[AZPete]

RRiver,

"...The insurance industry has been trying for a while now to get the government to develop through legislation a universal and legal definition to global warming so they have a framework to work from."

I cannot see why a politician or activist (whoever makes money from stirring this pot) would want clarity in such a situation. Quite the opposite; so long as business keeps producing potential silver mines, they can keep mining them. If it were ever to be the case that clarity effectively sealed the mines, well, the miners lose.

 

[5747hazel]

sorry I am new here and didn't read every post. I have been shop around for a policy also for myself. I am structural. one of the agent told me there is different btw general liability for your business and error and omission policy. which one do you guys get? what is the difference exactly? thanks

 

[phamENG]

Your agent should have been able to explain that to you. If not, find a new agent...

General liability covers you if you put your foot through an attic during an inspection, or if you drop a tape measure from your belt on a ladder and it puts a contractor in the hospital.

Professional liability/errors and omissions is for those times when you tell them to install in W8x10 when it should have been a W18x35, or you forgot to tell them to install the beam altogether and the mistake delays construction for a month and somebody comes looking for liquidated damages.

This is a really basic overview - your agent can give you more/better details.

 

[5747hazel]

thanks phamENG. yes he did a while back. just want to hear how the engineers explain it. basically we need Professional liability. only General liability is not enough. Do you have recommendations? I mean a good policy and affordable. also my agent also explain to me that the policy covers monetary lost. if you practice under and LLC I guess the LLC would shield you from any monetary punishment from to your personal property, is it necessary to carry the policy at all. I guess the engineer could be held responsible personally? I am still deciding if I should go on a LLC or just simply being employed or any other choices.

 

[glass99]

@5747hazel: in general if you are doing projects of any size you need E+O insurance. GL is in my opinion more marginal but probably a good idea too. E+O is mostly for design errors. If you are doing work for any sort of commercial or institutional client they usually ask you for an Acord certificate which details all of your insurances, and at a minimum will require E+O and GL, but often automobile and an umbrella policy too. You do not need workers comp if its just you. No an LLC or any similar business structure will not shield you from design risk, though would shield you from things like rent and insurance premiums in the event of a business failure.

 

[5747hazel]

thanks glass99. just called an agent and we will see what he comes up with. why LLC is not going to do anything? if the LLC is sued, it is the LLC who will pay whatever but not the engineer personally. of course I will try my best do keep all the good record and never breach any code requirement so never lose a law suit or never get into a law suit. still I think the LLC is the one that gets sued if you put your LLC in the title block of your drawings.

 

[glass99]

Technically it's you signing the drawings not the LLC, so you are personally liable. The confusion is that if you work for a firm they generally do not come after individuals, but they certainly would in the event of a small firm.

 

[SteelPE]

5747hazel.

I am a one man shop and I am routinely asked for updated insurance certificates. If you want to do any sort of business on larger projects be prepared to be asked for this certificate. If you are going to work with homeowners then it may not be an issue. If you can't produce the certificate be prepared to not get paid. I have plenty of clients who withhold payments until I produce a certificate. It only takes me a few minutes to fill out the form with my agent so it's not an issue for me (although irritating that they don't ask up front).

It's a good idea to carry some sort of professional liability policy (E+O insurance). I'm sure a savvy lawyer can cut through the LLC if they really want to and if it's worth it to them. Some people go without insurance, that's a risk only you can asses, but I am not sure the LLC will help you.

My PL policy is 15x more expensive than my GL policy. GL is cheap PL is not.

Good luck.

 

[IRstuff]

LLC's are not allowed to shield certain professionals from personal liability; doctors, lawyers, and PEs are personally liable.

We had a discussion once about possibly transferring assets from joint tenancy to protect the licensed professional from losing personal properties if sued badly enough to blow through the insurance.

TTFN (ta ta for now)
I can do absolutely anything. I'm an expert!

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[phamENG]

Single member LLCs are especially vulnerable. You have to really stay on top of your paperwork and bookkeeping to make sure your business entity really stands on its own. If a lawyer can prove that your LLC is really just you and not an independent legal entity, they'll cut right through it and get at your personal assets. And, as others have said, it's your signature on the drawing, not the business. They can still sue you personally. That can happen even if you work for a big firm.

In my state, you can form a Professional LLC (PLLC) or a PC. These are good if you have multiple licensed individuals. It compartmentalizes the errors. If your business partner screws up, they can come after the business and the professional who made the mistake - nobody else (assuming the business entity holds up in court - lawyers are tricky...).

 

[phamENG]

As for recommendations, I'm not certain if it's allowed based on everyone else's lack of response.

I'll take a chance, though, and let everyone else tell me I'm doing something wrong.

https://axaxl.com/insurance/design-professional[/URL]]AXA XL

seems to be good for me so far. Much more affordable than I expected, and they have a good educational library to bone up on the ins and outs of E&O.

Go through a good broker, though. One that specializes in E&O. They can help you navigate the process and get the best rates. Mine also has a fund that can be accessed for no cost pre-claim legal consultation (to a limit, of course). If it can be dealt with before getting to the carrier, everyone wins. If you worked in that area for professional firms before you could always call around and ask who is best to work with.