How many carry Liability Insurance?
Although I am licensed in a few states, I don’t carry professional liability insurance, nor do I seal and project manuals, even though I hold the copyright to the work I prepare.
Ronald, that has been my policy as well, however I am receiving more requests from clients that I carry liability insurance…so I would like to know from my peers who has it (or does not) and what are the pros and cons.
Jerome,
I think your attorney would be a better source of helping you determine the pros and cons of carrying professional liability insurance.
I had one client request that I carry professional liability insurance for a project. When I quoted them a fee that included me carrying the insurance, they changed their mind. I was not willing to absorb that kind of overhead for one project or one client. The premium can be a big hit, amounting to several thousands of dollars a year.
This came up several times in SCIP discussions in the years I attended SCIP’s annual meetings (which was in the latter years of the previous millenneum). As I recall, only one independent specifier in the group ever reported being covered by liability insurance, because his client required it, and ultimately the only way he could obtain coverage was for his client to include him as an additional insured on its own liability coverage. That made sense anyway, since the client sealed the documents and bore the responsibilty.
So, if your client insists that you be covered, explore that possibility. After all, specs are just one part of the total professional responsibility, so it makes sense that the coverage for them be under the same umbrella. Also, if there is an additional premium for that coverage, your client will know what it is, and be able to pay it directly. (If you have to pay it, it should be added to your fee, which at best would be a wash for your client.)
The problem in specifier’s E&O coverage seems to be this: Underwriters can’t figure out how to insure something unless they have some kind of way of estimating the risk, which usually means they need a claims history.
Trouble is, no one keeps track of claims against independent specifiers – probably because they carry no E&O insurance as specifiers. In a way, it’s a chicken-and-egg problem. Frankly, I don’t think it would make any sense for specifiers to be insured independently of their clients, unless they are practicing as associate architects, signing and sealing the specifications, and thereby taking on the corresponding responsibility. But that would be a joint venture relationship, not a consulting role.
Robert, yest I have done that when the Architect is my client, but on several upcoming projects, the developer is my client and there the liability issue gets more confusing. But, you are right we do not pay for it out of our pocket either way, if they want us to have insurance it is at their expense…most of the time after they investigate the cost they drop the requirement.
While Im not an Independent, Im a SCIP Affiliate, I wanted to respond to this discussion. A few years ago I was asked (by one of the big cheeses at CSI) if our insurance carrier gave us a discount because I am a CCS. This was part of an effort at that time to identify benefits of certification. Our carriers response was What is CCS? After it was explained to him, no additional discount was forthcoming.
Has anyone, in your quest for coverage, asked about (or been offered) a discounted rate due to certification??
I have carried professional liability for several years – and I sleep better at night knowing the coverage is there if a client of mine is ever brought into a lawsuit and there are any questions that involve the specifications.
It took a while to find coverage, but a major player in E&O insurance for A&E firms offers a policy for “Construction, Technical & Planning Consultants.” My agent and the insurance company reps I have spoken with have a good understanding of how specifications relate to the industry, how independent specifiers operate, and the relationship between the spec consultant and the primary professional. (I’ll be happy to provide the name of the insurance company if this isn’t considered a commercial plug. From my research, they appear to be the only one offering a policy that includes spec writers as insureds.)
My standard agreement, of course, includes a provision indicating that the design professional retains responsibility for the documents – my role as consultant is to document the architect’s decisions. This doesn’t give me sufficient comfort, though, knowing how construction claims can escalate rapidly to be aimed at every project participant. I consider the premium well worth the expense (it runs between 2 and 3 percent of gross if memory serves). I also receive expert advice on matters related to liability, and unlimited review of agreements by some very knowledgeable people.
I am continually amazed to learn how few consultants do not have liability coverage. In my view, the stakes are very high considering the exposure. This is particularly true for consultants involved with project types involving high risk or high claims rates (high-rise construction, condos, etc.)
Jeffery
Please email me name and contact information of insurance company for E&O insurance.
Also your disclaimer statement.
A few years back, CSI promoted a Company that offered E&O insurance for a reasonable amount. The reasonable about and coverabe only lasted one year.
Jeffrey
Addendum No. 1
Email address: usconsulting@earthlink.net
Jeffrey
me too
lazarcitec@msn.com
Be careful what you ask for.
Not so long ago E&O insurance was cheap for engineers and architects. Then the lawyers found out that they could collect major monies from these policies by suing everybody. next thing you knew it the premiums rose quite high.
