Insurance is one thing that everyone needs but hopes to never have to use. It may seem like you are spending money regularly for something that you can’t see or feel when your insurance bill comes in every month. Who wouldn’t want to spend the money instead on something else that you can actually enjoy, like a yearly vacation?
However, insurance gives peace of mind and provides protection for you, your family, and your business. Having insurance is one thing you should never take for granted.
Like other professionals, engineers are among those who need professional liability insurance, also known in the industry as Errors and Omissions insurance. This kind of insurance protects an engineer, or an engineering firm, from third-party claims of damages stemming from professional wrongdoing. It is important to note that this type of insurance coverage is different from general liability insurance that provides coverage for general liability claims such as slips, falls, and property damage.
For example, your client slipped at your construction site and hurt his back or you hit the side of his house when you were parking and cause property damage. If he files a lawsuit or claim against you in these types of situations, this will be covered by general liability insurance and not professional liability insurance.
Engineers need both general liability insurance and professional liability insurance as part of risk management and to protect themselves from any possible claims and lawsuits in the future. This type of professional liability insurance applies to everyone in the engineering profession, including civil engineers, architects, and those working as software engineers. One lawsuit that drags on for years can destroy someone’s career if they don’t have the resources, such as sufficient insurance, to cover all the costs that come with it.
What does professional liability insurance for engineers cover?
For engineers, professional liability insurance generally covers the following:
- Legal costs, defense costs, and attorney fees
- Design error
- Project delays
- A faulty or erroneous recommendation by a civil or structural engineer
- Poorly designed software program
- Projects that were never delivered
If you are an employed engineer, your firm should have enough coverage for all its employees and architects. Self-employed engineers or those that run their own firms should also make sure that their insurance policy provides enough coverage for all their business needs.
As a professional, no engineer wants to encounter any of the issues mentioned above. Engineers are perfectionists by nature and an engineer’s line of work always involved exact measurements and accurate data. However, just like life in general, there are always external and uncontrollable factors beyond anyone’s control that may affect projects.
From weather-related delays, human error, to misunderstandings between engineers, clients, and customers, unfortunate and unwanted situations may arise that result in lawsuits and require insurance.
For example, architects may make a mistake in calculations that affects the overall design of a building or extreme weather caused a major delay in the delivery of a project that cost the client a significant amount of money. A customer may claim negligence by the engineer or architect in these types of situations and he may decide to take legal action. This is the worst-case scenario but unfortunately, this is always a possibility when working with clients.
For engineers who are employed by an engineering firm, they are often safe from being sued as an individual, but it is possible that a client may sue both the individual engineer and the firm that the engineer represents. Although this is a highly unlikely situation, it is not impossible.
Generally speaking, the firm or company is responsible for the work of its engineers, as they are the ones who have contracts with clients. A good professional liability policy with sufficient coverage will protect both the business owner, the firm and the engineer involved in the claim.
How much is coverage for an engineer?
The cost of an insurance policy for an engineer depends on several factors. In general, the median cost of professional liability insurance in the United States is approximately $1,875 a year or about $155 per month. Although this may seem expensive, this should be considered an investment because having an active liability policy will save money, and more importantly, from undue stress in case you encounter a lawsuit in the future.
The cost of professional liability insurance can go higher or lower than the median mentioned above, depending on some factors such as the following:
1) Sales – the total sales, or income, that the engineering firm or company operates on. This also takes into consideration the revenue that each engineer and consultant brings in. This will affect how much a professional liability policy will cost.
2) Specialty – The type of engineering will also affect the cost of insurance. Civil engineers, electrical engineers, or software engineers have different levels of risk and will also have different costs for a liability policy.
3) Company size – For engineering firms, including those that employ architects, the more employees it has, the higher the chance that an employee might make an error that will involve a lawsuit against the company. The bigger the company, the higher the risk, and the higher the cost of the liability policy.
Other factors that affect insurance coverage:
1) Claims history – companies that have a history of claims are normally charged a higher premium. If a company has had several claims filed due to lawsuits from previous clients, it is expected that this company’s liability insurance will be more expensive compared to another company with zero history of claims.
2) Credit records -architects with good credit records will have a better chance of having a lower premium than those with bad credit history
3) Geographic location – the location of the business also plays a factor in the cost of the policy. Some states are considered high-risk states and firms located here should expect to have higher premiums.
These various factors determine the cost of professional insurance for an engineer. It is important to talk to a reputable insurance company, insurance agent, or insurance broker to discuss how much coverage you need and how you can get the most cost-effective and affordable policy that can cover your needs.
Professional liability insurance is a must for all professionals and it is the best way to protect your livelihood and business. No one is perfect and despite your best efforts, there is always a chance of an errors even for the best engineer or the most experienced architects. Having sufficient coverage and protecting yourself with enough insurance, both for general and professional liability, is one way to ensure that you and your employees are protected from possible claims of negligence or professional mistakes in the future.
An insurance broker can help you get the coverage you need, but you can now also easily shop around for insurance online. Many insurance websites offer free quotes and free online consultations. To save money, it is worth looking into getting your general and professional liability insurance from the same provider. When looking for the right insurance company, also make sure that you can easily contact their customer service or get hold of their agents. You don’t want to be stuck in a situation wherein you need their help but can’t get in touch with them.
Engineers, architects, and all those working in the engineering field should always be aware of their need for professional liability insurance. Having the right coverage gives you the freedom to do your job the best you can, while knowing that you are always protected, no matter what the future may bring.