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Partners don't want to pay for prof liab insurance

Partners don't want to pay for prof liab insurance

One of the companies I own is a mechanical contracting company.  We have "engineering" in the name.  I'm the responsible PE in charge on the certificate of authorization.  I just found out today that in a cost cutting move, the two other partners (non PE's) allowed the professional liability policy to lapse 4 months ago.  After I filled out the renewal form, they simply didn't write the check.  I've sent out quite a few proposals in that time, and completed work.  

I'm not comfortable operating without the PL policy, but our state doesn't require it.  Any one else ever run it this issue, or am I the only moron who has non-PE partners?

RE: Partners don't want to pay for prof liab insurance

INBCPE...I don't know of any state that requires professional liability insurance for engineers.  That's not the issue.  If your company gets sued, they can also likely sue you as an individual, particularly since you are the qualifier for the certificate of authorization.

With no professional liability insurance, your company can still be sued and if successful, your non-pe partners will share in the pain.  They are nuts for dropping the insurance.

I have a simple rule in my business and when I was a senior level officer in other engineering firms...if the person is not a licensed engineer, they don't run the business, whether it is a branch office or the main office.  They have nothing to protect (a license) and their decisions reflect it.  They just don't get it.

RE: Partners don't want to pay for prof liab insurance

This is of course a mess.  Does your partnership agreement say anything useful?

When you get new insurance make sure that the projects you did while you weren't covered get covered.

RE: Partners don't want to pay for prof liab insurance

This one is easy.

They do not sign the check, you do not sign any proposals/drawings/documents that come your way.

It seems to me that they need you more than you need them.

RE: Partners don't want to pay for prof liab insurance

Man, I'd consider looking for new partners... it's one thing to decide two to one that PL is not needed after a discussion, but to do it underhanded by not sending in the check?  There has to be some sort of breach of contract suit in there somewhere, at least enough to split off of the business without damages...

Dan - Owner

RE: Partners don't want to pay for prof liab insurance

Contracting company? PLI would be small compared to General liability and worker's comp etc.  Who pays for that?

Do they need you more or you need them more? Proablly time to dissolve this company and start a new company or talk to a lawyer. And if the paperwork/partner's agreement/contract is not in order, time to do it is now.


Rafiq Bulsara

RE: Partners don't want to pay for prof liab insurance

I'm not sure that they really do "share your pain".  If you stamp something that ends up with a criminal problem, then it is you who goes to jail, not them (remember that Parking Structure that collapsed in Florida a few years ago, the Engineer is still in jail last I heard).  In a civil case, the partnership should be liable, but I'd have an attorney look at that one.

Also, I found out an interesting thing about PL insurance a couple of years ago.  You are only covered while the policy is in force with that company.  As soon as you stopped paying, your relationship ended and anything that was insured prior to your policy lapsing is no longer insured.  At all.  When you start back up with the same or another company then your coverage begins for work done from that point forward.  Work that was done prior to the start date of the new policy will not be covered by anyone.  There are "bridge policies" that can be purchased, but they are hideously expensive.  I've been with the same company for 7 years, and for the first 5 years I shopped for a better price every year.  Sure glad I never found one, because by staying with the same company the work I did 7 years ago is covered.  Had I changed to save a few bucks the clock would have started there.

I'd have a Come-to-Jesus meeting with the partners that would probably end up with the partnership dissolving in blows.

David Simpson, PE
MuleShoe Engineering
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RE: Partners don't want to pay for prof liab insurance


I am not a lawyer and not familia with US law, but that sounds unbelievable really disgusting if true.

My dealings with insurance companies in general gives me no reason to doubt it and my observations of your posts on this site gives me every reason to believe it.

While I would never advise a punch up with partners, but with such an extremely irresponsible act, I would certainly be drawing on all my resources to retain control.

I would certainly be very tempted to feign a disaster from one of my designs from that time frame to try to scare them sufficiently to drive home the point.

The OP

Can you recall your designs issued in that time frame and do minor adjustments and reissue after the old policy is reinstated, that is if it can be reinstated with all retrospective liabilities in place. I think you rather than your partners need to pursue this with the insurance company.

I think you need professional legal advice as to where you stand with your old insurance company, any potential new insurance company and your partners.

Re sharing the pain, while someone said an engineer is in gaol over a disaster in Florida. I would expect that was from criminal negligence and would be independent of civil damages. I expect the engineer is responsible at a criminal negligence level, but the company and all directors or owners would be jointly and individually responsible. Those who bear the most pain in that case will depend on who gets sued. Who gets sued very often depends on who appears to have the most assets.


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RE: Partners don't want to pay for prof liab insurance

They didn't even TELL YOU?

Do whatever you can to get out of this "partnership" with them covering your liability for the jobs you unknowingly did while uninsured.  Call a lawyer, they should be able to help you with this.


Hydrology, Drainage Analysis, Flood Studies, and Complex Stormwater Litigation for Atlanta and the South East -

RE: Partners don't want to pay for prof liab insurance

The way it was explained in my class (which I may have misunderstood, but it seemed really clear, and my agent confirmed it when I got home) is that once a policy lapses the only way to get insurance for any past time frame (even the time you were insured) is with a bridge policy that my agent said was just about the same price as the face value on the policy times the number of years you want to be covered (he didn't give me a formal quote).

In other words, you are insured while your policy is current for the time period when that policy was in force.  If you let it lapse then people can sue you for stuff that happened while you were insured and no insurance company will pay a nickel.

The guy that went to jail in Florida stamped a drawing that he didn't prepare or review and it was incompetent.  The courts found the design to meet the standards for criminal negligence.  While he was in jail a bunch of civil suits were filed.  I haven't seen an update on that case in several years so I don't know how it all sorted out.


