Insurance question

[wayne123]

Does anyone purchase liability insurance on a per job basis? I am operating a part time contracting business (soon to be full time hopefully)and was interested in getting some input. I wire possibly four houses per year on my own and have been working under the construction companies insurance.

 

[luke warmwater]

Re: Insurance question

No.

Do you have to have an Electrical License?

 

[growler]

Re: Insurance question

On the insurance question . I have never tried to buy insurance by the job. There is probably a company that would sell it to you. My advice is to shop around for a company that will sell you insurance for a good rate and coverage. Insurance cost are based on the type and amount of work you do. You all ways pay a base amount and this may cover you for the year, unless you start doing more houses. Don't let the first price quoted by a company scare you, there are many out there selling insurance and they all want your business. While your at it make sure your truck is covered for commercial use. Some of the time it's not even a higher cost, it's just the way the policy is written. If part time, make sure the policy states commercial with some personel use. In most cases you can even get workmans comp. cheaper than the GC will cover you. Residnetial electrical is not considered hazardous, so shop around. Good luck.

 

[tx2step]

Re: Insurance question

All of the states I have worked in require a liability policy to be a licensed Electrical Contractor. You have to provide the State with a certificate of insurance to be granted a contracting license.

This is not the same as having a Masters License, which you must also have to obtain a state license as an Electrical Contractor.

Texas and the surrounding states do it that way. You can have a Masters license without being a EC, but you can't be an EC without having a Masters license and without providing proof of liability insurance.

Is it different in your state?

 

[active1]

Re: Insurance question

Illinois is a free for all. No state requirements but every city & village is different. Some make you buy insurance bonds to work in there town.

Tom

 

[wayne123]

Re: Insurance question

Yes Luke, I am licensed. North Carolina only requires insurance and bonding for the Intermidiate and Unlimited license. I hold the limited version which does not require this.

 

[highkvoltage]

Re: Insurance question

I carry a blanket bond to cover all jobs. There are some jobs that require a seperate bond I just add the cost of that bond to the job. What I don't so is ever exceed my bond limit. I usually carry a $1,000,000 bond. If I am working on a $5,000,000 building I raise my bond limits. Bonding is cheap so why take the risk. Remember it only takes one nuts case to put you out of business.

 

[growler]

Re: Insurance question

I keep hearing that you need to be a master electrician to be a contractor. I don't think this is correct ( you would have to read the laws of the state you do business in ). In the states I'm familiar with you do not. If you wish to start an electrical contracting business and you are not a master, then you must hire a master full time ( One that is willing to sponsor your business, usually a project manager ). The master must send a letter of intent to the state and must withdraw it if he quits the company. This is how large companies operate in different states without the owner being licensed in each state. One man can't over see that much work anyway. A young electrician that holds a master license may wish to sponsor a company and work with someone else's money for a while before committing to a venture of their own ( it's safer on large projects ). I tell my customers that they too can start raking in the money by starting a company and hiring a master( I haven't seen anyone try). Back to insurance (an insurance company can insure anyone for any reason , if they are willing to take the risk and have financial backing). Liability insurance is only a good as the company that sells it, check rating of company. Buy insurance and start building a track record ( by not filing claims or having accidents ). Once you are in business every insurance company in the country will call and offer a better deal.

 

[tx2step]

Re: Insurance question

Growler, I stand corrected. You are right.

In Texas and the surrounding states, you can own an electrical contracting company as long as you employ a Master Electrician that commits his state license to your company. He is then technically responsible for the work performed in that state meeting Code. You can have different masters in different states. The Master must immediately notify the State if he leaves your employ of if he no longer wants to license the company.

I'm just not comfortable operating on anyone else's license, as I have seen situations first-hand where the company was held hostage by the license holder. If you fired him, your work was shut down until you hired another Master to take his place or obtained a Master License yourself.

A company I once worked for got caught in that very bind on a large multi-million $ project, and it created some real problems. The license holder was the job electrical superintendent (or whatever you call him where you are from), and not a Project Manager (I was the Project Manager). Having the Job Superintendent hold the Master License is just asking for problems.

