Discussion: View Thread

Hi everyone,

If a client demands that I have Commercial Liability Insurance in order to take their project on, is it fair to revise my proposal so that it includes the cost of buying this insurance? Or do I have to absorb this cost myself as part of the cost of doing business?  (Let's say that the cost of the insurance is around $1,000 per year.)

Thanks,

Isabella

------------------------------
Isabella R. Ghement, Ph.D.
Ghement Statistical Consulting Company Ltd.
Phone: 604-767-1250
E-mail: isabella@ghement.ca
Web: www.ghement.ca
------------------------------

If the client springs that requirement on you after you've quoted a price, then yes, it's absolutely fair to revise your price.  

It's also worth considering whether you "should" have the insurance anyway, or whether it will be useful for other projects, in which case you might not stick the one client with the whole cost.

Of course, you also have to ask yourself whether raising your price now, fair or not, would jeopardize your chances of getting the project, and how you feel about that.  My personal attitude is that I don't like working for people who want to be certain I'll be worth suing later, or people who impose new requirements after the fact.  But I'm semi-retired with all the business I want; your mileage may vary.

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David Lyon
Aurora Market Modeling, LLC

You can do either. I'd recommend adjusting your rates and keeping this policy in place permanently. 

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David Mangen

Assuming that it will be a G&A cost (not project or client specific) why should the client pay the entire cost?  Assuming you have a meaningful consulting practice, the allocation to a specific project should be negligible.  

Having said that, bid whatever you like.  Add $1,000, raise your billing rate, do both, whatever you choose.  Of course. this might cost you the project!

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Charles R. Mann, Ph.D.
Charles R Mann Associates, Inc.

Isabella,  we have done it both ways. In one case, with a very friendly client, we revised the proposal. In some other cases, I have just absorbed the cost myself. In principle, the client, I feel,  should pay for it, but since most consultants do not have an "indirect cost", it sticks out a little more in the proposal —  i.e., It is more obvious. It is also a matter of communication. If the client did not tell you about this requirement before you made the proposal, then you can change in response to their change.

 I will be interested to hear what others say, as well. 

Best wishes, 

Nayak

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Nayak Polissar
Principal Statistician
The Mountain-Whisper-Light Statistics

Thank you all very much for your helpful answers!  

It looks like the best course of action is to find out exactly how much the insurance costs and then ask the client if it would be possible for me to update the cost listed in the proposal without risking the loss of the project. This would seem fair to me given that I only found out about the insurance requirement (long) after submitting the proposal, so my hourly charge out rate doesn't incorporate the cost of this insurance.  

If the client is not amenable to my request, I will have to consider whether it's feasible for me to absorb this cost given that this is the first client to insist on me having this type of insurance in my 9+ years  of consulting.  

All the best, 

Isabella 

------------------------------
Isabella Ghement
Ghement Statistical Consulting Company Ltd.

Original Message:
Sent: 04-08-2016 15:21
From: Nayak Polissar
Subject: Commercial Liability Insurance - Who Should Pay for It?

Isabella,  we have done it both ways. In one case, with a very friendly client, we revised the proposal. In some other cases, I have just absorbed the cost myself. In principle, the client, I feel,  should pay for it, but since most consultants do not have an "indirect cost", it sticks out a little more in the proposal —  i.e., It is more obvious. It is also a matter of communication. If the client did not tell you about this requirement before you made the proposal, then you can change in response to their change.

 I will be interested to hear what others say, as well. 

Best wishes, 

Nayak

------------------------------
Nayak Polissar
Principal Statistician
The Mountain-Whisper-Light Statistics

I think this is a reasonable approach.  In my experience, clients understand that they price they are paying goes toward all of the components that make up the product they're buying, whether they benefit from each component of that product directly or not.  So, your cost as a $x/hr consultant is composed of $x_1 for your cost of equipment + $x_2 for your genius + ... + $x_p for your marketing.  Asking for a consultant to tack on an additional piece should increase your cost by a reasonable marginal amount since they're asking for a different value of product.  The question about billing it all to them or spreading the cost across multiple clients is more nebulous, as others have pointed out. 

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Christopher Holloman
Information Control Company

Original Message:
Sent: 04-08-2016 15:40
From: Isabella Ghement
Subject: Commercial Liability Insurance - Who Should Pay for It?

