Dollar One Defense

[glass99]

I am renewing my E+O insurance for the year, and have to decide whether to buy Dollar One Defense (DOD), or whether to live with the $5,000 deductible. My insurance broker insists that the DOD deal is awesome and I would be nuts to pass it up, but it seems like I can self insure for a $5000 risk. Right now I am a one person practice.

Has anyone figured out whether this is actually a good deal?

 

[MiketheEngineer]

Run the numbers - what does the DOD cost versus $5,000. How many years do you have to go to save $5,000???

 

[glass99]

I would have to go about 10 claimless years to save the $5000, not taking into account the fact that they will jack up my rates if I ever actually make a claim.

 

[zdas04]

I looked at this and asked myself "who's going to sue a sterling fellow like me anyway?" I opted for the $5000 deductible. I work with companies that have a fairly realistic understanding of what I'm promising. If I was a Structural guy doing residential, I might have reached a different conclusion. I think you need to look really hard at the potential to be sued. While the savings THIS YEAR on $5000 deductible over first-dollar insurance would take 10 years to recover, next year the special deal may be over and the first-dollar stuff might be twice as much as the deductible.

I went to a class on this a few years ago (part of my "ethics" PDH requirement) and found something interesting. When you stop paying for insurance, it stops covering you (not a major revelation). Also, when you start insurance it covers you from the date it is bound until it is cancelled (again, in itself not a major revelation). The important fact is that if you change carriers (and in many cases if you change coverage) then unless you purchase explicit coverage for the prior period YOU ARE NOT INSURED for the times covered by the old policies. So if you change policies in June (without paying terrible fees for a "bridge" policy) and someone finds that something you did in May is actionable, then the whole thing is on you and neither your old carrier nor your new carrier will talk to you (except that your new carrier my cancel your new policy). The way the instructor explained it, if you change your deductible, unless you are very careful to make it a modification (with the same policy number) instead of a new policy, you can easily find yourself uninsured for recent activities. Since I've been with the same carrier, same deductible, and same policy number from day 1, any activities that my company might have been liable for from inception are covered. I don't shop for better rates on my insurance since the bridge policies are horribly expensive.

David

 

[beej67]

Nobody sues for less than $5000, do they?

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

http://www.campbellcivil.com

 

[glass99]

My usual assumption with any kind of insurance, whether that be medical, automotive, or E+O, is that if the likely payout on the claim is $1, they will charge you $1.20 in premiums over time. Insurance companies have overhead and need to make a profit.

 

[cvg]

minimum retainer would be at least $5,000 even if you are only named in a complaint, never mind going to court.

 

[Ron]

Dollar One insurance is essentially insurance on your insurance. You pay a premium for your professional liability insurance and then another premium to cover your deductible amount or to cover your legal fees. That second premium is way out of proportion to the coverage.

Check to see if you policy is a declining sum policy (most are), which means that your coverage is reduced by the amount of other claims and your legal fees. What this means is that you don't really have as much coverage as you think. An example would be...

You have $1 million in Prof. Liab. coverage. You get sued for $2 million. You go through litigation and ultimately lose the case or settle. Your attorney has racked up $400 thousand in legal fees. You now have $600 thousand in coverage and a personal judgment against you for $1.4 million. In short, if you have declining sum insurance, your personal risk is usually greater.....I'm not sure that you have a choice though...the carriers hold all the cards.

 

[AnotherEllis]

I personally skipped the Dollar One insurance my agent pimped to me as well.

My E+O policy has a reduction of the deductible by 50% in any given actionable claim in which I have a written contract with a mediation clause.

I do not have a mediation clause in my standard contract. I do have dual indemnification clauses and limitation of liability clauses I routinely use.

Anybody have a mediation clause you'd care to share? I'd love to read one over.

http://www.ellisconsultingengineers.com

 

[glass99]

AnotherEllis - Interesting about the mediation clause. I don't have one, though your broker should be able to give you a sample. Mediation is supposed to be a cheaper mode of conflict resolution than arbitration or litigation. I think it still involves lawyers thus is wildly expensive.

 

[MechEng2005]

I follow the assumption that extended warranties and insurance premiums are designed to make the companies offering them money. Don't get me wrong, I see the benefit. I would much rather pay slightly above the average cost of medical expenses for every month of my life than be socked with a bill for hundreds of thousands of dollars if things take a bad turn.

However I also believe that the people selling you the policies generally get paid their normal wage for selling you the "bare bones" policy, and bonuses for everything beyond that. I'm happy with the service provided for bare bones, and happy to help the salesperson feed their family. I don't need to be buying their Rolls Royce though.

-- MechEng2005