That was the beginning of my taking Masters exams and acquiring masters licenses in several states. That company paid all expenses involved for my obtaining the Masters licenses. I licensed all of their work for quite a few years, working as a project manager and later as VP. I eventually left and started doing my own thing, but not until they had the required Masters licenses in place using other employees.

You are also right that Liability insurance is only as good as the insurance company that underwrites it. I've seen a contractor get left hung-out-to-dry when he had a large claim and found out that his insurance carrier was going into bankruptcy. He ended up not having any real coverage. You definitely don't want that to happen to you.

You can check on the financial strength of an insurance company at:
http://www.ambest.com/
Look in the upper left hand corner of that web page, where it says: "Find a company's Best's Rating" and do a search for the exact name of the insurance carrier. You may have to register first, but registration used to be free.

Its always a good idea to check out any insurance carrier that you are thinking of using. It's also a good idea to check on your current carrier(s) every year or 2 just to be sure.

 

[dillon3c]

Re: Insurance question

You know tex,
In reading your post,don't know if I should be offended or not.It is just about paramount to a -slur- to the Master Licensed Electricians,working the field.The Licensed Master Electrician, running these jobs.

Seems like I just witnessed,the differance in the " suit and tie attitudes" to Masters Electricans,that work these large jobs in field. I'm just guessing now,but could be the lack of "hands on in working the field experience" in lew of why this statement was made?

Shame on you,in offering up of such a statement as this, against the field electrician..

 

[haskindm]

Re: Insurance question

It is probably not a bad thing for the "business owner" and the Master Electrician to be two different people as the skills needed for success in business are very different from the skills needed to be a good electrician. Most business failures are not due to people being bad electricians, but because they make poor business decisions. I include myself in that: been there, done that, got the T-shirt. Or in this case "lost the shirt"!
In response to this question, you would need to make sure that the insurance was not just for "the period of construction". A job may come back several years later and you have a liability issue.

[ June 10, 2005, 12:45 PM: Message edited by: haskindm ]

 

[tshea]

Re: Insurance question

haskindm said:

It is probably not a bad thing for the "business owner" and the Master Electrician to be two different people as the skills needed for success in business are very different from the skills needed to be a good electrician.

Absolutely the truth. This is the exact reason I went back to school at age 40+ to earn my business degree.
The mechanical skills developed as a Master Electrician do not help to make the business decisions. However, the people skills and problem solving skills do!
Business school teaches you a new way to think problems through and come up with different solutions.

 

[tx2step]

Re: Insurance question

Originally posted by dillon3c:
You know tex,
In reading your post,don't know if I should be offended or not.It is just about paramount to a -slur- to the Master Licensed Electricians,working the field.The Licensed Master Electrician, running these jobs.

Seems like I just witnessed,the differance in the " suit and tie attitudes" to Masters Electricans,that work these large jobs in field. I'm just guessing now,but could be the lack of "hands on in working the field experience" in lew of why this statement was made?

Shame on you,in offering up of such a statement as this, against the field electrician..

Dillon -- no slur or insult was intended at all. Sorry if you took it that way -- I certainly didn't intend to offend you.

I've worked in the field as well as in the office, from apprentice to owner, and all positions in-between, over the span of 40+ years. From small residential work up through industrial, commercial, and governmental electrical projects as large as $19,000,000.

I have nothing but high regard for qualified, skilled people in any of the various positions, including Masters (I have a number of Master licenses myself), superintendents, foremen, journeymen, estimators, project managers, etc.

I've worked with a number of people that were far more skilled at a particular position than I was. That was who I wanted to work with. I always look for people that are the best at what they do -- they are invariably more skilled and talented in those particular positions than I am. I try to utilize their skill and talent.

I was speaking strictly from a business point of view as the owner of an electrical contracting company.

If you take on a project in another state and your only Masters license that qualifies you (i.e. gives you legal " permission ") to perform that work is someones' other than your own, then you put yourself at risk of having that job shut down if you have a disagreement with that particular employee. It doesn't matter if the Master is your on-site electrical superintendent, an in-office project manager, or your own brother.