Thank you all very much for your helpful answers!  

It looks like the best course of action is to find out exactly how much the insurance costs and then ask the client if it would be possible for me to update the cost listed in the proposal without risking the loss of the project. This would seem fair to me given that I only found out about the insurance requirement (long) after submitting the proposal, so my hourly charge out rate doesn't incorporate the cost of this insurance.  

If the client is not amenable to my request, I will have to consider whether it's feasible for me to absorb this cost given that this is the first client to insist on me having this type of insurance in my 9+ years  of consulting.  

All the best, 

Isabella 

------------------------------
Isabella Ghement
Ghement Statistical Consulting Company Ltd.

I suggest you reconsider your decision.  

Assuming that the project requiring you to have insurance will be 10% of your annual billing, you will be asking that client to pay its share ($100) and an additional $900 that is of no benefit to that client, but which benefits by providing insurance for your other work and providing you with a selling point in seeking additional business. Why should that client provide you/your company with that benefit?  My guess is that the proper allocation ($100) is easily absorbed in the uncertainty of your cost estimate.  Translate it to your time and see if your estimate is so tight that the added risk to you would matter.  In addition, you may be able to cancel the insurance when the requiring project ends, reducing your risk.

A  more defensible allocation might take into account the duration of the project and the potential exposure to you of error.  Introducing such additional considerations does not appear to be required to respond to the issue you have raised.

Assuming, further, that later in the coverage year another client asks for the same coverage.  Will you also charge that client for the full annual coverage?  Will you charge that client for half the coverage and return half of the first client's payment?  Will you not charge the second client at all, potentially alienating the first client if the inequity is discovered.  

Will you take the suggestion of another respondent that you maintain the insurance after the first client's project is completed?   If so, who will you charge?  

The only way I can see you ethically charge the first client for the entire insurance cost is if you can buy project-specific insurance.  I doubt that you would be able to do that, but would like to know if I am wrong.

As an aside, although I have looked into such coverage several times and would have liked to have had it, I have have found it so difficult and/or unreasonably expensive to obtain (it must cover all employees) that I have consistently refused such requests.  I cannot think of a single instance where that cost me a contract.  

------------------------------
Charles R. Mann, Ph.D.
Charles R Mann Associates, Inc.

Original Message:
Sent: 04-08-2016 15:40
From: Isabella Ghement
Subject: Commercial Liability Insurance - Who Should Pay for It?

Thank you all very much for your helpful answers!  

It looks like the best course of action is to find out exactly how much the insurance costs and then ask the client if it would be possible for me to update the cost listed in the proposal without risking the loss of the project. This would seem fair to me given that I only found out about the insurance requirement (long) after submitting the proposal, so my hourly charge out rate doesn't incorporate the cost of this insurance.  

If the client is not amenable to my request, I will have to consider whether it's feasible for me to absorb this cost given that this is the first client to insist on me having this type of insurance in my 9+ years  of consulting.  

All the best, 

Isabella 

------------------------------
Isabella Ghement
Ghement Statistical Consulting Company Ltd.

"The only way I can see you ethically charge the first client for the entire insurance cost is if you can buy project-specific insurance."

REALLY?!

If a client asks me to rent a big office and hire two assistants and buy a big car as prerequisites for doing business with me (when all my other clients are happy without those things), I should divide the additional costs among all my other clients? Otherwise I am being unethical?

I would suggest you recompute.

------------------------------
Constantine Daskalakis
Thomas Jefferson University, Philadelphia, PA

Original Message:
Sent: 04-08-2016 17:04
From: Charles Mann
Subject: Commercial Liability Insurance - Who Should Pay for It?

I suggest you reconsider your decision.  

Assuming that the project requiring you to have insurance will be 10% of your annual billing, you will be asking that client to pay its share ($100) and an additional $900 that is of no benefit to that client, but which benefits by providing insurance for your other work and providing you with a selling point in seeking additional business. Why should that client provide you/your company with that benefit?  My guess is that the proper allocation ($100) is easily absorbed in the uncertainty of your cost estimate.  Translate it to your time and see if your estimate is so tight that the added risk to you would matter.  In addition, you may be able to cancel the insurance when the requiring project ends, reducing your risk.

