Professional Liability Insurance - Have been asked by a registrar to obtain!

[DannyK]

I am working as a subcontract lead auditor in Canada and have been asked by a registrar to obtain professional liability insurance.

I have asked a few insurance brokers and they indicated that the cost would be a minimum of $2500.

Does anyone have any experience with professional liability insurance and what was the approximate cost?


Thanks for your help!


Danny

[Wes Bucey]

Originally Posted by DannyK

I am working as a subcontract lead auditor in Canada and have been asked by a registrar to obtain professional liability insurance.

I have asked a few insurance brokers and they indicated that the cost would be a minimum of $2500.

Does anyone have any experience with professional liability insurance and what was the approximate cost?

Thanks for your help! Danny

That seems pretty high - but maybe not, since physicians and surgeons working in the USA are paying tens of thousands of dollars for liability insurance and upwards of $100,000 for specialties like cardiology and neurosurgery. In the late 1980's, I had an errors and omissions policy of my own in addition to my company's coverage (we were investment bankers specializing in targeting and shepherding private companies through the IPO process.) As I recall, my annual premiums were about 1/10 of 1% of the face value of the policy. They did NOT cover against me stealing intellectual property from a client.

Ask this registrar who they currently buy their own insurance from and what they pay and for what total coverage ($100,000 or $1,000,000?) Obviously, you want to have an insurance carrier that is acceptable to them. Especially ask to see and keep a copy of one of their policies and the fine print in it so that you can shop for a comparable policy.

I'm presuming they are only looking for an errors and omissions policy, as opposed to full liability [which might cover stuff like you stealing secrets and peddling them to a client's competitor or using information to enrich yourself in the stockmarket.]

One website I looked at described coverage this way (emphasis in blue is mine) Note the premium should be ameliorated since you are theoretically supervised by the Registrar hiring you who should be backstopping your work product before client's damages reach catastrophic proportions:

Professional Liability Insurance (Errors and Omissions Insurance) is your most critical coverage. Professional liability coverage protects you against loss from a claim of alleged negligent acts, errors or omissions in the performance of your professional services. This might include loss of client data, software or system failure, claims of non-performance, or negligent oversell. Be sure your professional liability policy includes the following key features:

• Coverage includes legal defense cost. Professional liability insurance will pay for any resulting judgments against you including court costs up to the coverage limits on your policy.

• Coverage extends to both W2 employees and 1099 subcontractors. Coverage should protect your company from claims resulting from the work done by 1099 subcontractors on your behalf. (It is important to note that 1099 personnel need their own errors and omissions insurance because your policy does not defend them if they are sued separately or in addition to you.)

[The Taz!]

The number seems high to me also. As a 1099 Contractor/Consultant I was required to obtain Business Liability insurance by companies I worked for. For $1,000,000 coverage, I was paying $380 per year.

One thing you may want to explore is the scope of your work and the liabilities associated with it. I was in a situatiuon where I was either performing tasks, or MAKING SUGGESTIONS and RECOMMENDATIONS. The company was in the position of implementing or not. I believe that limited the liability. As an assessor, you may be in a different category with higher liability.

I'd also see if you can get a hold of what others doing what you do are paying, or see if you can obtain the actuarial info. Maybe overkill, but may be worth knowing.

[Marc]

I went through this a couple of times and it came down to my asking what the customer wanted me to insure against? Never got a good answer and have never bought insurance.

To those of you who have bought insurance as a consultant or as an auditor, what, specifically, are you insuring yourself against?

[Hershal]

I can't see why a consultant would need insurance, aside from knocking over equipment or something like that....or because the company would sue for bad advice......in CA that is a likely concern.

When i do assessments of organizations however, one of the requirements is to check for "adequate" insurance. That of course is a judgment call. Perhaps the registrar was asked by their accrediting body for insurance and they got zealous regarding insurance?

Hershal

[DannyK]

I thank-you all for your helpful information.

One of the problems I have with this insurance is that I am not able to apply it just for my subcontract auditing, which represents about 10-15% of my revenues.

I am working for 3 other registrars and they do not require it.

I asked the registrar to waive the insurance but to no avail.

I also asked them to indicate where their other subcontract auditors get their insurance and I am still waiting.

Thanks again.

Danny

[Graeme]

FWIW, I had some discussion about this earlier in the week ... the main thing I got from the meeting was that one should have a general business insurance policy, and it is common (in the USA) for those to include up to (typically) US$1,000,000 professional liability insurance. For this type of coverage I heard people saying they paid from $300 to $500 per year - one person said $2500 and there was unanimous agreement that he was being badly ripped off! The consensus was that this should be adequate for a consultant or trainer ... but a professional engineer, attorney or medical practitioner would need a LOT more, including errors & omissions coverage, and those professions cost a lot more to cover. (A lot of them also earn a lot more as well!)

[gpainter]

I believe that it may be connected to an LLC. title. A friend of mine was consulting and a state affiliated consultant company wanted to subcontract him and required him to be an LLC. to work for them,which required him to have insurance. Next time I talk with him I will get more details. I do know he did not do it because of the insurance cost and the ROI.