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RE: Insurance questions (E&O this time)

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I had the same considerations about E&O a few months back. I took phone
numbers of agents providing the coverage - the top companies recommended by
mid size offices on this list. I ran into a number of problems:
1) None of the carriers returned my calls. Period, no reasons. I called two
or three times, mentioned the references that led me to them and none
contacted me for my business.
2) This client was shopping for a new engineer. I believe he found someone
else who offered better rates and who had E&O. I think the reason was that I
could not raise my rates for existing clients who did not require E&O, even
if they were gaining from this advantage. I needed to collect my annual
premium from the one client willing to pay rates commensurate with
professionals carrying E&O. I don't believe there was sufficient advantage
for this architectural firm to do work with me when my rates based upon
projections of business from that firm alone yielded higher per job costs
than my competitors with E&O. The competitive engineering firms had
established clients and were able to amortize the premium rates into the
cumulative work done for all clients.

Finally, I am a firm believer that E&O is like a pot of gold waiting for a
someone to come along with a frivolous suit to dip into the pot. So far, I
have been threatened on numerous occasions as a cross-complainant (never
directly sued), but was dropped from the suit when the attorney's found
there was no pot to dip into.
I believe we are in a risky business to begin with. Very few law firms will
proceed with costly suits when there is nothing to gain from the engineer. I
don't know of any attorneys willing to gamble when there are no stakes on
the table.
This is a very subjective issue. I hope I never make a mistake that would
warrant a suit against me. You need to decide how much risk your in.
One more caution. When I run up against a client who is adamant about
insurance coverage I get very nervous. My opinion is that many of these
clients try to fast track - leaving the engineer out of the construction end
of the job. Then, when the contractor constructs a project and does not
follow the engineers details, the war begins. When this occurs, the clients
team up with the contractor and nit picks the drawings in hopes that they
can recoup as much of their mistake as possible by involving the engineer in
an omissions threat or possible suit.
Without coverage, the owners are more apt to recoup the cost of mistakes
from those that make them, namely the contractor - assuming the error was
his. At this point the engineer is least likely to be served as
cross-complainant when it is discovered that he has no insurance to share.
I know many don't agree, but the fact is that if you can't make the fee's to
pay the premium, you have to exclude the coverage and attempt to limit your
liability in your contract. This can always be tested in court, but I think
most legal firms will test the water for what your worth before taking the


Dennis S. Wish PE
La Quinta, California

ICQ# 6110557

"Science may have found a cure for most evils; but it has found no remedy
for the worst of them all - the apathy of human beings"  Helen Keller

-----Original Message-----
From: Kathleen A. O'Brien [mailto:wildwoman1(--nospam--at)]
Sent: Monday, April 06, 1998 2:42 PM
To: SEAOC Forum
Subject: Insurance questions (E&O this time)

I need to find out about E&O coverage for a specific project.

I do not currently carry E&O because the last time I researched getting it
(1994 or 1995):
a.      it cost too much.
b.      the deductible was way too high in relation to the premiums (too
high for me, anyway).
c.      I was afraid it would make me a lawsuit magnet.

Many of the other small operators I have talked to don't carry it either,
a.      it costs too much.
b.      the deductible is way too high in relation to the premiums.
c.      they are afraid it would make them a lawsuit magnet.

I have a potential client who is eager to work with me but is uneasy about
my lack of coverage. He is willing to pay me more $$ to get coverage (up to
a point, anyway). The architect on this project doesn't carry E&O either,
a.      it costs too much.
b.      the deductible is way too high in relation to the premiums.
c.      he is afraid it would make him a lawsuit magnet.

(is there an echo in here?)

So: what I need to know is:

a.      is there an good underwriting firm who can cover me for only one
b.      what do other small operations do about E&O insurance?
c.      is there a good firm who can cover me with rock-bottom premiums, a
low deductible and no aggravation (hey a girl can dream)?


Kate O'Brien
Simi Valley, CA