A  more defensible allocation might take into account the duration of the project and the potential exposure to you of error.  Introducing such additional considerations does not appear to be required to respond to the issue you have raised.

Assuming, further, that later in the coverage year another client asks for the same coverage.  Will you also charge that client for the full annual coverage?  Will you charge that client for half the coverage and return half of the first client's payment?  Will you not charge the second client at all, potentially alienating the first client if the inequity is discovered.  

Will you take the suggestion of another respondent that you maintain the insurance after the first client's project is completed?   If so, who will you charge?  

The only way I can see you ethically charge the first client for the entire insurance cost is if you can buy project-specific insurance.  I doubt that you would be able to do that, but would like to know if I am wrong.

As an aside, although I have looked into such coverage several times and would have liked to have had it, I have have found it so difficult and/or unreasonably expensive to obtain (it must cover all employees) that I have consistently refused such requests.  I cannot think of a single instance where that cost me a contract.  

------------------------------
Charles R. Mann, Ph.D.
Charles R Mann Associates, Inc.

I agree. If a client asks for special items then they should be charged, subject, of course, to a successful negotiation of an agreement. Another client could insist that certain costs be removed from the billing rate, eg, political contributions, flowers in the office, etc. Most businesses wouldn't bother with this sort of nonsense, but if a client wants something special they should normally be asked to pay for it.

With respect to cars, I don't know current practice but it used to be standard when working for a Detroit auto maker to arrive in a late model car of the same make. (One never goes to visit Ford in a Chrysler or GM product, at least not more than once.) Ultimately, the companies paid for it though they gave vendors the same deals as their own employees got.

Regards,

David Smith

------------------------------
David Smith

Original Message:
Sent: 04-08-2016 20:07
From: Constantine Daskalakis
Subject: Commercial Liability Insurance - Who Should Pay for It?

"The only way I can see you ethically charge the first client for the entire insurance cost is if you can buy project-specific insurance."

REALLY?!

If a client asks me to rent a big office and hire two assistants and buy a big car as prerequisites for doing business with me (when all my other clients are happy without those things), I should divide the additional costs among all my other clients? Otherwise I am being unethical?

I would suggest you recompute.

------------------------------
Constantine Daskalakis
Thomas Jefferson University, Philadelphia, PA

 

In response to Dr. Constantine Daskalakis --  

I hope you are assuming that all those resources are used only for the benefit of the client requiring them or that you are given permission by that client to make other use if them,  Surely, if that project ends, you do not expect that client to continue to pay for them.

Consider a simpler version of this question as a legal question.  A client requires you to use specific software that you do not have.  It costs $1,000/user license and the client agrees to pay for one user license so that you may use it.  Absent prior specific agreements, when the project ends, who gets possession of that license -- you (to use for other clients) or your client to use (for other consultants)?

Also, who decides whether you may use that software for another client, or even your personal work, during the period that you are using it for the client paying for it? 

41,000

------------------------------
Charles R. Mann, Ph.D.
Charles R Mann Associates, Inc.

Original Message:
Sent: 04-08-2016 20:07
From: Constantine Daskalakis
Subject: Commercial Liability Insurance - Who Should Pay for It?

"The only way I can see you ethically charge the first client for the entire insurance cost is if you can buy project-specific insurance."

REALLY?!

If a client asks me to rent a big office and hire two assistants and buy a big car as prerequisites for doing business with me (when all my other clients are happy without those things), I should divide the additional costs among all my other clients? Otherwise I am being unethical?

I would suggest you recompute.

------------------------------
Constantine Daskalakis
Thomas Jefferson University, Philadelphia, PA

I find the discussion fascinating, if only because most of my clients expect that I carry this coverage, as a normal part of doing business. They would be stunned if I didn't. 

------------------------------
David Mangen

Original Message:
Sent: 04-08-2016 22:40
From: Charles Mann
Subject: Commercial Liability Insurance - Who Should Pay for It?

 

In response to Dr. Constantine Daskalakis --  

I hope you are assuming that all those resources are used only for the benefit of the client requiring them or that you are given permission by that client to make other use if them,  Surely, if that project ends, you do not expect that client to continue to pay for them.