Any time that your ability (legal permission) to perform work that you are contractually obligated to perform (electrical or otherwise) is dependent on someone elses' license, you give that other person quite a bit of leverage over you. I'm just not comfortable in doing that myself, though other contractors obviously are willing to take that risk.

I was speaking of a direct experience in this regard that went bad. The company landed a new large Multi-million $ electrical subcontract. It was the first company project in that state. It then obtained its state contracting license using the Masters license of the new guy that was hired to be the electrical superintendent for this specific project. He was the only company employee with a master license in that state. This new guy knew that the work couldn't be performed without him, and he became convinced that he didn't have to answer to anyone.

Work quality and work ethic problems developed during the course of this 18 month project. About mid-way through the job, things came to a head. The company owner tried to work things out with the guy and to get him back on-track, but he told the owner to buzz off, and that the owner couldn't fire him because he would shut down the job. Yes, he really did say that, and obviously believed it, too.

Well, the owner did fire him. And the electrical work did get shut down for a while. The Owner did a very quick search for another Master, and finally found an old guy that was retired and unable to work, but had maintained his license. He was hired by the company for the rest of the project, but pretty much just stayed at home. All he had to do was provide the license until that project was completed, and be there for inspections. He was paid a couple of thousand $ a month for doing just that -- he had no other role. It was a great deal for him and it allowed the company to complete the project without being defaulted or sued by the GC.

The company sent in one of their best superintendents to supervise completion of the project. He was highly skilled, but didn't have a masters license. He did a great job of pulling the project back on-track and correcting the installation problems. He saved the day.

In the end, though, there was a LOT of extra costs on that project. Productivity problems and fixing installation errors that were created by the original electrical superintendent, plus the added cost of employing a non-productive Master just to maintain the company state license, etc. It was an expensive lesson.

The owner did this to himself, though, by taking on a project where he didn't already have a license, then mis-judging the character of a new employee, and then making himself dependent on the license of that new employee.

The owner of the company didn't want to spend the time (and probably couldn't pass the tests) and trusted me, so he sent me around to the various states. I obtained Masters licenses in all of the places he had any interest in doing projects. I licensed the company in all of those states for a number of years.

Could I have done the same thing to the Owner? Yes, and it would have been a much larger problem for him, since I licensed all of the states. But I didn't take advantage of him or the situation.

I don't think that most Master electricians would take advantage of their employer in this manner, but I saw how much it could cost if you accidently picked the wrong guy. It's just a risk that I'm not willing to take, mainly because I don't have to -- I carry the licenses myself. If a company owner can't or doesn't want to carry the Masters license himself, then he takes a certain amount of risk. That's his choice.

So I wasn't saying anything bad about anyone that has a Masters license. For me, they're being paid for their knowledge, skill and experience. I've worked with some of the very best, and I have nothing but respect and high regard for their ability.

I just don't personally think that it is a good business decision for the owner of a company to have to depend on anyone elses license for their legal "permission" to do the work that the company (and the owner) has obligated itself to perform. If he does, he should develop some license "depth" (i.e. more than one person with the necessary licenses) just for insurance.

It may not happen often, but I've seen firsthand what can happen if the wrong owner/employee relationship goes sour.

To me, a Masters License is a designation of technical competence. It doesn't automatically make you a good employee.

Just because a doctor has an "MD" doesn't necessarily make him a good doctor.

There are many very good electricians that do not have a Masters License. There are also quite a few electricians who hold a Masters License that aren't necessarily good employees.

The license says that they may know how to do the work, but it is no quarantee that they will actually do it right. That all depends on the specific individual, not on his license.

Am I the only one who sees the electrical world this way?

 

[dillon3c]

Re: Insurance question

No tex,
In reading your new posting,your not the only one that sees things in that light..I would like to apologize,if my comments where a little off color,and of personal nature sir.

