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liability question - working for another engineer
6

liability question - working for another engineer

liability question - working for another engineer

(OP)
Hello,

I have a question about liability.  I have a PE license and most of my experience is in industrial building design.  However, I want to start doing residential design using timber.  I have an opportunity to do some work for a couple of other PEs on a contract basis where I wouldn't use my stamp.  (I don't want to use my stamp until I get a few houses under my belt)  

So, I'm wondering what I'm liable for if one of these guys who I'm working for gets sued.  I have a little personal savings but no E & O insurance and only one of these other guys has it, the other one doesn't.  I don't think either of them is incorporated or anything like that.

One argument against getting insured is that it attracts lawyers and law suits.  Does anyone have a feel for what's at risk here?  

TIA
Mark

RE: liability question - working for another engineer

My suggestions, if you are in the USA - for a reasonable cost (say a few hundred dollars) have a lawyer set up a one-person Limited Liability Company (LLC). Do business only thru the LLC, keep all financial matters "at arms length" from your personal life (for example use a different bank, not just a different account, for the LLC). Have the LLC obtain a state issued Certificate of Authroization to stamp documents as a "product of the LLC", not just you personally. Do certain things, that sound ridiculous, such as conducting regular business meetings (with only you present - as President of the LLC) - then publish/file minutes of the meetings.

Per my attorney, this approach helps to "prove" that you and your business are separate entities - unless there is gross negligence (hard to define, however) or other serious failures, your liability "may" be limited to the resources of the LLC.

However, there are no guarantees.

The one-person LLC offers an advantage at income tax time - tax filing (mainly using Schedules C & SE) is integrated with your personal return. No "corporate" return to file.

Best Wishes

www.SlideRuleEra.net

RE: liability question - working for another engineer

Unfortunately, you can not hide behind the corporate shield as a PE. (I looked into this long and hard and discussed with peers, lawyers, insurance people, etc.)

MarkAJohn, as long as you are doing detailing, drawings, etc., you should not have any problems. Not having E&O presents some risk for this, but also keeps you from being a target. Just make sure on your correspondance / invoice / etc. that you list the work done as detailing, drawing, etc. and not engineering or design.

Should work fine as they are the ones stamping the final designs to accept responsibility as EOR.

ZCP
www.phoenix-engineer.com

RE: liability question - working for another engineer

(OP)
SlideRuleEra,

Thanks for the reply.  I'm in California which most people, although not all, think of as part of the US.  Where are you?  

Do you think all this would be necessary even if I don't use my own stamp?

MJ

RE: liability question - working for another engineer

Go the incorporated route. It will offer you some shield, but not a perfect shield

Then have signed contracts between you and the engineer that you are working for that contains a term limiting your liability to the payment for the services and that the customer engineer will hold you harmless form any and all actions arising out of the work.

Make it clear in the contract that the client engineer will be assuming professional liability for the designs.

These terms can be in place and then included in all subsequent work by reference.

Any correspondence should be on company letter head. E-mail should be on a company account and not your personal account. Have a signature block that says

John Doe PE
Doe Engineering Inc.

It is very cheap to set up a web site, even if it is only for e-mail. You can also have a corporate identity easily by buying your paper supplies through a company like Paper Direct and using one family for business cards , letterhead, envelops etc. (I use influential and have bought the electric graphic’s and use them on my web page.

Basically you want to make it clear that you are dealing through a corporate entity and not acting as a provide person in your business dealings and yes it is necessary even if you are not using your stamp.

Talk to a lawyer, an accountant and an insurance agent to get the necessary professional advice. Don’t take advice from strangers on a web site, use the information here only to educate yourself on what questions to ask your professionals.

Rick Kitson MBA P.Eng

Construction Project Management
From conception to completion
www.kitsonengineering.com

RE: liability question - working for another engineer

Mark - In looking for insurance for myself, some of the companies use different terminaologies and incorporate E&O in the "Proffesional Liability" insurance.  You may want to check what the guy that claims he doesn't have E&O insurance.

RE: liability question - working for another engineer

MJ - I'm in (and from) South Carolina, and I do think of California as being part of the US - have both friends and relatives there. Using the techniques that I, and others, are suggesting to separate your business from "you" are a good idea from the start, IMHO. There is no way to predict what type of business opportunities will spring up, seemingly out of nowhere - when they do, that is not the time to be "rearranging" your business structure. Suggest that you set the precedent now - you are an employee of your (one person) company. Even if the "protection" is not perfect, it is a lot better than nothing.

RDK's suggestions for a separate business email account, website, stationery, business cards, all make good sense.
With basic software your can even print your own (near professional quality) documents as needed - I do this.

Another suggestion, be sure to obtain any required local business licenses, and at income tax time report every dime of income. This is offset by the fact that the cost of many things, such as building codes, reference books, professional society dues, website hosting fees, etc. are deductible expenses to your business.

Here is a respected website for "information" (not a substitute for specific, professional legal advice) on business matters
http://www.nolo.com/article.cfm/objectID/D7043E4E-91CB-4B29-B8DC0DDA10AD4B3B/111/182/245/ART/

www.SlideRuleEra.net

RE: liability question - working for another engineer

(OP)
Thanks to all of you for your help.  Thanks SlideRuleEra for the link too.  

So, do any of you have any recommendations for insurers, especially in California?  

TIA
Mark Johnson PE

RE: liability question - working for another engineer

There are 1.5 million lawyers in the world of which 750 k are in the US. May be 100 k or more would be in CA. Currently as the laws are anyone whether client, contractor etc. can claim  that you did something wrong and file a suit.

If you're an employee of engineering firm with errors and ommisions insurance, the company attorneys will defend you. It is irrelevant that you stamped a report or is even a project you've worked on. As long as you;ve worked for this firm, you're liable.  

If you're a contract employee(1099)form where you pay your own estimated taxes quarterly then you may have to defend yourself and pay for your own attorney-since you're not an employee.

Remember you don't have to do anything wrong or have a failed structure to be named in lawsuit. Usually in most states they have 5 yrs to file a suit from the end of project, but in California it is 10 yrs.  If you're not involved in Condo's, structural renovations, real estate sales crtifications or Tract housing development, then you've lessened your chances.

In my opinion,  if you do work that is of locally accepted practice and is of standard care then you have done all that you can.

If it will make you feel better, I have observed that ALL great engineers have been suided several times in the course of their careers-it is really when and not if you'll be sued.

We must produce work that will improve quality of life of our communities, make a buck for ourself and be glad that we can see our work makes a differenece.      

RE: liability question - working for another engineer

(OP)
Thanks for the link.

RE: liability question - working for another engineer

Hi,
  The best thing that u can do in my opinion as you are a designer, to get a job and  sign contracts with a another companies to do the construction with specific agreements. by this, u can minimize the liabilities as much as possible. and u can determine the profit. You know these ideas are applied by small & International Companies in projects.
 

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