Even Perfectionists Need Insurance
Swallowing Your PrideProfessional liability insurance (also known as errors and omissions insurance) protects land surveyors against losses from claims that arise from negligent errors, omissions or acts.
“Land surveyors sometimes have a problem with the idea of getting professional liability insurance because they think it is a stigma to carry it,” says Lisa Isom, Professional Land Surveyors of Colorado Insurance Administrator at Assurance Risk Managers Inc., Denver, Colo., which offers nationwide coverage for land surveyors. “They think it is a stigma to carry it because their peers will think they make a lot of mistakes. They often get a better feeling about it when we explain it is just like malpractice insurance for doctors.”
Some state boards require land surveying firms to carry professional liability insurance, which is good, according to Milton Denny, PLS, POB contributing editor. Florida is one such state, according to Bart Gunter, vice president of Rogers, Atkins, Gunter & Associates Insurance Inc. in Tallahassee, Fla., and the insurance program manager for the Florida Surveying and Mapping Society.
Even in those states where it is not required, Denny says he believes all firms should carry some type of professional liability insurance.
“It is almost mandatory. You need it to protect your company from lawsuits. It is easy to get sued,” Denny says. “An overall benefit for having professional liability insurance is that it is a good marketing tool to say that you have it. More importantly, if you have it and a claim comes up, a professional liability insurance company can provide you with legal support. Even if you don’t get into a big claim, they will provide attorneys that are familiar with the surveying and engineering professions.”
Respondents to a POB Online Poll in February 2000 agree. In response to the question, “Do you or your firm carry errors and omissions insurance?,” 61 percent of respondents answered yes.
Choosing a CarrierThere are a variety of places to look for a professional liability insurance carrier. Policies can be sold through professional societies, consulting engineering groups and state surveying societies. The American Congress on Surveying and Mapping (ACSM), together with CNA Insurance Companies and Victor O. Schinnerer & Company Inc., developed a nationwide professional liability insurance program specifically for land surveyors in which ACSM members receive a 15 percent premium credit.
Once you have narrowed down your options, take a good look at their policies, contracts and other literature. Some professional liability companies offer standard contracts. You may want to call and request one to look over before you decide to choose a firm. Compare the policies of each to make sure you are getting the coverage you need for the right price.
Policies, Gunter advises, should also be examined to see if they include backdate coverage.
“It is important when you are shopping for insurance to make sure you get an ‘apples to apples’ quotation. Look to see if you get prior acts covered up until the first day you bought the first insurance policy,” Gunter says.
For example, the CNA/Schinnerer program offers retroactive coverage and a three-year guaranteed premium for eligible firms.
You may also want to check to see if the policy covers “blanket” lawsuits. Even if a surveyor did his or her job correctly, he or she may still be named in a lawsuit involving everyone who had anything to do with a project, according to Isom. Some policies state that unless the plantiff claims you have made an error yourself, you may not be covered. Others allow you to be covered even if you are named in a suit that includes everyone involved in the project.
The CNA/Schinnerer program offers broad coverage for professional land surveying services, including pollution incident coverage and a broadened definition of “wrongful acts,” which provides coverage required for international practice.
Dollars and CentsOf course, everything comes down to dollars and cents. The type of professional liability insurance you choose will ultimately come down to what you can afford.
“The rating base for professional liability insurance is tracked by billings, or how much a surveyor is billing each year. This is how we assess the exposure,” Gunter says.
Deductibles for small businesses typically begin at about $2,500 but for very small businesses can go as low as $1,000, according to Isom.
“Larger firms may ask for $5,000 deductibles, and some large firms go as high as $10,000 or $15,000,” Isom says.
Premiums vary depending on the size of the surveying operation. The CNA/Schinnerer program offers a minimum premium of $500 at a $100,000 limit and premium credits up to 25 percent in most states for good claims experience. Some insurance carriers have premiums in the $24,000 or $50,000 range for large surveying businesses.
Self-InsuringIf, after assessing all of your options, you find yourself wanting to consider trying a form of self-insurance, there are several things to consider. Some firms self-insure by starting a fund that they pay into on a regular basis, allowing the money to earn interest and grow. If a claim occurs, the firm has the money to pay its own claim. Other companies choose to band together with like-minded companies of equal stature to start a defense fund, but this is not legal in all states.
“In Florida, the law requires you to have coverage in some way,” Gunter says. “You can set aside a certain amount of money to protect yourself from any errors or omissions, or you can get professional services. You can set aside cash or buy an insurance policy for coverage. The other option is to have no insurance, but in Florida you must state that. The law is very specific. It says that on any drawing or promotion you do you must state that you are not insured.”
Self-insuring isn’t usually the best option for small- to medium-sized companies; it can become very tempting to dip into the fund when times get tough.
Participating in Proactive ProgramsProfessional liability insurance firms cannot only help to cover losses, but can also provide guidance to help reduce the number of claims made against a firm through risk management programs. Written information, seminars and private reviews with liability insurance firm representatives can all help you to learn more about risk management.
“We advise surveyors and design professionals to help them avoid getting into legal trouble,” says Joe Jones, Esq., AIA, senior risk management consultant at Victor O. Schinnerer & Company Inc. “Professional liability insurance is there if they do get into trouble, but risk management is about what we can do to prevent litigation.”
Victor O. Schinnerer offers advice in a publication called Guidelines for Improving Practice and through regional seminars eight times a year. Clients can also request special in-house sessions.
Risk management programs also allow surveyors to get help from their insurance firms in designing contract language between them and their clients when necessary. In some cases it is a good idea to establish a limitation of liability clause into contracts with clients, which can establish a maximum limit on total liability. These types of provisions can state that contract and negligence claims are limited.
“Certification is often an issue for surveyors,” Jones says. “Surveyors are sometimes asked to certify things they can’t. For example, they may be asked to certify that all underground utilities are accurately shown on a drawing. Surveyors can’t say that because humans make mistakes. It’s best if they change the language to say, ‘In my professional judgement, this shows all underground utilities.’ If they preface that part of the statement with words such as ‘professional judgement’ or ‘In my opinion the plat shows all known utilities,’ it is couched in less than absolute language.”
Risk management services can encourage business owners to rethink business practices for self-protection as well.
“We can help with contract language and business practices, such as how to send letters and determine which materials you need to keep,” Jones says. “E-mail, for example, tends to be informal. You need to be as formal with an E-mail as a letter because it can be used as evidence against you.”
It is also a good idea for land surveyors to have an insurance agent review contracts that clients may require them to sign. Indemnification clauses requested in contracts are often written from the perspective of governmental agencies and may overextend coverage.
“Indemnifications clauses in contracts are often written from the perspective of a municipality or of a person (who a surveyor is working for) and it may overextend a surveyor’s own policy,” Gunter says.
Although it may require an initial outlay of cost and some additional cost for premiums, the overall benefits of professional liability insurance can far outweigh the risks, an idea that more and more surveyors are beginning to recognize.
“When I attend conferences, I see more and more insurance companies at the shows as exhibitors,” Denny says.
That’s probably because nobody is perfect.