Cost of E & O insurance

[WendyWelton]

Adam,

One more piece of the puzzle. You can work only with a signed contract and have that contract pretty seriously limit your liability. Your attorney will tell you about the laws in your state, but if you really can't get insurance, I would look into doing a contract that limits your liability to fees paid. Lawsuits are about money. If the amount they hope to gain is small enough, it won't be worth them paying an attorney.

[Allen42acj]

Only accept work that's well within your competency.

Best response to a post 2007
Wendy wins the award..YEA..

[alobartn]

Thanks Wendy, and jeez, sorry for your agony! I do have a contract that reads as mentioned. Nonetheless, I'm less perfect every day and may make an error someday, or perhaps even an omission!

[RMorrison]

Another bad sign for a client-

They yell at their kids in anger while you're there. Chances are they will not do well under the stress of construction if just a kid being a kid stresses them out.

[sutcac]

Another bad sign for a client-

They yell at their kids in anger while you're there. Chances are they will not do well under the stress of construction if just a kid being a kid stresses them out.

That reminds me of another bit of advice, make sure children are not present at client meetings. I had to learn to insist on this the hard way. Clients constantly distracted by their kids will very often not remember much of what you said, nor even what they said, leading to miscommunications that can cost money. It's good to be clear from the start that these meetings are critical and too important to have less than their full attention.

[Curtis Johnson]

Great Thread - thank you all for your opinions, personal information and advice - very informative. I just wish we were just the opposite of what we are in this country - THE LAWYER CAPITAL of the WORLD. Just think of the kazillions of $'s lawyers have taken away from the working man & woman! And we think they are so great, we continue to vote them into public office, and away they go .... writing more laws favorable to the insurance companies, etc. etc. OOOPs - shouldn't get carried away with my opinions. UGH

[WendyWelton]

John,

"Never design or build anything for an attorney"

I disagree. Some of my best clients are attorneys. The good ones get the whole risk/reward concept and are are not dying to bring their work home. I interview them as thoroughly as any other. It's almost easier to tell which will be trouble - they "lawyer up" everything right from the start. Both my NH & MA attorneys are also clients.

Adam,

Then you need to just stop worrying. Worry is the art of voluntarily experiencing a trauma that may or may not ever happen. I yell "stop" at myself in my head when I get on the worry train. Be professional, be ethical, educate your clients, then go hug somebody you love.

My little adventure is an entirely avoidable scenario. It's a project from my first year in business, for a client I never should have taken. My small fortune in attorney's fees goes in a category I call "tuition". Expensive, but lesson learned. I respectfully decline all manner of trouble now - "I'm sorry, but I just don't think I can meet your needs... "

Another tip. Re-write your contracts as much in plain english as your attorney can stomach - and go over it with clients paragraph by paragraph. It's called "managing expectations". That paragraph that says we're not responsible for the builder's mistakes? It only does you good if they understand it! I've had so few people try to drag me under the builder's bus since I started doing that, that it's not even funny. Ditto with all the other stuff.

Allen,

What did I win? A pony?

Richard - yes, yes, yes - yelling at the kids, yelling at each other, yelling at the mailman - yelling is not a good sign.

[perryh]

Wendy,
He was wanting a way to protect himself, not a way to draw something he shouldn't be drawing. An "L.L.C. is one way to do that if you cant get any insurance. I,ve had one since they have been invented. That vail can only get pierced only for very punitive actions and must prove malicious intent and very hard to do so. I am lucky to have attorneys as friends and get free advice. most attorneys will look at the case and try to find deep pockets such as "insurance" before they will file any case, but may do so if their client wants to pay for it. Lets just assume everyone here is on the up and up ,and proficient unless otherwise noted. the L.L.C. is a very good way of protecting yourself if there is no insurance.

[lbuttery]

Perry:

I have read/heard that Piercing the veil is easy if you don't conduct regular board meetings and keep minutes etc. IOW, you have to operate like a true business. Family members and friends can serve on the "board".

do some googles on "Piercing the veil" you might be surprised.

