LLC insurance question

[albireo13]

I have been doing part time contract work for 3 years now. I have professional liability insurance coverage and also workman’s comp.

I plan to stop work and dissolve the LLC next year. I am 69yo and am ready to end it. Anyway, I was thinking of the liability policy. Should I keep it active for a few years after I shut down the LLC? I am concerned about outstanding liability that could come to roost down the road.

The liability policy is about $1000/ yr and I’d like to stop paying for that ASAP.

Anyone else have experience or guidance in this regard?

Thx

 

[OldShooter]

Ask your agent.

 

[USGrant1962]

What do your client contracts say? I have at least one that requires 3 years of liability coverage after the end of the contract.

But it also depends on what kind of liability exposure you have based on the kind of work you do. Did you design a bridge that could fall down some day - keep PL forever. Are you a management consultant that just gives graybeard/SSTG recommendations and advice, but don't make any real decisions? Don't really need it. (SSTG = Say Smart Things Guy. I've always aspired to that and now I am one!).

However you mention workers comp, so you have employees? If so I would definitely want tails on my liability coverage. Though PL is not really applicable to those issues.

 

[Stormy Kromer]

Ask your agent is right. Your policy is likely on a "claims made basis". Meaning it only applies if it is in force when the claim is made. If you messed up 6 years ago you could lose everything. Tail coverage will buy you some time.

Here is when you will find out if your insurance agent was looking out for you. Or, knows what they are doing.

I had a business and carried professional liability insurance for 7 years after I sold it. The statue of limitations in my state. By the way, I was in the insurance business.

 

[Kings over Queens]

without knowing what type of consulting and what type of policy its hard to give advice so I'll add another "ask your agent" comment. if your professional liability was written on a claim made form you'll need an extended reporting period endorsement, also called a "tail." If your policy is on an occurrence form that would complicate matters because different type of professionals cause or contribute to different type of occurrences.

 

[albireo13]

I am doing electrical engineering design work. No contracts talk about extended insurance requirements. It is a 1 person LLC ... me. No employees. However, my clients have required WC coverage.

 

[Kings over Queens]

You can drop the work comp, and truth told, that was probably something you could have negotiated out. Nothign to do about that now.

As far as the professional liability, MEP design professionals are typically covered by design professional or A&E professional liability policies, typically "claims made" policy forms, and as such, IF you want coverage for claims that might present themselves later, you're going to need to purchase the extended reporting period endorsement. the cost for it is listed in the policy and something your broker can help you with.

 

[Sunset]

I did consulting, and when I decided to hang up the hat, I checked my State laws on liability lawsuits. In IL there is a statute of limitations of 2 yrs for that sort of thing.
So I kept my insurance going for the 2 extra years. They did have a tail insurance, but the cost was close enough I kept the original in case I changed my mind and jumped back in the game.

I deducted the insurance cost on taxes, as I filed my business taxes just like before, except no income, just a bunch of expenses for the 2 years while I kept the lights on.

 

[albireo13]

Interesting .... I talked with my agent about a later claim being made after I had dissolved my LLC and subsequently let my policy lapse. I was told that I would be covered by the policy as long as the claim made was concerning an issue which occurred during the time my policy was active.

I will check again later to see if I get a consistent story from them. I also plan to check with my state regarding liability lawsuits.

 

[USGrant1962]

Careful about state laws. It is probably not your state law you need to refer to. It is probably the jurisdiction specified in your contract Laws or Disputes clause. IANAL

 

[Kings over Queens]

Interesting .... I talked with my agent about a later claim being made after I had dissolved my LLC and subsequently let my policy lapse. I was told that I would be covered by the policy as long as the claim made was concerning an issue which occurred during the time my policy was active.

I will check again later to see if I get a consistent story from them. I also plan to check with my state regarding liability lawsuits.

Assuming the policy is written on a claims made form, that would be true if you purchase the extended reporting period, or more commonly called a "tail." I would have a second conversation with them, preferably with someone who has expertise with professional liability coverage.

 

[albireo13]

The policy states it is based on occur, not claims-made. Still, I plan to call them again and have another conversation about it.

 

[albireo13]

Careful about state laws. It is probably not your state law you need to refer to. It is probably the jurisdiction specified in your contract Laws or Disputes clause. IANAL

Good point. I will look into that. Thx.

 

[Kings over Queens]

The policy states it is based on occur, not claims-made. Still, I plan to call them again and have another conversation about it.

we're talking about a malpractice policy?

 

[albireo13]

Liability. It includes all sorts of things, property damage, etc