3 Reasons Engineers Shouldn’t Forgo Professional Liability Insurance
August 18, 2022
With so many different specifications to fulfill, the insurance requirements for Engineers can get very complicated, very quickly. Depending on your field and where you practice, Professional Liability Insurance might be mandated by your province or regulatory body. If it’s optional and you choose to forgo it, you may need to provide clients with a letter stating you have no insurance.
But even if it’s not a requirement, there are countless reasons why Professional Liability Insurance will come in handy for Design Professionals, especially if you’re starting your own consulting business, or if you operate as a Technician or Technologist. Here are three:
1. Your general liability policies won’t protect you.
Many clients might make having Commercial General Liability (CGL) Insurance a condition of the job in case someone is hurt or if property is damaged because of your involvement. But if you’re sued for a design flaw, an unexpected project delay, or a payment issue, your general liability policy won’t respond—it’s not designed to cover mistakes. For that you’ll need Professional Liability Insurance.
What’s the difference? CGL Insurance defends you against claims of third-party injury, property damage, or reputational harm; acts that aren’t necessarily caused by your professional advice or services. In contrast, Professional Liability Insurance shields you from allegations of errors, omissions, or negligence committed within the scope of your professional activities as an Engineer.
Both coverages are critical. Because they respond to different risks, they work together to protect you comprehensively from claims that may fall into a grey area. And if you don’t have the right policy, you’ll be personally liable for the damages.
2. You have a high duty of care.
As a Design Professional, you know that public safety is paramount. Even the slightest defect could have potentially fatal consequences. The expectations are high, which means the punishment is even higher. And if there’s an incident, you’ll be seen as guilty until proven innocent in the eyes of the court.
It doesn’t matter if your contract states otherwise. Even if the mistake in question was unintentional, a limitation of liability clause may not hold up in court if it’s an account of gross negligence or a breach of professional standards. Maybe a mistake was covered up before you had a chance to catch it during a field review. Maybe you authorized a design change that caused an injury. Or maybe you just gave a client some general advice or direction. Either way, your client is trusting your expertise to make key decisions, so even a quick response or an ambiguous comment could still trigger a lawsuit. Without insurance, you’ll have to shoulder the expenses out-of-pocket.
3. Lawsuits are costly.
In addition to legal fees, there’s also the cost of lost business. On average, it takes about three years to resolve a lawsuit, with the average cost of a settlement at $250,000. Keep in mind: bigger, more elaborate projects, with many involved parties generally have extensive legal proceedings that take more time—and money—to settle. And since you’ll be busy dealing with lawyers, you’ll have fewer billable hours to make back what you’re losing in legal fees.
Even if a claim is frivolous, you’ll still have to defend. Say your client misses a few payments and you stop working as a result. If they sue you for holding up the project, you could still have to spend an obscene amount of money just to clear your name. If you work for a larger firm, you might be covered under your employer’s policy. But if you’re consulting on the side or have your own business, you might have to temporarily shut down just to stay afloat.
But with Professional Liability Insurance, you’ll have the financial safety net you need to continue work as normally as possible if something goes wrong. Professional Liability Insurance will take care of your damages, like legal expenses, administrative fees, court settlements, and more, even if the allegations are groundless. And if you go through PROLINK, your policy will also include coverage for disciplinary hearings, so you’ll be protected if you’re dealing with a public complaint.
The amount of insurance you need—and the price of your policy—will depend on a variety of factors: the size of your company, your annual fees, the types of jobs you take on, where you practice, your specialty, and more. In general, the bigger your projects and the more you take home, the higher your premiums will be.
We know, it’s an extra cost, but it’s better to be safe than sorry and lose a few thousand every year for insurance than potentially millions in a claim. The right policy will help you avoid financial strain and ensure that legal action won’t jeopardize your business or your reputation.
For maximum protection, be sure to consult with a risk advisor that specializes in the engineering sector. With over 40 years of experience, a licensed broker like PROLINK understands the scope of risk you face across different engineering disciplines and services. We can help you:
- Navigate industry trends and identify exposures based on your business operations;
- Adopt a proactive approach to risk management to control your costs long-term;
- Conduct a full analysis of your existing insurance policies to detect any coverage gaps;
- Secure a comprehensive solution that aligns with your unique needs and strategic objectives.
Connect with PROLINK today to learn more!
PROLINK’s blog posts are general in nature. They do not take into account your personal objectives or financial situation and are not a substitute for professional advice. The specific terms of your policy will always apply. We bear no responsibility for the accuracy, legality, or timeliness of any external content.