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You may consider liability inurance a necessary evil, but it's actually an important asset to every A/E firm, noted Thomas H. Porterfield, Jr., vice president of insurer Victor O. Schinnerer & Company, Inc. (Chevy Chase, Md.; 301-961-9800; www.schinnerer.com), at the 2004 convention of the American Council of Engineering Companies (ACEC; www.acec.org) in Colorado Springs. Katherine D. Enos, another Schinnerer vice president, joined him in presenting the workshop, "Professional Liability Insurance: What You Need to Know and Why."
Porterfield noted that 30% of all claims are paid, and if your firm has to deal with a claim, it will spend many hours of billable time countering it. "The best way to prevent claims is to walk away from projects that involve risks. Evaluate clients carefully," he advised. He noted that the biggest reason for claims is "unfulfilled expectations."
Basics of every professional liability policy:
* What is covered: Wrongful acts, including negligence, errors, and omissions, involved in the professional services that the A/E firm performs.
* Who is covered: The firm named in the policy and all those who work for the firm, including consultants and retirees. Though coverage tends to be broad, noted Porterfield, it does not include moonlighting. An employee of your firm taking a freelance job after hours is not covered.
* Where are you covered: Worldwide, except in certain countries where the U.S. prohibits doing business.
* When are you covered: The policy must be in force when a claim is made. It's important to have retroactive coverage, with extended reporting periods, so that earlier work is included, advised Porterfield. If you ever change policies, make...