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Building design vs. Widgit design

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JAE

JAE

Structural
Jun 27, 2000
15,594
As part of a small structural engineering consulting firm, we typically design things like buildings and bridges that are one-time, one-shot things. We do the design and they build our design.

Our insurance and exposure to risk is based on this idea of a one-time construction of a singular entity.

We have an opportunity to design a product that depends on our engineering design...i.e. it is a product that is primarily developed through structural engineering, which we do.

The product will be eventually marketed and sold to contractors and used on construction sites.

We have discussed the fact that with 100's of these products out there we would have a magnified exposure to risk. We would have no control over the use of these things.

We thought about establishing a separate company to limit our original firm's risk - but not sure if that makes sense.

Any thoughts on this?
 
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What does LLC stand for? "Limited Liability Corporation!" The main reason for incorporating is to limit risk.
 
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Agree with your idea and TheTick's repsonse.

Food for thought, they are even suing the band that was scheduled to be on stage for the Indiana fair collapse. When your widget is installed improperly, they will sue everyone.......
 
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Look at the ICC ES-reports “conditions of use” (of course they get money each time someone buys one, can you get additional money for each use?) and see if you can write something similar to limit its use to what you want it to be. Then talk to your insurance company and your lawyer.

Garth Dreger PE - AZ Phoenix area
As EOR's we should take the responsibility to design our structures to support the components we allow in our design per that industry standards.
 
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JAE...as you know, product liability is a whole different animal from professional liability.

I like the separate entity approach...in fact, your professional liability insuror might require it. You will probably need separate product liability coverage as well.

I also know that you have probably long ago decided to do as Mike suggested and that your purpose for this post is to do a little brainstorming before meeting with both....never hurts to be prepared.

Go for it and good luck. Consider licensing the design to the company if possible...that way you can get re-use residuals, or at least get a royalty agreement for multiple uses.
 
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As a general rule, lawyers will typically determine who has the deepest pockets, and sue accordingly. This would be particularly obvious if the two companies share resources. Only if the two companies are "firewalled" to the point where the only interactions are at the bottom line would there be an obviously partition of liability.

TTFN

FAQ731-376
Chinese prisoner wins Nobel Peace Prize
 
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