I recently got licensed and have started moonlighting on a residential project. It's a small project (kitchen renovation), and my fee is very very modest given the scale of the project. Nevertheless, it does include plumbing, electrical, new appliances, custom cabinetry, and new finishes throughout the kitchen.
I have decided to NOT get insurance (none whatsoever) because it is such a small project, though I do realize doing so opens me up to claims if something does go wrong.
Do many of you do this? And if so, what do you consider a project worthy of insurance? I am much more accepting of risk than a lot of my peers, but perhaps I am just naive. I'd love to hear what you guys think.
If I'm not mistaken, E&O insurance follows the professional, not the job. I don't think its even possible to get ins. on just one job rather you have to get it to insure you throughout your office's work. I have a freelance gig myself (out of the country) and no insurance, but it is my only contract and I have no intention of starting another job in the near future. My liability is also limited to a percentage of the final cost of construction in the contract and I wouldn't even qualify for E&O because of the nature of the project and my professional status.
E&O does not shield you against claims, it doesn't shield you against suits either. What it does is pay out if you lose a suit, similar to malpractice insurance for doctors.
Considering you are licensed and practicing, and also the fact that even though this is your first gig I'm assuming there will be others I would def. talk to an agent about getting E&O for your practice.
If this is a one-time freelance gig you may be able to skip it, that said make sure there is a clause in your contract outlining your liability in case of a future suit. If there is no clause/section than there is no limit for what you could potentially be sued for, even if its a small job they could come after you for additional damages beyond the cost of any destroyed property, even if the client is your best friend.
I would base the decision on scale of project etc. If you only do small projects, then often any claims you might have against you would probably not exceed the deductible you would have with an E and O policy. To get affordable rates you are often looking at 5 to 10k deductibles. If you don't have a family or own a house etc. then the cost of coming after you for anything covered by an e and o policy would outweigh anything they could recover. If you want to have kids and a home then insurance can cover your butt. I do know that it is possible to get insurance for a single job, however this is usually expensive. (this may vary by jurisdiction) It may be something the client is willing to roll into your services.
For a small job (even if you have insurance) a limitation of liability written into the contract is the way to go. That way you have an explicit conversation about liability with the client.
And as for the pluming and electrical, unless you plan to hire MEP engineers, you should specify those as design-build, with your drawings just defining the scope. Even if you know how to do it you do not want to be on the hook for correctly calculating circuits and pipe sizes.
Thanks for your responses. Truthfully, I simply cannot afford insurance right now and am basically doing this project to extend my client base (the client is very well connected in the city). And my contract with the client was drafted months ago. In retrospect, the contract should have had a limit of liability clause as Spruce suggests, but that's too late now.
I'm not too worried about the client suing me. They're a very nice couple and I don't think they would ever even consider legal action for my services, especially considering the scale of the project.
And yes, I have a family (wife and kids), but I rent in NYC. I am fully aware of the risks I'm taking...I was just curious of others out there take similar risks when the project is small and seemingly straightforward.
"I'm not too worried about the client suing me. They're a very nice couple and I don't think they would ever even consider legal action for my services, especially considering the scale of the project."
Oh my lord ... the naivete inherent in this statement!
Yeah, I know. People get sued. But really, the job is so small I seriously doubt anything will go wrong. And if something does go wrong I'm more worried about the building management office and the contractor...that's another story.
FP, we (my partner and I) have taken that risk for 4 years with no problem - and he did it for 8 years before I came along. Honestly, we choose our clients carefully (it's not naivete, stone, it's savvy) and have very personal relationships with them. We have always managed to work any issues out straightforwardly with them - they know that legal actions are expensive and usually not worth the fight, plus we are are the first to admit when we screw up, and are exceptionally accommodating when we do so.
In the last four years we've only had one problem, and that was a client who didn't want to pay us - and WE were the ones who ended up hiring a lawyer to go after THEM!
All that said, this year we got a contract with the city, so I now have E&O insurance. It's costing about $1,500/year, and for this specific project it was required by the city, so we had no choice. Now that I have it, I'll renew it for at least the next 10 years (the limit of the contract). Oh well - but I have to say, it feels pretty good to have it. I'm a grown up now!
So long as you're doing small private jobs, and your assets total is relatively small (a house and savings, for instance), I would skip the insurance as an unnecessary expense at this time. If you're operating out of your home, and your projects are single-family residential in nature, you can skip insurance until you're ready to expand practice. Note that insurance brokers will tell you a policy is always necessary, but that's how they earn their fees.
