Errors and omissions (E&O) insurance is an insurance policy that provides personalized and/or collective coverage for individuals and their companies when they are sued for negligence, errors, omissions, or failure to provide services to meet the requirements or expectations of their clients. This type of insurance is sought after by many types of professionals, including accountants, doctors, architects, dentists, and event planners. Even though the majority of professional engineers understand the importance of signing up for E&O insurance, many commit errors in the process and only recognize that their coverage is inadequate when facing claims later. Here are some of the common mistakes professional engineers can avoid to ensure that they get all their bases covered should they ever face a claim.
Every professional engineer should be aware that there is no one-size-fits-all E&O insurance policy. Most engineers think that just because they have a valid insurance policy means that they can undertake engineering contracts of any magnitude because their current policies will take care of any future claims, should they arise. It is important for engineers and their firms to consult their insurance carriers on a frequent basis in order to analyze their levels of coverage at any given point in time. Additionally, engineers should talk to their brokers to determine their levels of coverage before undertaking any new contract because in certain cases, additional policies may have to be purchased. Many reputable insurance carriers provide contract review and risk management consultation for their clients at zero cost, and professional engineers should take advantage of that.
It is important for engineers to factor self-insured retention (SIR) costs into bids they place for large projects. Lots of engineers try to outbid their competitors in large contracts by submitting lower bids, and as such most of them fail to factor self-insured retention (SIR) costs for their E&O insurance policies into their overall financial proposal. SIR costs for large projects can be as much as $1 to $2 million, and failure to consider these expenses when submitting bids for projects can lead to significantly reduced profits or even losses when the project is completed.
It is typical for firms to make use of engineering subcontractors, especially in design-build projects. Some engineering companies seek the necessary coverage for their employees without making sure that their subcontractors are also adequately covered. In some cases, they become liable for claims brought against their subcontractors, which may not be covered by their own insurance policies. This can lead to substantial financial losses, and a sizable number of engineering firms have been bankrupted as a result of similar mistakes.
It is advisable for professional engineers to consult their lawyers and insurance carriers on a regular basis to assess their risk, and implement the necessary safeguards, especially before they take on a new project.
Need more information about Errors & Omissions insurance for engineers? Call Insurance By Design at 972-499-3414 now.