Surveyors Personally Liable for Errors in Work
Imagine this scenario. You are the surveyor employed by a surveying firm. A registered letter comes in the mail at work addressed to your employer. The return address shows it to be from a law firm. These letters always bring some anxiety when they arrive. Even more anxiety arises when your spouse calls to say the same registered letter came addressed to you at your home address.
What’s going on here and do you have a problem you should be worried about? That depends on several issues that we will discuss here.
Let’s say that this letter is alleging a mistake on a survey that you signed and sealed off on two years ago while working for this firm. The claimant is a property developer, and they are suing the firm you are employed by and you personally for $200,000. In 50% of the claims that we see, this is how the suits are filed – they are filed against the firm (usually a corporation) and the surveyor personally – whether or not the surveyor has any ownership in the business.
Here are the basic things the surveyor needs to know and it is much more preferable that the individual surveyor know the answers to these questions PRIOR to a lawsuit ever arising.
- Does the firm I work for carry Errors and Omissions insurance? (The majority of surveying firms in Texas don’t)
- Verify that employees are shown as “insureds” under this policy. (Most policies do)
- What is the deductible on this policy? Deductibles range anywhere from $2,500 to $50,000. Do you have an employment contract that spells out who pays for the deductible?
- Does your employment contract state that the firm will have E&O insurance and maintain this coverage, including the purchase of “tail” coverage if the survey firm is sold or closes its doors?
We see firms that sell, close or merge with other firms. When this happens, the firm must buy “tail” coverage in order to provide liability coverage for past surveys. This coverage can usually be purchased for one, two or three years. The statute of limitations for negligence on a survey is two years after discovery of the error or after the error should have reasonably been discovered.
Let’s say that the owner of your firm is retiring. They have sold the business to someone else. They have sold the business for X amount of dollars and plan on going fishing for the rest of their lives. When tail coverage is purchased, the total premium for the term, either one, two or three years, must be paid in full at that point. These premiums are usually one to three times what the annual premium was prior to the closing. If the firm was a good size, this premium could be substantial. He could be weighing the options of a bigger bass boat vs. paying insurance premiums. And remember, he is somewhat protected by “the corporate shield” which could favor his decision. You meanwhile, are not.
Here is another scenario. Insurance premiums can fluctuate. As revenues increase, premiums increase. If claims occur, often this causes premiums to increase. Sometimes firms just decide to drop coverage in these cases, especially if no clients are requiring this coverage of them.
Sometimes, if a firm has had too many claims, your employer may find himself unable to get coverage at any price. Even when there is an E&O policy in place, and the employees are insured under the policy, the only person who gets notified when a policy cancels for non-payment or when a policy non-renews, is the first named insured – not the individual surveyors working for the firm.
Where does this leave the individual surveyor? It can leave you exposed to a lawsuit with no insurance coverage to help you defend yourself or pay judgments against you.
This issue was brought to our attention by a Texas surveyor who was concerned about his personal liability exposure. We have developed a method of addressing this. We worked with an insurance company to offer a product for individual surveyors. The premium is $2,500 (+fee/tax), and it will insure the surveyor in excess of what the employer may carry. The policy is written in the surveyor’s individual name and is owned by him or her. Premiums can be financed as well.
If you have any questions regarding this product or your individual liability, please contact Gina O’Hara with ANCO Insurance at (888) 275-2626, ext. 6324 or Mark Hanna, TSPS Legal Counsel at (512) 477-6200.