Cost of E & O insurance

[billemery]

I've been shopping for $1,000,000 policy and the beat quote so far is $2650 per year. Is this a good rate?

The cost is considerably higher than my contrators liability insurance for $1,000,000; but then what it covers is described in a paragraph, and the exclusions could fill a book

[Steve C.]

Doesn't sound too bad. My liability insurance runs between $4,000 and $6,000 a year but I mostly build houses. The way my business is going now, it looks like I will have to look in to E&O insurance before long.

[WendyWelton]

Bill,

I'm in the process of shopping for new insurance - so have some current input. I'm currently paying close to 4% of my gross. They underwrite each business separately. I'm told it's based on your gross, the dollar volume of construction that represents, and the relative risk of your market segment. Residential is generally considered higher risk than commercial - because it has both a non-professional clientelle and because there's an emotional component. On the other hand, my new broker is guiding me towards emphasizing that I'm a residential specialist, who has both more in depth knowledge of residential construction, and procedures in place to deal with this clientelle. They're telling me that 1%-2% is typical for E&O for architects in my states overall, so I'm hopefull that I can maybe get down to maybe 2% or 3%.

Let's just say that if I could get down to $2650, I'd be jumping for joy. I don't know what your dollar volume is, but if it's low, you may also be paying more if you're a non-registrant. I believe the insurance companies make some assumptions about all that education behing beneficial. If you have tons of experience in design and/or construction, perhaps see if a different broker will plead your case better.

What state are you in?

Steve,

If you're being paid for design and don't have E&O, you might as well just go hire a hooker and throw away all your condoms. Seriously, one wrong choice of client or one false allegation can set you back years. You can be as right as rain, and it will still cost you a small fortune in legal fees to prove it.

And no, incorporating won't save you. Simply being diligent and ethical in your business will certainly help, but a single dishonest client can churn up enough fiction to make Hogwarts look like your average kindergarten.

[carpenterguy]

Excuse the dumb question but what the **** is E & O insurance?

Andy.

[Steve C.]

Wendy,

Interesting analogy, but you did make your point. Thanks.

[Steve C.]

Excuse the dumb question but what the **** is E & O insurance?

Andy.

Errors and Omissions.

[WendyWelton]

Andy,

"Errors & Omissions" is shorthand for Professional Liability Insurance. It covers you for mistakes - the design-world equivalent of doctors' malpractice.

Some policies cover errors or omissions that were made while the policy is in effect. Others, the kind I have and I believe the more common, are called "Claims Made" policies - they cover any claim made during the policy period. A claim is usually defined as "an allegation of wrong doing in conjuction with a demand for money or services".

The come in packages like 250/500. That's short for $250k limit per claim, and $500k limit per year. Just like with all insurance, higher deductables equal lower rates.

They generally only cover problems with your work. You really do need to read the policies thoroughly. Most will not cover anything characterized as fraud (like keeping the money and not doing the work, or a non-registrant using the word "architecture" in promo or contracts, illegal in most states).

I just learned a new one - that they also generally do not cover "product liability". One of my agreements referenced the drawings as the "deliverable product". Oops. I've changed the words to a simple "what you get".

It's a never ending topic. Get insurance. Get it from a good broker who will actually educate you along the way. Don't listen to anybody who tells you to avoid using Preclaims Assistance or to handle fender benders on your own. Get it, learn how to use properly, conduct yourself ethically, foster good relationships with both clients and builders, and then just conduct your business and send in the checks.

You can't disclaim or insure your way out of every problem, nor is there any bulletproof way to avoid future conflict - any more than there's any proven way to avoid disease or earthquakes. I'm pretty sure that getting out of bed in the morning is hazardous to your health!

[carpenterguy]

Thank you Steve for the clarification on the meaning of E&O insurance.

Now if someone would be so kind as to translate for me from English to English what is meant by errors & omissions? Is it like if the designer calls out the incorrect Simpson tie? Wouldn't that be the responsibility of the licensed Engineer calling out details?

Maybe I should look into this if I am going to be doing more 'prescriptive' detailing of my plans here in Callyfonya as our Governator would say.

Thank you all very much. This is bar-none the best, most helpful community of cad users anywhere. Which brings to mind a question: Does Chief make Chiefers great or do Chiefers make Chief great? Food for thought.

And special thanks to Wendy, the Grand High Chancellor of Chiefers.

Andy

[carpenterguy]

God! She's quick, witty, insitefull and wicked smart. Would you have my children?

No, really...you can have them, especially the boy.

Thanks again Wendy.

Andy.

[billemery]

Wendy,

Thank you for your input.

I'm in transition from general contracting to design; I'm doing mostly design work now but my dollar volume is low, and I hope to increase volume gradually over the next few years. Design has always been a part of what I do as a contractor; but was never aware of the liability until reading the threads on E and O here. I'm working with a lawyer to set up an LLC, and to help with contracts, and disclaimers.

I have many years of experience in design and construction, know the IRC well, and know the limits of design for non registrants, and I know when to call an engineer.

I live and work in Ashland, OR.

[sutcac]

...what is meant by errors & omissions? Is it like if the designer calls out the incorrect Simpson tie? Wouldn't that be the responsibility of the licensed Engineer calling out details?

If you are doing the drafting work for your engineer, then I would highly recommend completely separating the structural sheets from the non-structural ones. Anything non-structural, my engineer will call out "per architect" and anything shown in my arch. details even remotely structural in nature will say "per engineer".

Getting back to what has been said on this forum before, most claims against design professionals are for water intrusion, not structural stuff. So you are responsible for those non-structural details. If the detail fails to do the job properly (i.e., if there is an error or omission on your plans), this could result in a claim.

[WendyWelton]

Heloise here...

Since most E&O premiums are based in large part on your gross billings, some thoughts:

If the questionaire doesn't ask what percentage of your gross is then paid to consultants who have their own insurance, keep looking.

Or - if your options are few - consider having the structural engineer paid directly by the client.

Bryce is giving you solid advise. Pay very careful attention to your thermal and moisture details. One of our NE group is being sued for allegedly specificying defective patio doors (and I'm told they were one of the mainstream major player brands). That means the builder put them in wrong, everybody know its, but the builder hasn't got any money and they think the designer does.

Particularly if you're a non-registrant, don't be afraid to send your clients shopping and have them pick out some of the high ticket (and high risk) items. Anybody who can buy a car and is willing to take the time, can decide what window brand is right for them - ditto with toilets, faucets, floor tile, etc. More cost usually gets better quality. Let them decide whether they need (and want to pay for) the coastal windows or not.

[WendyWelton]

Andy,

My mother thought children were sent to her to do chores. When does that boy arrive?

[woody18428]

isnt it amazing how the world is going with insurances !!!!! pay pay & pay !!! i was a pretty good size gc at one point stopped doing most of it just because of insurances !!! i know i might have been cutting my nose of to spit my face but i am a sttuborn italian lol !!!! i do believe there are ways around some of this but it seems more of a legal accounting game !! maybe seperating the contracts to decrease the dollar amount in other words you are a consultant to a certain point and then the plans are by the architect ( just a concept ) however with all that being said what i do now is own nothing EVERYTHING IS IN MY WIFES NAME AND IF I WAS TO GET SCREWED IT MIGHT AS WELL BE BY HER ACTUALLY SHE IS PRETTY GOOD AT IT lol

[woody18428]

Hope This Doesnt Offend Anyone Whats The Diffrence In A Whore And An Attorney ????
A Whore Will Stop F- - -ing You When Your Dead