You’ve likely encountered many situations where you need to have some type of insurance if you work in engineering. You might be a sole professional engineer or a small engineering firm with just a few people. You might be wondering why you need all this coverage.
The deal is already known: If the developer tells you that you and your engineers require insurance, then you must get it. In almost all cases, however, you can get the insurance coverage that is both affordable and profitable for your business.
Clients often require proof that professional engineers have provided the following types of insurance:
General liability insurance
Engineers can get liability insurance that covers injury or damage to their clients’ property or people (exclusions: professional liability). Engineering consultants are often asked if they really need this type of insurance. What are the chances that someone drawing in their own office could cause damage to a client’s property, after all?
It’s not your fault. Client companies will often ask vendors to provide proof of their general liability insurance to anyone who visits their offices or jobsites – from delivery men to construction crews to engineers. It’s often the corporate risk managers that make the call and require insurance for engineers and other contractors to lower the company’s risk.
General liability insurance is inexpensive and engineers who have it can rest assured that their workers are covered in the event of an accident. If your engineering consultancy is located in an office building, you may be required to have general liability insurance.
Professional liability insurance
Professional liability insurance, also known as malpractice insurance for engineers, is shorthand for professional liability. This insurance covers you for the errors and omissions that you, or your engineers consultants make while on the job. Professional liability insurance for engineers is essential because you are human and mistakes happen.
The greatest risk to your client when you are hired as an engineer consultant is that you may make a mistake or miscalculation that could result in a lawsuit against the client or other financial loss. Your client does not want you to be an independent professional engineer, or to run a small business. However, they do expect you to have sufficient financial backing to cover any losses.
Let’s say, for example, your engineering firm is hired by a developer to design storm drainage systems for a new shopping mall. After construction is completed, the developer finds erosion and other damage to parking areas. Then, the developer files suit against your firm, claiming that you were negligent in your design. Engineers without professional liability insurance are responsible for their own legal defense and any settlement they receive from the court.
Engineers are fully responsible for any claims of errors or omissions. Professional liability insurance does not cover engineers. This is a very dangerous position to be in, especially if you are a small business.
Workers’ Compensation Insurance
Workers’ compensation insurance can be confusing for professional engineers. While some states require companies to have it, others do not. Your engineering company may be required to carry workers’ compensation insurance if your client is located in a state that requires it.
This is because in some states, if your client’s workers are hurt while on the job, it must cover you with its workers’ compensation policy. In some states, clients’ insurance companies will bill them for coverage for subcontractors who don’t have their own certificate. These two situations can result in higher premiums for your client.
It is a good idea to have workers’ compensation coverage if your engineering company employs more than one person. It may not be necessary if you are an independent professional engineer who has your own health insurance. However, workers’ compensation insurance is essential to help you get the job. If you don’t have the coverage you need, someone else will.