I'd recommend a fair amount of client management too, making sure that fee collections occur monthly, at minimum, and that accounts remain current. Clients who are in arrears tend to be those who create objections that may morph into a liability claim to avoid payment collection. Attorneys tend to file lawsuits only against firms that have attractive insurance policy limits or assets, but disgruntled clients can successfully file in small claims court specifically without legal representation in a mostly consumer-friendly environment.
A friend with a small residential practice also likes to show pictures of her small children periodically to her clients, reminding them that the fees go to school fees. Half in jest, half serious; it helps collections. This friend is very clear with clients that payments must occur promptly. Also, when approached by a prospective client, goggle them to find out all background information readily available. Same friend has been able to screen out several prospective clients with "bad vibe" histories discovered in goggle searches - seriously.
So long as you're doing small private jobs, and your assets total is relatively small (a house and savings, for instance), I would skip the insurance as an unnecessary expense at this time. If you're operating out of your home, and your projects are single-family residential in nature, you can skip insurance until you're ready to expand practice. Note that insurance brokers will tell you a policy is always necessary, but that's how they earn their fees.
I'd recommend a fair amount of client management too, making sure that fee collections occur monthly, at minimum, and that accounts remain current. Clients who are in arrears tend to be those who create objections that may morph into a liability claim to avoid payment collection. Attorneys tend to file lawsuits only against firms that have attractive insurance policy limits or assets, but disgruntled clients can successfully file in small claims court specifically without legal representation in a mostly consumer-friendly environment.
A friend with a small residential practice also likes to show pictures of her small children periodically to her clients, reminding them that the fees go to school fees. Half in jest, half serious; it helps collections. This friend is very clear with clients that payments must occur promptly. Also, when approached by a prospective client, goggle them to find out all background information readily available. Same friend has been able to screen out several prospective clients with "bad vibe" histories discovered in goggle searches - seriously.
Thanks liberty & chicago...Good to hear your experiences.
FYI, I have no problems with payment at all. In fact, I send an invoice and within 4 days a check arrives in the mail. I was just wondering about the insurance part...that's my only liability, as far as I'm concerned.
Mar 6, 09 8:24 pm ·
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Would you bother getting insurance?
I recently got licensed and have started moonlighting on a residential project. It's a small project (kitchen renovation), and my fee is very very modest given the scale of the project. Nevertheless, it does include plumbing, electrical, new appliances, custom cabinetry, and new finishes throughout the kitchen.
I have decided to NOT get insurance (none whatsoever) because it is such a small project, though I do realize doing so opens me up to claims if something does go wrong.
Do many of you do this? And if so, what do you consider a project worthy of insurance? I am much more accepting of risk than a lot of my peers, but perhaps I am just naive. I'd love to hear what you guys think.
Thanks
If I'm not mistaken, E&O insurance follows the professional, not the job. I don't think its even possible to get ins. on just one job rather you have to get it to insure you throughout your office's work. I have a freelance gig myself (out of the country) and no insurance, but it is my only contract and I have no intention of starting another job in the near future. My liability is also limited to a percentage of the final cost of construction in the contract and I wouldn't even qualify for E&O because of the nature of the project and my professional status.
E&O does not shield you against claims, it doesn't shield you against suits either. What it does is pay out if you lose a suit, similar to malpractice insurance for doctors.
Considering you are licensed and practicing, and also the fact that even though this is your first gig I'm assuming there will be others I would def. talk to an agent about getting E&O for your practice.
If this is a one-time freelance gig you may be able to skip it, that said make sure there is a clause in your contract outlining your liability in case of a future suit. If there is no clause/section than there is no limit for what you could potentially be sued for, even if its a small job they could come after you for additional damages beyond the cost of any destroyed property, even if the client is your best friend.
Do you own anything?
Do you ever plan on owning anything?
I'd cover my ass if it were me.
i practiced w/o insurance for about a year - the projects were unlikely to end up in lawsuits.
after i took a residential project where the client was an attorney, i then went out and got the insurance.
I would base the decision on scale of project etc. If you only do small projects, then often any claims you might have against you would probably not exceed the deductible you would have with an E and O policy. To get affordable rates you are often looking at 5 to 10k deductibles. If you don't have a family or own a house etc. then the cost of coming after you for anything covered by an e and o policy would outweigh anything they could recover. If you want to have kids and a home then insurance can cover your butt. I do know that it is possible to get insurance for a single job, however this is usually expensive. (this may vary by jurisdiction) It may be something the client is willing to roll into your services.
