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Free from Terra Insurance Company: A New Risk Management Advisory That Addresses Clients' Requests To Be Named Insureds on Their Consultant's Professional Liability Insurance Policy
Corte Madera, CA - Although a number of clients ask to be named insureds on their consultants' professional liability insurance (PLI) policies, "no professional liability insurance company we're aware of can do that," said David L. J. Coduto, CEO of Terra Insurance Company. Terra is a risk retention group that provides professional liability insurance to geoprofessional, environmental, and civil engineering firms.
Clients that request that they be added as named insureds "need to be told they cannot be," Mr. Coduto said, "so they are not given a false sense of security. Surprisingly enough, any number of consultants tell clients they can accommodate their request, because that's what clients want to hear. What clients should really want to hear is 'no.'"
This issue is discussed in "Engineers Cannot Provide 'Additional Insured' or 'Contractual Liability' Endorsements to Their Professional Liability Insurance," a newRisk Management Advisory PDF monograph available for free download at Terra's website (www.terrarrg.com).
According to the new monograph, clients should want to hear "no" because that would indicate that the consultant they're dealing with is "conscientious, informed, and scrupulous." The monograph goes on to note that those who say "yes":
- "did not read the contract, and thus did not know that the contract contained provisions contrary to their E&O [errors and omissions] insurance; or
- [they] read the contract, but did not understand that it contained promises regarding their E&O insurance that they could not comply with; or
- they read the contract and understood it, but decided they could ignore its requirements."
The monograph provides some additional guidance on steps engineers can take to show clients that firms that have agreed to make them additional insureds on their PLI policies did not, in fact, do so.
"Engineers Cannot Provide 'Additional Insured' or 'Contractual Liability' Endorsements to Their Professional Liability Insurance" is the newest of a number of Risk Management Advisories available free from Terra. Terra was originally formed in 1969 and became a risk retention group in April 1988. Since then, Terra has set a new record-high stock value at the end of each quarter, now 64 in a row. As a risk retention group, Terra is owned by its 90 owner/insureds, ranging in size from $500,000 in gross fees per year to more than $150 million. Rated A ("Excellent") by A.M. Best Company, Terra is the nation's highest-rated risk retention group in its field. For more information, visit www.terrarrg.com, or contact Terra Insurance Company, 2 Fifer Avenue/Suite 100, Corte Madera, CA 94925; tel. 1/800-872-0077 (in CA, 415/927-2901); e-mail terra@terrarrg.com.
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