There are a number of engineers and architects who believe that they are less likely to be sued if they do not have E&O insurance.
I am insured. Regarding lawyers collecting major money as mentioned above: It is my opinion, that the above comment by Mark is correct. But I also suggest there is a balance here. I am very satisfied with the service I get from an insurance company. It is worth the premium.
It is also my opinion that we as a profession need to seriously react to the current and potential suits being generated over mold. Manufacturers are really trying to take advantage of the situation and it needs to be addressed before suits over mold get out of control.
It only takes three “conditions” to generate a suit: an owner, some mold, and a lawyer. All we need to do is eliminate one of the three.
I vote for the elimination of lawyers!
I’ve just started independency (after being in-house) and like Jeffrey and a few other area independents, I too sleep better at nights knowing that I have coverage (along with an extensive 12 pg. standard agreement). In fact, I was able to receive quotes from three different companies (via two different brokers). A couple thousand dollars a year is just the cost of doing business…along with your standard business liability insurance (which all of you have…right?)…even if you work out of a home office. And…I’m not even licensed. True, the fact that I do have coverage, is an attraction for “ambulance chasers” to pursue quick settlements, but as I read in another thread about a specifier being individually sued some time ago, it still provides that “safety net” for me in that one instance that could ruin me (and my family) personally. Regarding the mention of mold, I agree that something needs to be done, but also realize that in the context of the original question, mold along with other haz-mat is generally not covered by E&O (and most if not all personal home) policys.
Regarding being added as an additional insured under architect’s policy, first how can you be ensured that architect will do that, and second that architect’s insurer permits adding someone that they have no clue about? The broker that I rec’d coverage thru, explained that typically additional insureds can’t be added…even to my policy…primarily based on added (and somewhat unknown) risk to architect’s insurer. Even if insurer did accept add’l insureds, certainly not for a specific project without any add’l premium…which will be paid by the Architect? Sure, the broker may have been self-serving with that statement, but we, as individuals, are in the best position to “protect” ourselves, whether it’s language in our agreements, obtaining own E&O, or just outright refusal for working specific type projects (e.g., condos); depending on architects for our E&O coverage is…almost…naive.
Besides, if an architect had to choose between insured or non-insured consultant (everything else being equal/close), I’m confident that the insured would be chosen…despite fee differential. Thus, in a way, I’m justifying (to myself) my high(er) fees.
I would like to know where you found a policy for a few thousand dollars per year. What kind of coverage did that buy?
The last quotes we had ranged from $25 - $40K per year for $1MM coverage. It took 6 months to get the first quote and then several months for each quote after that.
I was in the same situation as DAvid when I consulted – I was getting quotes in the $20 to $30K for $1 million in coverage, and that was back when that was about 45% of my yearly gross. I did have personal liability insurance, and on two projects I was included in a project umbrella policy. I paid the additional premium for my coverage, which usually was about $500 per year for each project. on the other projects, my letter agreement limited my liability to the total fee earned for the project. I was fortunate enough to simply not have any problems during the decade I consulted.
The irony (?) of those figures is that I worked for a 25 person architecture firm in the mid-90s where I did the “shopping” for the firm’s liability insurance. If I recall correctly, the premium was about $15K for $1 million coverage, but the billings were obviously substantially more. I’m not an independent, but I’m wondering if there would be merit for a committee from SCIP to sit down with a couple of the primary insurers, explain the business, certifications, qualifications and the like, and see if they’d set up a program for independents that may be more in relation to the real risks.
John, that is a pretty good idea. I belong to several “hobby” organizations whose primary benefit to members is liablity insurance. One such organization is the Acadamy of Model Aeronautics (AMA) at: http://www.modelaircraft.org/
My annual dues are under $60/year and they provide:
Liability Coverage for the Operation of Model Aircraft, Boats, Cars, and Rockets
$2,500,000 Comprehensive General Liability Protection for model activities for members, clubs, site owners, and sponsors
$25,000 Accident/Medical Coverage for members
$10,000 Maximum Accidental Death Coverage for members
$1,000 Fire, Theft, and Vandalism Coverage for members
Primary Site Owner Insurance ‑ up to $5,000,000 each location
Nathan,
I am really puzzled how a model airplane can cause so much damage that you would need liability insurance…but that is a discussion for another thread.
I wonder if CSI or SCIP has ever looked into liability insurance for their members?