liability insurance

[moncton golden flames]

i have recently incorporated myself as a numbered alberta ltd. i have a potential client asking me about liability insurance and if i carry any. currently i do not carry it. being a limited company, do i need this insurance? and for any insurance guys out there...how much would insurance like this cost me?

thanks in advance

[Slava]

You only need the coverage if you could make an error and cause injury to someone else as a result (injury as in cause a loss for someone else) and potentially be found negligent. The coverage would also be handy if you need to defend against an action like that.

You should probably have some coverage....I tend to be over insured though!

[moncton golden flames]

i should clarify a bit. i design homes and i think the client is concerned about mistakes or issues during construction.....not sure if that changes anything.

thanks for the info slava.

[fredr123]

Consider the question from a potential client's point of view. If you mess something up, can the client seek compensation from you?

If you are a limited company then you may not be personally liable. Without much of a track record to speak of (since you have recently incorporated) and probably few, if any, assets of value held by the corporation there is a greater risk of the client being unable to recover anything from you if things went sideways.

Similar concerns apply should you find yourself going to get a line of credit for your business. The bank will likely require you to personally guarantee the loan in order to be sure someone with some value is on the hook if things don't work out.

[macker]

To start you likely need a commercial general liability policy and some companies offer these for a minimum premium of $350 and they go up from there, so they aren't very expensive for picking up 1-2 Million commercial coverage. A lot of companies won't give out contracts unless this type of coverage is in place so people buy them for that reason alone but that is missing the point. Protect yourself! There is potential for some very large claims that could put you under without proper coverage. You may also want to look at E&O coverage but this is seperate and a lot of contracts don't require it but it is also important. Peace of mind that you can also write off....

[moncton golden flames]

Originally Posted by fredr123

Consider the question from a potential client's point of view. If you mess something up, can the client seek compensation from you?

If you are a limited company then you may not be personally liable. Without much of a track record to speak of (since you have recently incorporated) and probably few, if any, assets of value held by the corporation there is a greater risk of the client being unable to recover anything from you if things went sideways.

Similar concerns apply should you find yourself going to get a line of credit for your business. The bank will likely require you to personally guarantee the loan in order to be sure someone with some value is on the hook if things don't work out.

i understand the clients perspective completely. but like you said, being a limited company, i am personally protected but the business accounts are exposed. i've had experience with a few builders who will start a new company every few years in order to protect assets from the older companies.

in my line of work, there is always an engineer who with review and provide their technical analysis. does the engineer not bare thebrunt of the structure design. if so, it leaves my company open to windows, doors and framing errors, which on the grand scale, can be small.

also, if a client comes after my company for something and the company only holds a few thousand dollars, what else can the client do?

[fredr123]

Originally Posted by moncton golden flames

i understand the clients perspective completely. but like you said, being a limited company, i am personally protected but the business accounts are exposed. i've had experience with a few builders who will start a new company every few years in order to protect assets from the older companies.

in my line of work, there is always an engineer who with review and provide their technical analysis. does the engineer not bare thebrunt of the structure design. if so, it leaves my company open to windows, doors and framing errors, which on the grand scale, can be small.

I don't have a great deal of experience with your line of work but I do know of cases where a pipeline engineering firm subcontracted some specific design work to an individual working through his own company. Things went sideways and not only was the firm named in the lawsuit but so was the individual subcontractor and his own little company. The individual, surprisingly, was not insured. The way things unfolded, he could be personally liable for whatever damages were incurred. The courts have yet to hear the case so who knows how that will turn out in the end.

Originally Posted by moncton golden flames

also, if a client comes after my company for something and the company only holds a few thousand dollars, what else can the client do?

Not much unless they can get you personally.

[Slava]

I think the important distinction is that the corporation will protect you from personal liability (although the case fredr123 mentions above might be very interesting?) it doesn't absolve the corporartion of liability.

[Locke]

The degree of personal liability that a corporation can shield you from is grossly exaggerated. Get insurance.

If the company is liable for something, as a director you can therefore be personally liable as well, not to mention personal guarantees. Get insurance.

Although, I'm no lawyer and this isnt legal advice.

[fredr123]

Originally Posted by Slava

I think the important distinction is that the corporation will protect you from personal liability (although the case fredr123 mentions above might be very interesting?) it doesn't absolve the corporartion of liability.

I don't want to go too far and offer anything that could be construed as legal advice but suffice to say in the circumstances I was speaking of the subcontractor wasn't entirely clear when dealing with the engineering firm that they were contracting on behalf of his company and not the individual. It is open for debate whether all the other parties in the transaction understood that the subcontracted engineering work was conducted by the company or the individual. That's why they are both named and that both of them are still involved in the matter.