Consider a simpler version of this question as a legal question.  A client requires you to use specific software that you do not have.  It costs $1,000/user license and the client agrees to pay for one user license so that you may use it.  Absent prior specific agreements, when the project ends, who gets possession of that license -- you (to use for other clients) or your client to use (for other consultants)?

Also, who decides whether you may use that software for another client, or even your personal work, during the period that you are using it for the client paying for it? 

41,000

------------------------------
Charles R. Mann, Ph.D.
Charles R Mann Associates, Inc.

I had projects where a lot more money was on the line and no such insurance was required. But this particular project involves medical patients, so this could be the reason why some form of insurance is required. Initially, the client's legal department also requested Errors and Omissions Insurance and Automobile Liability Insurance, but those were waived.  It's been tremendously helpful to get a variety of views on how to go about this.  Thank you again for sharing your views and insights!

------------------------------
Isabella Ghement
Ghement Statistical Consulting Company Ltd.

Original Message:
Sent: 04-08-2016 23:12
From: David Mangen
Subject: Commercial Liability Insurance - Who Should Pay for It?

I find the discussion fascinating, if only because most of my clients expect that I carry this coverage, as a normal part of doing business. They would be stunned if I didn't. 

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David Mangen

Hi David. 

We also have carried general insurance for most of my consulting career and now clients want E&O (errors and omissions) which is another league higher. We have resisted stating we have follow fully compliant SOPs, but business has become more and more risk adverse and wanting all the partners to share the risk, so we carry both levels of insurance. Never used them and hope never to. But if the lawsuits start everyone gets dragged in and the cost of proving you were not in anyway responsible can be very expensive. 

We also pay a stunning increase in license fees to SAS our main analytical application just because we are a business and they are a monopoly.  

------------------------------
Janet McDougall
President
McDougall Scientific Ltd.

Original Message:
Sent: 04-08-2016 23:12
From: David Mangen
Subject: Commercial Liability Insurance - Who Should Pay for It?

I find the discussion fascinating, if only because most of my clients expect that I carry this coverage, as a normal part of doing business. They would be stunned if I didn't. 

------------------------------
David Mangen

I wonder if there has already been a discussion on this somewhat related question.

The question is if you are a single statistician doing consulting then should  you as a business be a 

1.   Sole Proprietorship

2.    LLC

I have done about 40 ALJ (Administrative Law Judge) hearings as an expert witness on statistical sampling and extrapolation of over payments in medical records but most under the umbrella of a larger company that is an LLC. This work is like that that was recently described in our ASA pub "Significance".

I am retired now but still active and recently did an "Expert Report" on an overpayment in a health insurance case.  I just had the client sign a disclaimer saying roughly that my opinion was based on experience, education and good faith.  They had to agree to hold me harmless and without blame in all matters of liability resulting from this work. They signed it and I felt protected but I am no lawyer.

Any and all comments appreciated.

J. Gregory Dobbins

Dobbins Consulting

------------------------------
J. Gregory Dobbins

Original Message:
Sent: 04-09-2016 11:12
From: Janet McDougall
Subject: Commercial Liability Insurance - Who Should Pay for It?

Hi David. 

We also have carried general insurance for most of my consulting career and now clients want E&O (errors and omissions) which is another league higher. We have resisted stating we have follow fully compliant SOPs, but business has become more and more risk adverse and wanting all the partners to share the risk, so we carry both levels of insurance. Never used them and hope never to. But if the lawsuits start everyone gets dragged in and the cost of proving you were not in anyway responsible can be very expensive. 

We also pay a stunning increase in license fees to SAS our main analytical application just because we are a business and they are a monopoly.  

------------------------------
Janet McDougall
President
McDougall Scientific Ltd.

To the LLC and Sole Proprietorship I would add the option of incorporating, either as a Sub-chapter S corporation or a "true" corporation. My business is incorporated as a sub-S corporation.

Regarding what you "should" do I doubt that there is a simple answer.  In part it depends on the amount of consulting that you plan on doing and the risk tolerance that you personally have.  If you are terribly risk averse, then you probably want to stop consulting because you will expose yourself to some risk, and ultimately no insurance or legal status of the business organization will really protect you.  If somebody wants to come after you they can and will, and you will have to fight it.  Being in business is not for the timid and faint of heart.