For a small job (even if you have insurance) a limitation of liability written into the contract is the way to go. That way you have an explicit conversation about liability with the client.
And as for the pluming and electrical, unless you plan to hire MEP engineers, you should specify those as design-build, with your drawings just defining the scope. Even if you know how to do it you do not want to be on the hook for correctly calculating circuits and pipe sizes.
Thanks for your responses. Truthfully, I simply cannot afford insurance right now and am basically doing this project to extend my client base (the client is very well connected in the city). And my contract with the client was drafted months ago. In retrospect, the contract should have had a limit of liability clause as Spruce suggests, but that's too late now.
I'm not too worried about the client suing me. They're a very nice couple and I don't think they would ever even consider legal action for my services, especially considering the scale of the project.
And yes, I have a family (wife and kids), but I rent in NYC. I am fully aware of the risks I'm taking...I was just curious of others out there take similar risks when the project is small and seemingly straightforward.
thanks again...
Oh my lord ... the naivete inherent in this statement!
Stone,
Yeah, I know. People get sued. But really, the job is so small I seriously doubt anything will go wrong. And if something does go wrong I'm more worried about the building management office and the contractor...that's another story.
FP, we (my partner and I) have taken that risk for 4 years with no problem - and he did it for 8 years before I came along. Honestly, we choose our clients carefully (it's not naivete, stone, it's savvy) and have very personal relationships with them. We have always managed to work any issues out straightforwardly with them - they know that legal actions are expensive and usually not worth the fight, plus we are are the first to admit when we screw up, and are exceptionally accommodating when we do so.
In the last four years we've only had one problem, and that was a client who didn't want to pay us - and WE were the ones who ended up hiring a lawyer to go after THEM!
All that said, this year we got a contract with the city, so I now have E&O insurance. It's costing about $1,500/year, and for this specific project it was required by the city, so we had no choice. Now that I have it, I'll renew it for at least the next 10 years (the limit of the contract). Oh well - but I have to say, it feels pretty good to have it. I'm a grown up now!
So long as you're doing small private jobs, and your assets total is relatively small (a house and savings, for instance), I would skip the insurance as an unnecessary expense at this time. If you're operating out of your home, and your projects are single-family residential in nature, you can skip insurance until you're ready to expand practice. Note that insurance brokers will tell you a policy is always necessary, but that's how they earn their fees.
I'd recommend a fair amount of client management too, making sure that fee collections occur monthly, at minimum, and that accounts remain current. Clients who are in arrears tend to be those who create objections that may morph into a liability claim to avoid payment collection. Attorneys tend to file lawsuits only against firms that have attractive insurance policy limits or assets, but disgruntled clients can successfully file in small claims court specifically without legal representation in a mostly consumer-friendly environment.
A friend with a small residential practice also likes to show pictures of her small children periodically to her clients, reminding them that the fees go to school fees. Half in jest, half serious; it helps collections. This friend is very clear with clients that payments must occur promptly. Also, when approached by a prospective client, goggle them to find out all background information readily available. Same friend has been able to screen out several prospective clients with "bad vibe" histories discovered in goggle searches - seriously.
So long as you're doing small private jobs, and your assets total is relatively small (a house and savings, for instance), I would skip the insurance as an unnecessary expense at this time. If you're operating out of your home, and your projects are single-family residential in nature, you can skip insurance until you're ready to expand practice. Note that insurance brokers will tell you a policy is always necessary, but that's how they earn their fees.
I'd recommend a fair amount of client management too, making sure that fee collections occur monthly, at minimum, and that accounts remain current. Clients who are in arrears tend to be those who create objections that may morph into a liability claim to avoid payment collection. Attorneys tend to file lawsuits only against firms that have attractive insurance policy limits or assets, but disgruntled clients can successfully file in small claims court specifically without legal representation in a mostly consumer-friendly environment.
A friend with a small residential practice also likes to show pictures of her small children periodically to her clients, reminding them that the fees go to school fees. Half in jest, half serious; it helps collections. This friend is very clear with clients that payments must occur promptly. Also, when approached by a prospective client, goggle them to find out all background information readily available. Same friend has been able to screen out several prospective clients with "bad vibe" histories discovered in goggle searches - seriously.
Thanks liberty & chicago...Good to hear your experiences.
FYI, I have no problems with payment at all. In fact, I send an invoice and within 4 days a check arrives in the mail. I was just wondering about the insurance part...that's my only liability, as far as I'm concerned.
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