Insurance Foresight-Basic Coverage Considerations
Accuracy is a watchword in the surveying profession. In this column, I will provide information to aid you in accurately purchasing and/or pursuing insurance for your surveying firm.
Unfortunately, in today’s society even the best surveyor can find him or herself involved in a lawsuit. Having insurance is one solid way to protect yourself. In my work, the question that arises most frequently--and is asked by those in the smallest to the largest firm--is: What basic coverage should I carry for my surveying firm? There are many ways to insure yourself and find the coverage to best protect your interest, but keeping it affordable isn’t easy.
Professional Liability CoverageProfessional liability insurance (also known as errors and omissions insurance) protects against losses from claims that arise from negligent errors, omissions or acts. Some state boards require firms to provide proof of professional liability insurance or provide written acknowledgement to their clients if they do not carry the coverage. In states that do not require surveyors to carry professional liability, more and more firms are choosing to purchase this type of insurance to protect themselves from lawsuits. An overall benefit of carrying professional liability is that, if a claim is brought against your firm and a suit develops, the insurance company will provide you with legal counsel.
There are a variety of places to look for a professional liability company and agent. I recommend that surveyors inquire about options with their professional societies and state associations, and research insurance companies that specialize in the surveying profession. Some associations have developed insurance programs especially for land surveyors that allow members to receive a credit on their premium.
Once you have selected the agent (insurance professional) and insurance company to market or shop your professional liability, make sure to compare each policy within the agent’s proposal. It is extremely important to get an “apples to apples” quotation on any portion of your insurance coverage. Confirm with your insurance professional that you are getting the coverage you need for the right price.
It is imperative that you have a good working relationship with an insurance professional who knows your profession and the exposures you are facing on a daily basis to customize an insurance plan to fit those insurance needs. When comparing insurance quotations and marketing your professional liability, here are some things to consider:
- Retroactive date (prior acts). In order for coverage to apply on a “claims made” policy, the claim has to be filed during the period between the retroactive date and the current coverage date.
- Defense (legal counsel) inside/outside the limit of liability.
- First-dollar defense.
- Limit of coverage provided.
- Billings/gross receipts. The policy premium will typically be based on the estimated annual billings/gross receipts of the surveyor. If the estimation is low or incorrect, the insurance company has the right to ask and/or audit financials of the surveyor, therefore adjusting the premium charged for the exposure.
- Deductible amounts.
- Financial ratings or A.M. Best rating of each insurance company (available at www.ambest.com).
- Admitted versus non-admitted insurance forms. An admitted carrier has rates/regulations that are guaranteed or backed by the state insurance commissioner to pay claims on those policies. Non-admitted carriers are not guaranteed by the insurance commissioner and/or do not have to follow the cancellations regulations required under the state insurance commissioner. Also, additional taxes will be charged on the non-admitted carrier’s policy for each state in order to conduct business in that state.
- Mediation credits and the definitions of such. If an insurance policy has mediation credit on the policy and a claim occurs (i.e., if it is settled via mediation in lieu of actually going to court, which most are), the deductible would be reduced by 50 percent in most cases.
- Risk management tools provided, such as pre-claims assistance, contract review and/or mitigation of loss.
Business PackagesYou should find coverage included within a business package for business general liability, property, computer/media, valuable papers, property in transit, surveying equipment and business income/extra expense. As you can see, this particular portion will encompass many pieces of the entire puzzle of your insurance portfolio. However, while business packages may appear on the surface to be much “simpler” than professional liability--consumer beware!
In my experience comparing policies for my clients, these packages can have more holes in their coverage. For example, an agent may imply that the policy being proposed covers the property out in the field while a survey is being performed. However, when a piece of equipment is stolen, the agent may then tell the surveyor that there is NO insurance for that piece of equipment because it was not in “his care, custody and control.”
Business general liability coverage provides protection against claims arising from injuries including those a surveyor may become legally obligated to pay for, such as bodily injury and/or property damage. You must understand, however, that this coverage will not provide professional liability (errors or omissions) coverage. In fact, most policies will have an actual exclusion of professional liability.
But the surveyor should not underestimate the value of general liability insurance. Most of the clients that surveyors work with on a daily basis require a certificate of insurance reflecting this coverage prior to going on the jobsite. With that being said, surveying firms provide professional services and should not be rated and/or calculated for a premium like a contractor. If your premium is calculated as a contractor (based on payroll), your initial bottom-line insurance cost could increase, and you could be eligible for a payroll audit at the expiration of your policy.
As for the property, computer/media, valuable papers, property in transit and surveying equipment portion of the business package, you need to recognize once again that each of these coverage parts must be compared “apples to apples.” The typical differences between policy options are found in the definitions of how the coverage will apply. Again, some of the state associations and/or professional societies may offer specialized coverage while the typical insurance form may require additional coverage to be comparable. Endorsements are additional coverage added to the policy form or as amendments to the form, such as specified parameters of coverage for property off-premises.
Here are some questions to consider in comparing business packages:
- How will the business general liability premium be calculated?
- Will the business general liability be auditable?
- Will my business general liability apply on premises as well as off-premises?
- Will surveying equipment be covered while in my custody and control or out in the middle of the field?
- Will the computer/media portion of the package cover my electronic data and/or data collecting devices?
- Where does the business income/extra expense apply?
- What cost will be generated to add an additional insured and/or waiver of subrogation (substitution of one creditor for another) to my policy?
- What limits of liability are quoted?
- Will physical damage be quoted? If so, what deductibles are applied?
- Is business or personal vehicle usage covered?
- Are symbols shown on the policy that limit coverage? An example would be “any auto,” which usually provides automatic coverage for 30 days on a new vehicle purchased over a weekend. “Scheduled auto only” insures only the vehicles listed on the schedule, so a newly purchased auto wouldn’t be insured until the surveyor advised the agent to put it on the schedule.
- Is hired/non-owned liability covered?
- Is “drive other car” coverage included and/or needed?
- Have you compared additional enhanced coverage by endorsement (such as “hired car physical damage”)?
- Is rental reimbursement covered and/ or needed?
The Bottom LineWorkers compensation is a required coverage in most states; however, there are some states providing coverage only via their state fund. (See “Protecting Your Best” in POB August 2006 for suggestions or ideas when comparing quotations on this particular coverage part.)
Of course, the decision on what and how much insurance to buy simply comes down to the ultimate decision of what is affordable. Your insurance professional should provide you with a comparison of the insurance companies and coverage options available to you and provide you with optional coverage limits, optional deductibles, etc., to customize an insurance plan that works well for your firm while reducing the bottom line of your insurance cost.
Understand that the above coverage represents some basic insurance policies needed by surveying firms; however, each of these policies can be enhanced by adding additional coverage parts and/or policies necessary to specifically address your individual needs. You will need to inquire further with your insurance professional regarding those needs.
This material is intended for informational purposes only. Readers are advised to compare the actual insurance forms to determine how coverage would apply to their situations. If you have specific insurance questions, the best source of advice is a licensed insurance agent.