Why Do Engineers Need Professional Liability Insurance?

There is hardly a more versatile profession than an engineer. Not only there are many engineering specialties (we counted 17!), but many specialties have further subdivisions. For example, a Civil engineering branch includes specialties such as structural and geotechnical engineering; computer engineering includes hardware and software engineering specialties, and so on. As an engineer, you might be involved in everything from designing and building the product to testing, maintenance, and production.

As an engineer, you may be responsible for a product that can cause thousands of dollars in damages and can impact hundreds of lives if it failed or was designed improperly.

It’s easy to see how an architect or an engineer that works on public construction projects such as office buildings, bridges, or other structures hold many lives in their hands. Just imagine a building or a bridge collapsing due to faulty design. Hundreds of thousands of property damage is a virtual guarantee, and that’s if no one was injured or worse.

Of course, these are extreme examples. A mistake an engineer makes can cause thousands of dollars in damages even on the smaller scale projects. Even if you are not involved in major construction and design projects of, say bridges, you are still at risk of something going wrong.

So what happens if something does go wrong? That’s when the blame game begins. In our notoriously litigious society, a lawsuit is often the next step. As an engineer responsible for designing, developing, or maintaining the product, you will likely be a primary defendant or a co-defendant on such a lawsuit.

A Professional Liability insurance policy for engineers (also called Errors & Omissions insurance) protects your business and your personal assets from the financial consequences of a lawsuit brought against you. In basic terms, the policy covers your legal costs such as attorney fees, forensic accounting, etc. as well as any awards, judgments or settlements against you.

Why you should get Engineer Professional Liability insurance?

As the name of the articles suggests, this is the main topic of our discussion today. Most insurance agents that you will talk to, will advise you to purchase a Professional Liability policy. But do you really need it? The short answer is … most likely. Whether you are a small, one-person engineering consulting shop or a big business with many staff members, you likely do not have thousands, or even hundreds of thousands of dollars earmarked for covering a lawsuit.

Below are the three biggest reasons to purchase engineer E&O insurance:

1. Lawsuit Defense

One of the biggest reasons to purchase the policy is to protect yourself from the often-astronomical costs of defending your case in the court of law. It doesn’t matter how good you are in what you do; mistakes are a part of human nature. Many of these mistakes can be caught in time or mitigated to avoid a legal battle. But all it takes is that one error that slipped through the cracks for everything to come crashing down on you. As we mentioned before an Errors and Omissions policy will help offset these costs. Another significant benefit of such a policy is that it will help to defend a nuisance lawsuit as well. Even if the wrongdoing is only perceived and you cannot be faulted for the situation that occurred, it still costs money to investigate and defend your case. This is again, where Professional Liability insurance comes in. The insurance carrier will still pay your attorney fees, the cost of the investigator, costs to file motions with the court, and many other expenses that are typical when you are fighting your case.

2. Contract Requirement

The last but not least reason to purchase this policy has to do with helping you win more contracts instead of protecting you from a financial loss. All business owners want to protect their investment. When your client enters into a contract with you, they put their trust in your company that the product or service they are paying for will be completed correctly and at no loss to them. As we all know, unfortunately, it doesn’t always happen that despite everyone’s best intentions. Professional Liability is not only a way for you to protect your business assets from being liquidated to pay for a lawsuit, but also a way for your client to protect their investment. Without such insurance in place even if sued, you simply might not have the funds to compensate them for damages you caused. If you have an engineer’s Professional Liability policy, they know that they will get reimbursed for any damages. It simply gives your client a piece of mind. Professional Liability insurance as a contract requirement is becoming a widespread practice, and not having it will often preclude you from winning the bigger and better contracts. Not only that but having such policy will position you as a serious company with high standards and will help you stand out amongst the rest.

Conclusion

As a business owner, it is imperative to develop sound strategies to protect what you worked so hard to build. An engineer Professional Liability policy that addresses your unique business needs is one of the strategies to safeguard your business reputation as well as its’ assets.

Of course there are ways to minimize the chance of a lawsuit. A robust risk management plan will help set forth standardized procedures to streamline your operations, ensure quality control, and document steps to be taken to mitigate any errors. An effective risk management strategy helps foster clear communication with your clients and reduce the risk of any misunderstandings.

An example of a risk management strategy is formalizing a contract where you specify the scope of work, how any change to such scope will be handled etc. Your insurance carrier’s loss control representative should be able to help!