Professional Liability Insurance -- 6 Misconceptions
Steve Whitehorn
Managing Principal of Whitehorn Financial Group, Inc. & Risk Free Construction Solution
Be aware- in the design industry, nothing can be taken for granted. This applies to purchasing insurance as much as anything else. Now, you may educate yourself on all the facts, before going ahead with buying insurance:
1 -- The only worthwhile reason to purchase professional liability insurance is to get work. This is probably true. Because getting work in certain markets requires carrying specific professional liability limits.?
On the flipside, purchasing professional liability coverage makes you an easy target for both owners and contractors. You are now the deep pocket for additional costs adversely impacting the project. Put it this way: What is the owner’s budget at the end of the project? It no longer exists!
Also- contractors never give anything away for free. So by purchasing professional liability insurance, you are now the default deep pocket for them.??
Without professional liability insurance, plaintiffs are dissuaded from pursuing you, as “you can’t get blood from a stone.” Odds are they won’t even be suing you in the first place.
Note: It has been our experience that this is mostly the case with few exceptions. However, as a practicing design firm, you don’t want to be one of those exceptions.
2 --? You must always pay your deductible. Maybe.?
It is possible for your firm to purchase extra coverage to protect your deductible from frivolous claims. This will protect your deductible if you are exonerated from a suit. This coverage is known as ‘first dollar defense.’?
However, this coverage may not be available due to your firm’s size. Another option is to purchase a program that incorporates deductible credits based upon the qualification criteria. Given the size of some firms, it is probable that some firms do not qualify for either first dollar defense or deductible credits.?
However, it is possible to potentially offset deductible expenses in certain situations for bodily injury claims irrespective of your firm's size. This is our proprietary strategy known as The Zero Deductible Solution?.
3 – All contract reviews are the same.?? False.
Representatives familiar with the construction industry are more inclined to give you focused advice, specific to your situation.
At the end of the day -- You get what you're able to negotiate.
4 – National insurance brokers give me the strongest representation. False.
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It is a relationship business. However, once the insurance is placed, you could be handed off to someone who’s not as seasoned as your initial salesperson.
5 --The carrier that offers the lowest price is best suited for your firm. ? False.
There is a difference between price and quality. If your firm is never going to get sued, then the lowest price would suffice.?
But it's not a question of “if you get sued, rather when you get sued.” Therefore, it’s best to have the best possible coverage in place and you won’t have to argue with your carrier and plaintiff at the same time.?
As the saying goes, “Would you rather know what’s going to happen, or would you rather guess?? Because hope is a terrible strategy”.
6 -- Any insurance broker is equipped to handle my firm's professional liability insurance.? False.
Non specialists are ill-equipped to help you navigate the issues and disputes that arise from the construction process. Furthermore, there are also practice management strategies to help improve your firm’s profitability, cash flow, get more work, and at the same time reduce your risk.?
Keep in mind- not all brokers are created equal!
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