[Finny61]

You have a commercial business then you need commercial insurance. I don't know all the details of what your business is involved in but typically a CGL policy supplemented with E&O is best. I say E&O because if you are an engineer and are involved in architectural designs then exposure exists. It's called Professional Liability and a traditional CGL policy will exclude that aspect of your operation. The only time when that exposure is suppressed is when you have a technical-oriented superior party who signs off on your work however that may not take away the need for E&O but it definitely reduces that need. Really you should talk to an insurance rep somewhere.

[Nufy]

I work as a consultant and two of my clients have required me to carry my own Liability insurance.

The third one (incidentally who is giving me the most work right now) is covering me under theirs as I am doing work in the company name.

As others have said some companies won't hire contractors without it. Some will cover you under their own.

[HOOT]

MGF does your profession have an organization or council looking over it? I would give them a call and see what they recommend for you to carry or if you even need it. I'm shocked you wouldn't have any designing houses because if your design fails the customer would have no choice but to go after you personally.

Liability insurance can be pretty cheap (well guess it depends on your definition) and if there is a chance you could get sued I would advise you to carry some. The small amount you will pay on a yearly basis would be well worth it if you do make a mistake. One of those things where you may never need it but you will be pretty damn happy you have it if you do.

[GGG]

I am not a lawyer but I believe you can be liable through a Tort as an individual if you are negligent. If you represent yourself as anykind of professional you may have a duty of care to the public so while the individual you have a contract with may not be able to hold you liable if a 3rd party not involved with the contract is injured as a result of your work you may be found liable.

I think that is the only think I learnt from the engineering law and ethics books. Basically carry insurance because there is always a way to sue you.

[pylon]

Put it this way, I would never, in a million years, hire someone to design a home for me if I found out they or their design weren't insured. In fact, if I found out they weren't out of the gate, I would move on to someone else, and not give them the chance to get insurance. It seems like a massive oversight from someones point of view who is likely spending hundreds of thousands of dollars, and in all honesty, kind of Mickey Mouse operation'esque'.

[macker]

Originally Posted by pylon

Put it this way, I would never, in a million years, hire someone to design a home for me if I found out they or their design weren't insured. In fact, if I found out they weren't out of the gate, I would move on to someone else, and not give them the chance to get insurance. It seems like a massive oversight from someones point of view who is likely spending hundreds of thousands of dollars, and in all honesty, kind of Mickey Mouse operation'esque'.

Not to mention they should have a surety bond in place. Insured and bonded or no deal. Why would you do business with a company that isn't professional enough to protect themselves and your interests.

[moncton golden flames]

thanks for all the feedback and non-legal advice guys.

my day job, which is the same profession, is for a company who has been designing homes in calgary for over 25 years and it carries no insurance. i asked my boss why and he said it's because they can only get the company and not him, so he chooses to not get it.

after speaking with a home builder today, he is not concerned about a lack of insurance at all. infact, most if not all the designers he has worked with do not carry insurance, mainly because the engineer and floor/truss manufacturer will carry the structural burden. after you take out the structure of the house, there really isn't much left to be concerned over.

i'm really torn here. people that i have spoken to in my industry say don't get it, then cp tells me i should. i know it's better to be safer than sorry, but i'm still on the fence about this. i know the peace of mind would be nice, but i also don't want it to be an ornament-like insurance where it serves me no good.

[moncton golden flames]

Originally Posted by pylon

Put it this way, I would never, in a million years, hire someone to design a home for me if I found out they or their design weren't insured. In fact, if I found out they weren't out of the gate, I would move on to someone else, and not give them the chance to get insurance. It seems like a massive oversight from someones point of view who is likely spending hundreds of thousands of dollars, and in all honesty, kind of Mickey Mouse operation'esque'.

to each there own, but i think you will have a hard time finding somebody to design your home if that is the case.

[moncton golden flames]

update:

i spoke with several insurance people yesterday and we went over the nature of my business and how liability insurance would affect it.

2 types of liability; general and professional

general would cover my business and you if you came to my office for a meeting and you slipped on the icey sidewalk. things like this would have us covered. fortunately, operating on home occupancy, i have no clients coming to my 'office'. i have very little to zero exposure.

professional would cover me if there were errors in my drawings. fortunately, i do not have 'stamping' ability like an engineer or architect. my drawings are always stamped and reviewed by a certified engineer. floor, truss and beam design is always stamped by the manufacturers own engineer. a structural engineer stamps my drawings for such things as tall walls, lateral support, foundation and footings. the engineers alleviate me of any liability with their stamps. i have little to zero exposure.

so essentially, because engineers review and take responsibility for most, if not all my structural work, i have no liability when it comes to the structural integrity of a home i design.

general liability insurance cost would be about $600/yr. small cost if a occupied an office, which i don't.

professional liability insurance cost would be about $2500/yr. for a small company like mine (zero sales to date) and virtually zero exposure, this insurance is throwing money out the window.

thanks everybody for the advice and guidance. and to those who don't think you would work with a house designer with no liability insurance, i hope you reconsider and come to me for a quote

[Shazam]

You might also have to get WCB for yourself.