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Professional Liability Insurance
4

Professional Liability Insurance

Professional Liability Insurance

(OP)
I am a mechanical P.Eng. I am just starting to work as a contractor for an engineering consultant company. My contract with the Company states that I am responsible for buying liability insurance. Could anybody tell me how much a typical annual premium for professional liability insurance and the best provider in Canada.

Is it reasonable as a contractor to ask the Company that I intent to work for to cover my liability insurance.  

Thanks

RE: Professional Liability Insurance

I don't know about Canada, but in the US I pay $50/$1000 gross billing.  

David

RE: Professional Liability Insurance

You need to specify what kind of liability insurance.

In Canada, I pay about $350 a year for general liability insurance (this is for breaking something, such as coffee on the computer, dropping your client's laptop, driving through his front door, you get the idea). Lots of companies offer this - State Farm for one.

For professional liability insurance (errors and omissions), well, the pickings is slimmer. Aon is one of 3 or 4 that I know of - can't rembmer the rest. I was quoted about $15,000 per year, depending on my gross. It's not cheap.

Is it reasonalbe to ask the company that you intend to work for to cover you? Well it depends. If they cover you, then Revenue Canada will look less favourably on you as an independent contractor, instead of an employee. Savy? Up to you to decide - are you a contractor or an employee?

"Do not worry about your problems with mathematics, I assure you mine are far greater."   
Albert Einstein
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RE: Professional Liability Insurance

I am not sure about in Canada, but I am insured through Lloyd's of London for prof liability.  They have an agent, Hall & Co., in Poulsbo, Washington.

The rates depend on the type of engineering work that you do.  One major factor in price seemed to be "product design".  Buildings and bridges didn't seem as "liability prone" in the insurance company's eyes as product design.  I actually had a company reject me because I have done about 10% product design for individuals.

Yes, if you do work under contract, you are expected to have your own liability insurance.

RE: Professional Liability Insurance

I sure would like to know about the $50/$1000 in gross billings insurance.  I would like to start a small Sprinkler design Co. and need to do some smaller jobs first so not expecting a lot in billings.  Other fees I have seen are all flat rate anywhere from $2500 on up.

RE: Professional Liability Insurance

I am just starting to look into the subject myself. I have done a few, smaller jobs with no contract or insurance so I am looking for project specific insurance - especially some larger projects I proposed for.

I have a client I am helping through rezoning and if successful, I will do some structural, mechanical, electrical, and plumbing. Small project - hair salon in first floor of a duplex residential.

What scares me is the client. In checking him out, I found his current property was lost in a sherrif's sale but he somehow got it back through his sister - a co-owner. He owns several other similar properties - probably rentals, and he has had many civil cases - mostly evictions it seems, that he initiated.

I am thinking I need protection to ensure I get paid, filled out the EJCDC contract for the project and will spring it on my client once the property is rezoned, if it gets rezoned. The language in the contract limits my liability to the fee or $50,000 - whichever is greater. This got me thinking I need coverage for that $50,000 since my fee will be about $3000.

I am sure about project insurance but I think you can buy smaller policies like my need of $50,000. I should be hearing from some companies in the next couple of weeks and I will post what I learned.

Sorry to sort of ramble. Just throwing out some other options that may better serve your needs - depending on your circumstances.

Don Phillips

RE: Professional Liability Insurance

Yes please when you find out I would like to know.  Good luck with your client.  Very important to know as much as possible about their backgrounds to foresee any potential problems.  You may want to consider a set amount up front and/or progress payments to keep an honest person honest if you know what I mean.

The liability limit in your contracts is excellent. I was referred to order the following book on Amazon - ("A Complete Guide to Consulting Success"-Howard Shenson) which I think has some sample contracts etc...

Dave Fenton

RE: Professional Liability Insurance

The latest issue of PE magazine (from NSPE) is several articles devoted to risk management: liability insurance, contracts, choosing the right client, etc.

--Scott

http://wertel.eng.pro

RE: Professional Liability Insurance

Someone asked about the %50/$1,000 number I quoted before.  My first year in business the insurance guy asked me what I thought my billing would be.  I told him $100k (who knew?) and the underwriter quoted it at $75/$1000.  When I actually did much better than that, the underwriter shifted me to another category and the rate dropped.  No one offered a flat $2,500/year policy or I would have grabbed it.

David

RE: Professional Liability Insurance

I asked my current insurancer to give me a quote so I'll get back to everyone about that. She did say an annual policy would be much cheaper than project specific coverage.

What I did not tell her is sometimes, project insurance makes more sense. If you want to go bare on most of your smaller, verbal contract projects, and only insure the larger, contracted projects with higher risks, then the project coverage may be the way to go. I will bring that up when she gets back to me.

Don Phillips
http://worthingtonengineering.com

RE: Professional Liability Insurance

With project specific policies , the format is generally a claims made policy. once the policy expires, so does the coverage unless you buy a tail which is generally charged out at the same rate as the covered period. thus a plicy for a one year contract period plus a two year tail will cost three times what coverage for the contract priod cost. Any clams brought forth in the tail period for acts performed in the covered period are insured. Be sure to carefully look at risks and coverage for project specific policies.

RE: Professional Liability Insurance

I'd be surprised if an insurance company would even be interested in writing only occasional, project policies for you.  The small amount of premiums you would be paying and the recurring custom policy writing would probably be enough to make the insurance company pass on issuing you insurance.  They are in the business of making money, not worrying about the small guy (you).

RE: Professional Liability Insurance

Very good points. The quote I am working on is from my auto/home/umbrella/life insurer so I hope, as they gain business history with me, my rates will reflect the relatively low rates.

Don Phillips
http://worthingtonengineering.com

RE: Professional Liability Insurance

I called NSPE and they sent me a free copy of the latest edition which had some valuable advice!  I also went to their homepage and downloaded a matrix of liability insurance providers (very useful).  All this in addition to my web search has yielded numerous insurers in the $2000-$5000 range for a year for my small start up amount ($50K in billable first year).  I just need to fill out all the apps. and send back.  One of them wants a copy of my contract which I am working on.  NSPE and ASCE want $110 ($55 if member) to download an editable contract.  Does anyone know where these might be found for less or even no cost?

Also whichever company I can go with will try to sell my the general home/office trip/slip liability but I already have from my existing S Corp. I have set up.  Just to let you know in case you have another business also so you don't get double coverage.

RE: Professional Liability Insurance

TopPipe:

Where are you located?  What is your experience in sprinkler design?  I have been at it for about 17 years.  What software to you use?  

T

RE: Professional Liability Insurance

T,

I'm located in South Florida.  Not nearly as much sprinkler design as you but I do have a lot of boots in the dirt/building construction project management experience.  I'm thinking of going with Hydratec.  What do you use?

S//
TP

RE: Professional Liability Insurance

I use Autosprink and hydracad.  I greatly prefer Autosprink, but some people are very tied to HydraCAD, so I still keep a copy around.

RE: Professional Liability Insurance

Your best bet, to get the work with out having to get insurance and saving some money is to team up with an already insured firm.  They would carry the project  and possibably you on their insurance for a small fee and the rest is yours.  I know a few people that do this in the States so an individual and get some work without having to get insurance, because they don't have alot of jobs to support the cost of the insurance.

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