RE: Partners don't want to pay for prof liab insurance

Seems to.

RE: Partners don't want to pay for prof liab insurance

Which parking garage are you referencing?


RE: Partners don't want to pay for prof liab insurance

I don't know a lot of details.  It was a case study in a PE class I took a couple of years ago for my ethics PDH.  The way the New Mexico Enforcement guy explained it, a contractor designed a multi-story parking garage in Miami (but later he said Orlando, so I'm a bit unsure) and got a local engineer to stamp the drawings.  The Engineer was apparently not involved in the design or the drawing prep and maybe didn't even read the plans (the instructor was incensed at this and railed on for a while).  He stamped them, the structure was built and put in service, it collapsed with some loss of life (again the instructor was so vitriolic that details got muddied).  Civil cases were brought against everyone involved.  The board went after the engineer.  Criminal charges were filed against the engineer and he was found guilty by a jury of his peers (I think the charge was manslaughter, but again we got more histrionics than details).

If this rings any bells, please feel free to correct any nonsense in the above.  I don't design structures so the story didn't have a lot of relevance to my practice.

I looked for this in Google, but it is either apocryphal, too old, or my Google skills are inadequate.


RE: Partners don't want to pay for prof liab insurance

I think you have it right...hystrionics!  There have been only two parking garage collapses in Florida in the last 5 years....Berkman Plaza in Jacksonville and a canopy structure at Tampa International Airport.  Resulted in 1 death in Jacksonville (too many) and the investigations are ongoing.  The engineers have not been charged criminally, though in the Jacksonville case, the engineer's design has been implicated by many. My partner and I are working on this investigation. Not divulging anything that isn't public knowledge.

I did an evaluation of a deficient parking garage in Miami about 15-18 years ago.  Did load test and strain monitoring. Wrote a paper on it that was published in Civil Engineering Magazine.  No collapse, no injury...just construction corrections.

I did investigate the collapse of a structure during demolition in Miami about 16 years ago.  It was the Biscayne Kennel Club and there were 2 deaths in that one.

What does this have to do with the subject?  Well, professional liability insurance is provided on a "claims made basis". This means that the timing of the claim is important to the coverage, as you noted.

You've made me want to go back and read my policy!!  You now owe me a beer for having to read that crap...again!


RE: Partners don't want to pay for prof liab insurance

My agent told me (after the class) that he used to explain the whole "you are only covered while premiums are current for the stuff that happened while the premiums were current" to his clients, but no one understood or believed him.  Whenever someone wanted to shop for better prices he would try to explain again, but then people thought he was making crap up to try to keep the business.  He finally just gave up and said "read the policy before you sign it".  No one does.

As rational people we want to think that the insurance companies assume a liability forever (or at least as long as the statute of limitations) for the time period that you paid for coverage.  It doesn't work that way with your homeowners insurance--once you stop paying a company they wash their hands of you and the new company can get sticky about pre-existing conditions.  Same thing with PL insurance.  If you get sued for an event that happened while you were insured by someone else (or not insured, or a different policy number with the same company) then they "disavow all knowledge" of you.


RE: Partners don't want to pay for prof liab insurance

We need to keep reminding ourselves what business insurance companies are in.

It is not selling security, it is collecting premiums. A perception of security is merely only an aid in doing this.

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RE: Partners don't want to pay for prof liab insurance

Perhaps the timing issue is regulated differently based on location. I once successfully made a claim against the insurance that covered a contractor during the time he did some work for me. Claim was made after contractors insurance and license had lapsed, and he was long gone.  

RE: Partners don't want to pay for prof liab insurance

Interesting.  Was it PL insurance or builder's liability?  The government seems to have stepped in and regulated builder's insurance.


RE: Partners don't want to pay for prof liab insurance

Contractors don't generally carry PL insurance.  Theirs is CGL (commercial general liability) or it could have been a builder's risk policy.

Any chance it was actually a performance bond policy?

RE: Partners don't want to pay for prof liab insurance

Whatever is needed (in addition to the bond, also lapsed) to get licensed.  Contractors board gave me the name of company and agent. Agent happened to be my own for a homeowners policy. Agent claimed policy did not cover workmanship and refused to help, so I contacted the company who did. The fact the policy had lapsed was never an issue. Took homeowners policy business to a new agent. Since the rework/repair had already been done, I bought a cheap old well used boat, and named it "Settlement".

Regulation of contractors' insurance is nothing new, I'm speaking of events that occured over twenty years ago.   

RE: Partners don't want to pay for prof liab insurance

Update:  I laid down the law.  I told them they could forget about me doing any more work until a policy is in place.  I make more money with my one-man engineering firm anyway.  I told them to stop telling people we do engineering work, take engineering out of them name, I'm going to cancel our certificate of authorization, and contact our current clients to cancel our purchase orders and provide them with recommndations for engineers that could complete the work we started, including my little engineering firm.

Boy, did that wake people up.  Meeting with agent is set for Friday morning.

RE: Partners don't want to pay for prof liab insurance

I'd get it all set back up... just in time to tell your two "partners" you intend to do things without them from now on.  If they're willing to do this without a second thought, imagine what the future holds?  Think about how this would have turned out if you received a notice of lawsuit before finding out you're not covered?

Dan - Owner

RE: Partners don't want to pay for prof liab insurance

Couple of observations (and, I'm not a lawyer):

In many jurisdictions, your company can be sued... and your partners can countersue you!

Just because you don't sign a proposal, etc. you may be liable, anyway... being the only technical person with an Engineering company.

Just a couple of thoughts.


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