Insuring Against Oops
If a surveyor permits a hazard to exist, he or she is negligent. Neglecting to remove the ice and snow from in and around your place of business is a good example of negligence. Remember, however, no matter how hard you might try to remove all possible hazards from your profession, today all businesses are usually assumed by the courts and juries to be responsible for just about anything.
General liability insurance protects any business against claims made for bodily injury or property damage to a third party, for medical expenses accruing to an underlying incident, for the cost of defending lawsuits, including investigations and settlements, as well as for any bonds or judgments required using an appeal procedure. In addition to general liability insurance, every surveyor needs other types of liability insurance.
Workers’ Compensation insurance is probably the best-known liability insurance. Required by law in all 50 states, Workers’ Compensation (formerly known as Workman’s Compensation) insurance protects an employer from liability for employee accidents. This type of insurance will pay medical expenses and lost wages for an injured employee and, in cases of death or disability, provide lump sums or annuities. Maintaining a safe working environment usually goes a long way toward controlling the cost of this type of coverage, a risk-management strategy not available to many surveyors whose workplace is often on others’ property. Premises and operations is part of a business liability policy that covers a surveyor for bodily injury or property damage liability to members of the public while on business premises.
Professionals like surveyors often find that their professions create liability. Today, lawsuits frequently arise alleging that professionals have committed negligent acts or omissions in performing certain purchased services.
Professional Liability InsuranceThe rise of professionalism in today’s world parallels the transformation of American business from a manufacturing-based economy to a service-oriented economy. And, no, it is not only physicians and attorneys that are being sued by their clients for malpractice—many other professionals are now at risk in our litigious society. Accompanying the expanded base of professional services, many surveyors today find themselves exposed to malpractice claims.
Of all the suits that could be brought against professionals, the two most common are for breach of contract and negligence in the performance of services. Negligence suits arise from damages sustained due to the professional’s failure to perform according to known standards of conduct within his or her field. Naturally, there must also be a close relationship between the negligent acts and the damage caused.
The financial consequences of such suits, including the cost of defense, can be severe. As a result, it is critical for surveyors to recognize their exposure to financial losses and adopt effective means to deal with them.
Protection from InsuranceThe insurance industry has expanded its professional liability capacity to embrace many of the newer classes of professionals. Some policy forms are tailored to a single profession such as surveying. Other insurers cover the acts of the professional by describing them in a space on the policy declarations page or in an endorsement.
A few professionals, such as morticians, opticians, printers and photographers, can obtain professional liability insurance in a business owners policy (BOP) or similar package-type policy. More often, it is necessary to secure a separate policy, which may be sponsored or endorsed by a trade association.
Errors and omissions (E&O) liability insurance is available for surveyors who require protection for negligent acts and/or omissions resulting in bodily injury, personal injury and/or property damage liability to a client.
Even insurance agents require E&O liability insurance because they are constantly exposed to the claim that inadequate or improper coverage was recommended. This often results in the client’s suffering a loss of indemnification. If sustained, that insurance agent or broker (or the insurance company) would have to make good on the claim of the client without adequate insurance coverage. E&O liability insurance covers this.
How much any surveyor will pay (known as the premium) is typically based on the following factors: profession itself, number of professionals covered, annual revenues, location of business or practice, limit of liability and deductible. Every surveyor is encouraged to shop carefully for this protection, since eligibility requirements, underwriting criteria, policy language and pricing can vary widely among insurers.
The “insured” in many professional liability policies includes the covered business itself as well as its past and present partners, directors, officers and employees while acting within the scope of their duties. The policies include coverage for defense costs, even if a suit proves to have no merit.
How much insurance do you need?Too little insurance or carrying only the minimum amount, can leave you vulnerable. On the other hand, if you work out of your home and pay annual insurance premiums for general liability coverage, you may be bleeding cash from the business since that same coverage may already be provided by your homeowner’s policy.
Other ways of keeping liability insurance premiums at a minimum are to:
- Know the legal minimums. Ask your insurance agent, broker or state insurance commissioner if there are minimum insurance levels set by law. Also ask if certain minimum levels are required by state licensing or accreditation boards.
- Know your business. Take a look at the structure of your operation. If it is incorporated, and if you obey all of the rules of running your business as a corporation, buying reduced protection limits might be a viable, cost-cutting move. In the event that you are sued and lose, only the assets of the corporation can be seized in order to satisfy a judgment. Naturally, you should check with an attorney to see whether you as an officer or principal shareholder in your surveying firm can be held personally liable. More and more today, courts appear to be reaching behind closely-held corporations into the pockets of the principal shareholders.
- Know your people. This includes knowing your employees and yourself. Is your business staffed with highly skilled professionals with years of experience in the field? Or have you hired younger, less experienced employees? Are you, or any of your employees, accident prone?
Consider all of the facts when deciding how much liability insurance to purchase. Also remember there are methods for reducing or managing risk.
Managing riskEvery surveying business or practice should establish and maintain a loss prevention program to help minimize the chances of malpractice claims. Among common loss prevention techniques that minimize an exposure to risk (and often reduce the cost of insurance protection) are:
- Establishing fees and/or billing practices at the beginning of every client relationship;
- Using engagement letters, contracts and other means to precisely identify the scope of the services to be performed;
- Keeping written documentation of all activity, including telephone calls, billing calculations, etc;
- Participating in peer reviews, where feasible;
- Avoiding situations that present conflicts of interest;
- Obtaining appropriate credentials and certification, and taking continuing education courses to remain current;
- Screening new clients carefully and keeping existing clients informed at all times; and
- Avoiding giving specific performance guarantees.
Self-insuranceSelf-insurance might not be a viable option for some in areas where insurance coverage is tied into licensing or bonding. With self-insurance there is also the danger that you could have an unfortunate incident before you have enough money in your self-insurance fund. And, don’t overlook the fact that insurance premiums are tax deductible expenses; contributing to self-insurance contingency funds is not.
Fortunately, even if you can’t totally self-insure, you may be able to partially self-insure by purchasing policies with higher deductibles. Suppose, for example, that you maintain fire, theft and collision protection on your business vehicles. If you agree to be responsible for the first $1,000 of any damage to the vehicle rather than the first $250 that is standard in some policies, your additional risk is not that great.
In today’s litigious society, liability insurance is a necessity. For surveyors, insurance coverage that goes beyond the basic business liability protection is available. How readily available and at what cost require shopping. Remember, however, that professional liability insurance, like most other insurance, doesn’t cost—it pays.
Sidebar: Land Surveyors’ InsuranceThe CNA insurance company, in conjunction with the American Congress of Surveying and Mapping (ACSM), has developed an insurance program specifically for land surveyors. Available through numerous insurance agents and brokers, the CNA program protects land surveyors against losses from professional liability claims that arise from negligent errors, omissions or acts.
This comprehensive coverage is available in all 50 states and can be tailored, using coverage options, to meet the needs of individual land surveyors and their firms. For guaranteed coverage, the Land Surveyors Program offers a three-year policy with the same broad coverage available in shorter term policies.
ACSM members receive a 15 percent discount on their premiums through the CNA program. The program also offers other options for professional land surveying services, including pollution coverage. First dollar defense coverage, retroactive coverage, additional premium credits of up to 25 percent for surveyors and those firms with good claims experience are available.
The CNA program also has a “mediation credit” that reimburses up to 50 percent of the deductible amount (up to $15,000) when mediation is successful in resolving disputes.