From the mailbag – Do I need client insurance?
This question arrived today from a friend and engineering consulting colleague. Once in a while a company will request a “General Liability” insurance certificate.
Hi Daryl,
I’ve run into this requirement (client insurance) a handful of times. Most companies don’t ask for it, but some are asking to be named on my insurance policy. Do you know the reason why they might want that?
Here is my response. The beautiful irony is that just today my “General Liability” insurance was cancelled, after 20 years with no claims, and zero probability of a future claim.
As far as I know, there is no good reason (but I’m not an attorney.) Rather, it is the result of good lobbying by the insurance industry.
We ran into that a few times. The request was usually for “General Liability”, not “Professional Liability.” The former covers things like driving you car into their lobby. The latter covers “errors and omissions.”
If you have a GL policy, ask for a certificate naming the client. It’s just a piece of paper, and should cost nothing.
Do you really need a GL policy? I don’t think so. We went without a policy for many years.
But after fighting it a few times and to save time, Bill and I caved in and got a GL policy — about $1000/year for both of us. Upon our attorney’s advice, we never carried PL, since EMC has such a low risk.
If we had been doing product safety, we would have carried PL too.
The IEEE has both, but when I last checked, they would not sell the GL alone. We got our policy through a broker.
When Bill passed away, they reduced the premium to $500, so I renewed it. A total waste of money in my opinion, but still easier than fighting about it. Haven’t had a request for several years now.
As a coincidence, just today I got a certified letter canceling my General Liability insurance.
Seems some underwriter visited my web site, and panicked when they saw “medical devices, vehicular electronics, military systems, industrial controls, etc.” Even though the web site clearly states I no longer consult, but only do training.
My guess is some bureaucrat with no common sense did this. Probably their chance to make a “big decision.” But a stupid decision, as it was easy money for them.
As an side, my older son started with Hartford (the carrier) right out of college. He left in less than a year. Like his dad, he has a low tolerance for petty bureaucrats.
My plan is to forget the insurance. If somebody insists on it, my response will be to either waive the requirement of find somebody else.
Before getting insurance, I did that several times with success. I found that engineering VPs/directors/managers can and will override purchasing if they really want you, and need to do so.
And if they don’t want you, do you really want to do business with them?
Don’t want you to think I’m a jerk about these things. As a rule, I go out of my to be polite and professional.
But at the same time, I don’t let petty bureaucrats intimidate me. Neither should you.
As always, check with your attorney and/or accountant. We carried General Liability insurance for many years, simply because it was easier to do so than argue about it.
But other than saving time, it was a waste of money. We never lost any business when we did not have it.
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Here’s the rest of the story.
Not described in the above was the fact my client was located in Canada and my current insurance company refused to include “out-of-country” companies as “additional insured” on a certificate of insurance.
After applying quite a lot of pressure on the client’s admin and legal folks, as well as my own insurance agent; and after the client simply insisted on being named as “additional insured” on the certificate, I found this company: http://www.hiscox.com.
Not only can a small business apply for simple $1M general liability insurance on-line, but even with a call in to one of their agents to explain in more detail about my consulting practice, I was able to get insured and have my certificate in about 30 minutes. Because they do business worldwide, they are fine with providing certificates for any company in the world. They sure seem nice to work with. I can even generate my own certificates on-line for any company.
Sticking with this client means a potential of $60k of business during the next year, so worth the effort. I fired my agent.