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Professional Liability Insurance for Engineers
As an engineer, the work that you do must stand the test of time. But as you know all too well, it only takes one miscalculation to cause a costly delay, safety concern or problem that will need expensive repairs later. If you get sued over mistakes in your work, your legal and other expenses can multiply exponentially.
That's why professional liability insurance is so important. Also known as "errors and omissions" or "E&O" insurance, this type of coverage protects your engineering business if one of your clients should claim that you're the cause of its financial loss.
For example, if a drainage project is completed based on your specifications, but over time it becomes apparent that the drainage system you designed is insufficient and needs retrofitting, your client could allege that an error you made in providing your professional services caused a financial loss. Or, if you're unaware of local codes and miss the mark on a construction project, you could be held liable for any re-work required to make it right. If you're sued—even if you don't believe the loss was actually your responsibility—you'll still have to hire lawyers and take time out from work to defend yourself.
Up to policy limits, professional liability insurance pays for your legal defense, the time you spend in court instead of working, and other expenses as specified by your policy. If you're legally obligated to compensate your client for the loss or other damages, your E&O insurance will pay that award as well, according to the provisions in your policy.
What You Need to Know
E&O insurance policies are typically issued in increments of $1 million and have per-claim deductibles ranging from $1,000 to $25,000. These types of policies are issued on a "claims-made" basis, meaning that coverage must be in force both at the time of the alleged incident and at the time the claim is made, so it's wise to keep your policy in force even after you've completed a project.
Because your client may require that you carry professional liability coverage, read the fine print in your contract to be sure you have the amount specified.
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Professional Liability Insurance Tips
- E&O policies are typically issued on a "claims-made" basis. In other words, for a claim to be covered, the alleged error or omission must have taken place while the policy was active, and claim must also be made while the policy is still in force. This is why, even after you complete a project, it's critical to continue your E&O coverage.
- E&O insurance doesn't cover certain types of lawsuits, such as if you're sued for luring away a customer from your client. Many engineers protect themselves against such situations with contracts that outline conflict-resolution procedures and each party's rights.
- Whether or not you get sued has a lot to do with your clients' temperament and expectations. If you're doing great work but your client relationship goes sour for some other reason, you could still be accused of negligence. That's why it's so important to carry professional liability insurance, even if you've never been sued.