Cost of E & O insurance

[WendyWelton]

Allan,

Me thinks I totally didn't understand the line I quoted from your post! Many apologies. I think I had also just read something somewhere else that got under my skin - more apologies.

"her"... Hmmm - I could swear there was a Draw4Food here once before, who was a woman. There's an easy way around it. If you go to User CP you can put an automatic signature with your name etc.

Allen,

Yes, absolutely. The problem with certain project types is that the liability can be way way way out of scale with what most non-registrants get paid.

The amounts charged by any business, whether they are the price of a product or fees for service, are also about the Risk/Reward equation.

If you get paid to design 1 unit, built 1, good. Let's say you get $5,000, just for giggles. You make a mistake on a window and they ding you $800 for labor and materials. Yeah, ok. Now multiply that same mistake by 100 units. Uh oh.

Allen,

What to do about liability:

Rule #1 - keep your risk in reasonable relationship to your reward.

Single family house, no insurance - I would include 2 clauses:
1 - limiting liability to fees paid, or whatever your state allows.
2 - a clause clearly limiting your liability to the service provided.

Huh? Yes. If you aren't paid for the time it takes to do a full estimate, you should not be responsible for construction. If you are not paid to review construction weekly, you should not be responsible for verifying that the windows were put in correctly. If you were not paid to do thermal & moisture details...

Without insurance, I wouldn't touch any project where the end users are a whole lot of potential people, unless I got an indemnity clause. Condos, churches, schools, most retail businesses (depends on what you're doing)... I think the legal eagles call all those people potential "third party complainants", who would not be covered by any limits in your contract, 'cause they didn't sign it.

I worked for a firm that got sued because a woman slipped in the water from an overflowing toilet at a retail store we designed. The claim? That we "specified a defective toilet". It was the American Standard that's in half the big box retailers in the country.

Bryce,

Sorry - yes - advice. That bugs me too. I always look at it, ask myself which one, can't remember...

All,

Sorry for going on an on. I guess that when I see posts here that tell me somebody really doesn't know much about this, like this current condo question, I go into Mother Hen mode - getting her chicks ready to cross that big road, where one mistake can be crushing.

[RMorrison]

What to do about liability:

Rule #1 - keep your risk in reasonable relationship to your reward.

Single family house, no insurance - I would include 2 clauses:
1 - limiting liability to fees paid, or whatever your state allows.
2 - a clause clearly limiting your liability to the service provided.

Wendy,

I'm not trying to be argumentative here, but I have struggled with the ethics of this, and I really believe that, while it's certainly a nice thing for the design professional to be able to limit liability to a fee, I'm not sure how ethical it is.

For example, how would you feel about your doctor being able to limit her liability to the fee of the office visit? I don't think many patients would go along with this.

Similarly, if a design professional's screwup causes a client tens of thousands of dollars worth of damage (let's say, a bad siding detail that requires the entire exterior to be redone), or even worse, a detail that causes serious injury, should the design professional be able to hide and say, "Oh, sorry. But my liability is only $2,500. Ha, ha."? Aside from being dubious that a court would uphold such a weaselly limitation of liability, I wonder about someone who wants the rewards but is unwilling to step up to the plate with the responsibility that goes along with it.

It makes me very sad that the risk in this business is so disproportionate to the reward, but I don't think pretending that the risk isn't there, or trying to disclaim one's way out of legitimate responsibility, is appropriate. Maybe an attorney like George could opine.

[lbuttery]

Richard:

I agree with you that who ever signs and submits the permit represents the client and has a ethical responsibility to them to do right.

Some of us drafters work as subs for the builder, who is suppose to review the work product prior to submitting it, thus the limit on liabity for the drafter to the fee charged. We work as temp employees for the builder.

I now have a clause in my "limitation of liability" disclaimer that states that if the builder sends the plans to print and/or submits them for permit then they have been reviewed and found acceptable.

I had a builder who was in a rush, take a draft and send it to print for 9 copies and then the engineer found numerous errors, some ours, most the builders (we inherited 15 pages of the layout, due to illness of the builder). He was then mad for having wasted $200 on the prints. Then he tried to rush again the next two drafts.

I finally got him to realize that he needed to print one copy as
13 x 19 or send PDF to engineer and not print the rest until the engineer signed off.

Lew