How to Choose the Right Insurance Coverage
“Insurance is not for sale when it‘s needed the most“ –Industry quote
As the old adage goes: You get what you pay for. (There’s a reason this slogan has been around so long.)
You can skimp and buy a cheap umbrella. But, ooh, the embarrassment when a soft breeze turns your umbrella inside out while the folks at the bus stop have a good laugh at your expense.
From umbrellas to clothing, to cars, to insurance — there is an inversely proportional relationship between PRICE and VALUE.
I always tell my A/E clients you can choose cheap insurance, quality insurance, or anything in between. The choice is yours, sort of Russian Roulette. Roll the dice, and things may work out okay. Or the results can be catastrophic.
To help you decide, let me share three stories that illustrate the (vast) difference between good and cheap insurance…
Story #1: Carrier chooses to litigate rather than pay
I had a client who, wanting to save money, decided to skimp on his coverage and hope for the best. (Spoiler alert: it wasn’t worth it.)
My client, an engineer, provided construction inspection services for roadways in NYC. The contractor was supposed to show up with one crew. However, two crews showed up, yet there was only one engineering inspector (my client) to watch both crews. My client was forced to go back and forth to keep an eye on both crews. My client discovered that one trench (approx. 8 feet deep) in which one crew was working was not shored. The foreman convinced the engineer “not to worry–we’re almost done….”
Tragically, my client turned around to head in the other direction, and just then, the trench collapsed, killing one crew member and leaving the other a paraplegic.
The engineer was deemed negligent and was culpable for the horrific injuries. The City asked the court to enforce the indemnity provision in their agreement with my client. The courts agreed that the engineer was responsible, and the city’s judgment of $800K was now the Engineer’s responsibility.
The carrier paid $400K for the Engineering firm but refused to pay the city’s $800K. The carrier decided that it was cheaper to litigate rather than pay. My client fought them in court. The Engineering firm won after a year of litigation; however, it cost $100,000 in out-of-pocket costs to force the carrier to pay, in addition to the overwhelming stress and anxiety of not knowing if the carrier would pay the $800,000.
Had the firm spent the extra money, they could have avoided a lot of expense and heartache.
Story #2: Carrier covers MORE than their obligation for unconventional design
This story has a much happier ending. My client, a structural engineer, was contracted to raise the roof of a warehouse by six feet. Typically, the structure is designed from the inside of the building. However, the warehouse was in a very secluded area, where appearance did not matter, and my client determined that he could save the owner a lot of time and money by designing the structure on the outside of the building.
Because the location was pretty desolate, he did not think anybody would mind the unconventional design. As luck would have it, a “good Samaritan” drove by the warehouse, noticed the work that had been done, and snapped pictures, which were sent to the local licensure board. The licensure board alleged the design violated HSW.
My client incurred a hefty $116,000 in legal fees to fight the charges. I convinced his insurance carrier to cover this matter on a pre-claim basis. Even more amazing, insurance carriers typically do not cover licensure issues. And if they do, there are significant limitations. The carrier had no obligation to cover this situation, but because he purchased the “right” coverage, he was protected from a huge financial loss with no out-of-pocket expense.
Here is the best part of the story–while the litigation was taking place, there was an earthquake on the east coast. The exact location of the warehouse was hit by the quake, yet the structure did not fail–which is clear proof that the “unorthodox” design was 100% safe.
Story #3: Snowstorm injury leads to lawsuit
My client, a very large and nationally renowned architectural firm, was contracted to renovate a 1 million sq. foot building for the IRS. Due to a blizzard, somebody slipped on the sidewalk as it was not shoveled and severely injured their back. Of course, my client was sued (as we know, architects have a “bullseye” on their back) even though YOU, reading this article, had as much responsibility for the injury as my client.
Not only did we get the insurance carrier to cover the entire cost, but we also got the carrier to cover their deductible, thanks to my proprietary Zero-Deductible solution TM. (If you’d like to learn more about this strategy, please don’t hesitate to contact my office.)
These are just a few scenarios to consider. Sadly, there are many scenarios that can arise in which A/E’s discover the courts find them liable. And nowadays, with COVID-19, it is scarier than ever. Believe me; there are few things as upsetting as dragging you into a lawsuit and thinking, “Why was I so stingy? Why did I not spring for a few extra bucks to avoid this massive headache and unthinkable stress?”
I’m not telling you what to do. That’s your decision. I can only say, in 30+ years, I’ve never seen a client regret purchasing quality insurance coverage. Yet I’ve seen many firms regret choosing the wrong option. The choice is yours!
When you are ready, here are 5 ways I can help…..
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