Didn't mean to stray from topic either,the wording in post just caught me alittle of guard in the reading of it.If I ever had a non-workable beef with owner and in the mitts of a underway project of mass-dollar or small..I'd see my obligations through to point of understanding,in where I could be relieved of this responsibility,to the conforming of all concerned in applical way, of agreement..

*felt the need to add this also.Providing no intentional deception,was involved..
-->dillon

[ June 10, 2005, 05:58 PM: Message edited by: dillon3c ]

 

[tshea]

Re: Insurance question

tx2step said:

Just because a doctor has an "MD" doesn't necessarily make him a good doctor.

What do you call the person who finished last in their MD class? Dr.

tx2stp said:

Am I the only one who sees the electrical world this way?

No your commentary hit the nail on the head. A Masters designation indicates technical proficiency, not business proficiency. Although some Masters have learned business savy (some the hard way).
As I said earlier, a business degree makes you think differently in regards to problem solving, whether it be a technical or abstract problem.

 

[tx2step]

Re: Insurance question

Dillon -- No Problem! Sorry that my wording was clumsy and that I was unintentionally offensive.

tshea -- I agree!

I'm reminded of that old adage:

Experience is the best teacher, but the price of tuition can be VERY high!

 

[silverbk]

Re: Insurance question

Originally posted by wayne123:
Does anyone purchase liability insurance on a per job basis? I am operating a part time contracting business (soon to be full time hopefully)and was interested in getting some input. I wire possibly four houses per year on my own and have been working under the construction companies insurance.

Here in NY, I cannot maintain my county license without showing proof of insurance. I have found that for $1,000,000 of coverage (the minimum) the prices here are pretty reasonable under $2000 a year, up slightly since 9/11 .

We also have to carry $1,000,000 on every vehicle owned, which was tougher to find, but was available, some guys choose an umbrella type policy for this.

 

[benwieland]

Re: Insurance question

in north carolina you dont need insurance to obtain your unlimited license. what you do need is a certificate of bondability issued through a company in good standing with nc dept of insurance. this form is almost impossible to get filled out due to you not having any projects of your own for the bonding company to verify your competencein completing them. so what i did was the only other thing you can do to obtain an unlimited license in nc and that was get your bank to issue a letter stating you are eligable to obtain a credit line over $75,000. now as far as the main question you can get a $1,000,000 general liability policy for your kind of part time work for about 500 the first year, but make sure you shop around. you dont have to have workmans comp unless you employ 3 or more people or the gc requires you to

 

[tx2step]

Re: Insurance question

benwieland -- would you please explain North Carolina's logic in this?

They don't require that you carry liability insurance, but they want to be certain that you are capable of bonding a job if it is required by some contract that you don't have yet?

Most electrical subcontractors don't provide a payment and/or performance bond to a GC unless it's pretty large work.

If you bid a project as a "prime contractor", like with the state for instance, then you would usually have to provide a bid bond (with your bid) that would guarantee that a payment and performance bond would be provided to the owner by the bonding company if you are awarded the contract.

Is North Carolina trying to restrict issuing an "unlimited license" to just large electrical contractors that already have bonding established?

And all you have to do as an alternative is get a letter from a bank stating that you qualify for a $75,000+ credit line? That certainly wouldn't do much good if you had a $1,000,000 lawsuit filed against you for causing a fire and burning down a building.

States require General Liability Insurance coverage to protect the Public. In the event of a big claim, the injured party is guaranteed to have someone (the insurance co.) to go after that might possibly have enough money to pay the settlement. Most contractors wouldn't have enough net worth upon liquidation to pay a $1,000,000 claim -- they'd just go bankrupt. How does this certificate of bonding capacity protect the Public for your potential liability?

I don't get it -- please explain.

 

[hardworkingstiff]

Re: Insurance question

Originally posted by tx2step:

I don't get it -- please explain.

Heck, I'm an electrical contractor and a general contractor (for speciality "fuel" license) in NC and I don't get it. He is right, all you need for the electrical unlimited is a statement of bondability (and pass the test of course).

I don't get it either. It makes sense to require liability insurance.