Lew

[perryh]

Just The Opposite Is True. L.l.c.'s Are Just A Partnership With Corporate Protection. No Meetings Like The Corps. You Must Have 2 People Min. And Maybe That Has Changed Now, Not Sure About That. I Drew Up My Own Years Ago, Very Simple. My Attorney Says They Must Prove Fraud, And Errors Or Omissions Are Not Fraud. Luckily I Haven't Been Sued Even Though I Have Completed Over 4,000projects And A Ok. A Lot Of Attorneys Around Here Are Using L.l.c.,s For There Own Business's.

[RMorrison]

Just The Opposite Is True. L.l.c.'s Are Just A Partnership With Corporate Protection. No Meetings Like The Corps. You Must Have 2 People Min. And Maybe That Has Changed Now, Not Sure About That. I Drew Up My Own Years Ago, Very Simple. My Attorney Says They Must Prove Fraud, And Errors Or Omissions Are Not Fraud. Luckily I Haven't Been Sued Even Though I Have Completed Over 4,000projects And A Ok. A Lot Of Attorneys Around Here Are Using L.l.c.,s For There Own Business's.

No, they must prove NEGLIGENCE, not fraud. Big difference. And a lot easier to prove.

[WendyWelton]

"Seems to me the LLC approach is dubious as it doesn't provide money for any lawyer, let alone a good one well-versed in the pertinent law"

Bingo - it's not than an LLC is a bad thing. It's just not a substitute for either insurance, or a self-insurance fund you set aside just in case.

I'm going to summarize my thoughts and then move on. This thread is devolving into a debate about LLC's and losing true helpfulness by the minute.

1 - Your first line of defense is to consider each client before accepting them.

2 - Equally important is competence and ethics. (and Perry, read closely - I did not say anyone was not competent - I'm guessing Adam didn't react as you did because he knows that I know and respect his work). My point is that you should gain some peace of mind from reminding yourself that you are doing the right thing each day.

3 - Next in line is having a good attorney review your contracts and business practices. As someone pointed out - it's critical that this attorney be versed in construction law.

4 - And last - get insurance. If you can't get insurance, consider start a self-insurance fund.

Seriously - if they won't sell you insurance, just do good work and do it for good people. Don't worry about something that may or may not happen.

The only adjustment I would make if I could not get insurance would be to be all the more careful about what clients to accept and I would avoid any project that's either on the fringe of my knowledge base or in a high risk group. Condos - highest risk project type. EIFS - I'd probably turn down just based on my own lack of current familiarity.

[Allen Brown]

-

Do absolutely nothing to do with condos - period. They're the single highest liability type project.

Condos - highest risk project type.

Wendy, I don't doubt you for a second, but would you mind elaborating? What sort of condos are you referring to? I have 2 subdivisions of retirement condos under construction right now, doubles mostly a few single units. Two different developers, one selling outright, one selling just "paint-to-paint". I have a great relationship with both developers, and all has gone well so far. I have never considered these high risk projects, but maybe you know something I don't?

Thanks,

[clinton]

As a Structural Engineer licensed in NC and SC, I was able to obtain E&O insurance through for $1,600/year and payments of $406/quarter for $1 mil coverage. I am using HRH ( www.hrh.com ) who shops the E&O for me and gets the best deal.

Grace to you,

[PhoenixConstruction]

Allen;

Can everyone say it together; "Class Action Lawsuit". My insurance carrier forbids me from having anything to do with "multi-unit projects". This is because of the possibility of two or more homeowners getting together over coffee one morning and deciding that the stair treads are spaced 1/8" to much for comfort and contacting a lawyer who will rally everyone in the complex to the same consensus, and sue the designer, builder, developer, roofer (yes, they name EVERYONE, just to be safe - And once you're named, that's it), and pursue a lawsuit where the attorney stands to make millions of dollars, while the claiments might get enough for a quality lunch at a drive-thru burger joint. Some of my subs in years past, who've been involved in multi-units and tract homes, have seen their insurance rates go up 10 times, just for being named in the suit, subsequently leading to thier demise.