When you work as a licensed, practicing engineer, you are exposed to liability risk for the design, construction and consulting services you provide, and you can be sued for errors or omissions in your work product.
In some cases, these mistakes can have serious, even deadly, consequences. If you or one of your engineer employees miscalculates the load a wall, support beam or pile can bear, a building or bridge may collapse.If your company improperly designs a heating, ventilation and air-conditioning system, it may result in a“sick building.” Or if an employee is negligent in ordering the right kind of concrete, a foundation could crack.
Practicing engineers (those licensed and who “seal” their plans and specifications) are especially at risk for liability exposure, although any engineer who fails to meet a professional standard of care may find themselves in legal hot water. Not only can you be held responsible for mistakes while a project is under way, you can be held liable for damages long after it’s completed.
While professional liability is a significant risk for your civil engineering company, there are other risks you face as well. These include general liability and employment practices liability, damages to property and vehicles, personal injury, and employee injuries on the job.
An experienced insurance professional can put together an insurance program that helps protect your engineering business and gives you the peace of mind that you’re adequately better protect.
Professional liability coverage
Liability is a key concern in civil engineering, since both lives and livelihoods depend on the accuracy of your services and complete and timely delivery. Yet many civil engineers don’t have sufficient insurance coverage to cover a costly lawsuit. Defending an expensive claim can drain your cash flow, ruin your reputation, and even bankrupt your firm.
Architects and engineers (A&E) liability insurance covers you when you make errors or omissions, are negligent in your professional duties, or fail to perform as specified in your contract. A&E helps with your legal expenses and settlement costs in the event of a claim.
Many engineers mistakenly believe they are covered against errors and omissions by their commercial general liability (CGL) insurance. But CGL policies exclude these types of exposures, as do umbrella policies.
Remember, A&E coverage is specifically designed to meet claims involving the performance of your duties and your standard of care as a professional. (CGL, as discussed below, helps pay for bodily injury and property damage resulting from your firm’s business operations.)
Professional liability premiums are based on the size of your firm, annual revenue, the type of work you do, and the amount of coverage you choose. You can lower your premiums by reducing the amount of your liability exposure in your contracts and instituting quality-control programs.
Ask your insurance professional about aggregate and occurrence limits. The aggregate is the maximum amount your policy will pay during the policy’s term (usually one year). The occurrence limit is the maximum your policy will pay for a single claim. In many policies, they are the same limit.
It’s common for firms to begin with a $1 million limit, but larger firms may need $5 million or more. An insurance broker can help you purchase the appropriate limits for your firm, which may require layering coverage from several insurers.
Certain risks are typically excluded, so make sure you have all the coverage you need. For example, you may need pollution coverage or want to include cyber liability insurance.
In addition, be aware that most liability policies are claims-made, meaning that only claims made while the policy is active will be covered. You’ll likely want to keep your policy in force for an extended period in case errors and omissions are discovered after the project is completed.
Commercial general liability and related insurance
You’ll also need to carry CGL insurance. CGL covers your business against claims you are responsible for bodily injury and property damage that occurs on your premises or the client’s property. It also covers personal injury such as libel and slander, copyright infringement, misleading advertising, and use of another’s intellectual property.
Like professional liability, CGL is sold in various limits, depending on the size of your firm and your risks. While CGL covers a customer or visitor who may be injured at your office, it doesn’t cover employee injuries. For that type of coverage, you’ll need to purchase workers’ compensation insurance. Workers’ comp is required in most states, unless you are a sole proprietor.
Here are three other liability insurance forms you may need as well:
- Employment practices liability insurance (EPLI) comes into play when an employee claims job discrimination, harassment, wrongful termination, retaliation or other unlawful employment practice. EPLI, like professional liability and CGL, pays for your defense and settlement costs.
- Directors and officers (D&O) is a separate type of liability coverage you may need for your company’s board of directors and officers. It helps protect them if they are sued during the course of their duties. D&O policies cover a range of claims, including failure to comply with laws or regulations, mismanagement, HR issues, failure to provide a safe work environment, and bankruptcy.
- Cyber liability insurance helps protect your business in the event of a data breach. It covers customer notification, anti-fraud coverage, recovery of compromised data, and repair of your systems. These policies may also protect against the costs of ransomware. You can purchase cyber liability separately or as an add-on to your other business insurance.
Commercial property insurance
If you own or lease office space, you’ll need a commercial property policy to cover damages to your premises. These policies cover the structure as well as its contents, including computers, equipment, tools and supplies. They cover perils such as fire, theft, vandalism, burst pipes and certain weather-related damages. Note that, if you work from home, your homeowners insurance likely won’t cover business property.
Your vehicle may need commercial auto insurance if you use it for business or your firm owns it.
Business owners insurance
Small firms and self-employed civil engineers may benefit from a bundled policy known as a business owners policy (BOP). BOPs combine into one policy many of the coverages you need at a lower price. Talk to an insurance professional about a BOP or similar bundled approach, but be mindful that BOPs won’t cover all your needs and usually have lower limits than stand-alone policies. For example, they don’t include professional liability insurance.
Being a civil engineer is important work. It’s a field that can have lasting impact on our environment and everyday life. It’s also a career that has its share of risks. One costly lawsuit could end your practice if you aren’t adequately insured. Take the time to consult with an experienced insurance professional to make sure you have all the coverage you need.