Fortunately, however, most people/companies are not that nasty, and so some degree of protection is usually sufficient.  My personal opinion is that you will want to get some form of legal organization (LLC or Sub-S) and get some basic insurance coverage once your consulting revenue exceeds approximately $50,000/year.  Of course, this is a rough rule of thumb and depends on whether your revenue stream includes other items (e.g., costs of data collection,etc., etc),

All of this leads to my most important point:  Your exposure to risk ultimately depends on who you choose to do business with.  If you're going to consult with snakes, expect to be bitten once or twice.  If you work with people who have personal integrity, you'll probably be fine.

------------------------------
David Mangen

Original Message:
Sent: 04-12-2016 08:21
From: J. Gregory Dobbins
Subject: Commercial Liability Insurance - Who Should Pay for It?

I wonder if there has already been a discussion on this somewhat related question.

The question is if you are a single statistician doing consulting then should  you as a business be a 

1.   Sole Proprietorship

2.    LLC

I have done about 40 ALJ (Administrative Law Judge) hearings as an expert witness on statistical sampling and extrapolation of over payments in medical records but most under the umbrella of a larger company that is an LLC. This work is like that that was recently described in our ASA pub "Significance".

I am retired now but still active and recently did an "Expert Report" on an overpayment in a health insurance case.  I just had the client sign a disclaimer saying roughly that my opinion was based on experience, education and good faith.  They had to agree to hold me harmless and without blame in all matters of liability resulting from this work. They signed it and I felt protected but I am no lawyer.

Any and all comments appreciated.

J. Gregory Dobbins

Dobbins Consulting

------------------------------
J. Gregory Dobbins

I agree with David. Since I've left the corporate world, I've carried General Liability, E&O as well as Auto Liability, and most of my domestic clients require all three with specific limits. My sense is that it probably depends on the clientele - I am heavily in financial services, healthcare, public sector, and other professional services firms, and they are mostly large national or international clients. In any case, having seen what can happen in the corporate world, I wouldn't think of not carrying any of these. (I am also an LLC, in part for the same reason.). To me it's a cost of doing business. It's like any insurance - you don't need it until you need it... I have never had to use any of them for my own practice and hope to never have to.

------------------------------
Michiko Wolcott
Principal Consultant
Msight Analytics

Original Message:
Sent: 04-08-2016 23:12
From: David Mangen
Subject: Commercial Liability Insurance - Who Should Pay for It?

I find the discussion fascinating, if only because most of my clients expect that I carry this coverage, as a normal part of doing business. They would be stunned if I didn't. 

------------------------------
David Mangen

I recommend 2MM General Liability, 1MM E&O. that seems to be what most clients want.

------------------------------
Nelson Lipshutz
Regulatory Research Corp.

Original Message:
Sent: 04-09-2016 12:24
From: Michiko Wolcott
Subject: Commercial Liability Insurance - Who Should Pay for It?

I agree with David. Since I've left the corporate world, I've carried General Liability, E&O as well as Auto Liability, and most of my domestic clients require all three with specific limits. My sense is that it probably depends on the clientele - I am heavily in financial services, healthcare, public sector, and other professional services firms, and they are mostly large national or international clients. In any case, having seen what can happen in the corporate world, I wouldn't think of not carrying any of these. (I am also an LLC, in part for the same reason.). To me it's a cost of doing business. It's like any insurance - you don't need it until you need it... I have never had to use any of them for my own practice and hope to never have to.

------------------------------
Michiko Wolcott
Principal Consultant
Msight Analytics

My point was that it is FAR from unethical. Particularly if it's clearly agreed upon up front. Whether insurance, car, computer, or whatever, how it can/cannot be used depends on the contract.

NIH grants to individual investigators sometimes cover such things (typically equipment) for the use of that specific grant. Can they also be used for other purposes besides the grant that paid for them? Maybe yes, maybe no. If yes, there's sometimes cost sharing. Also, the investigator often gets to keep the equipment after the grant ends and use it as he/she sees fit (with relatively few restrictions). But all these things are agreed upon up front and I've never heard anyone say those practices are unethical.

See

http://grants.nih.gov/grants/policy/equipment_faqs.htm

------------------------------
Constantine Daskalakis
Thomas Jefferson University, Philadelphia, PA

Original Message:
Sent: 04-08-2016 22:40
From: Charles Mann
Subject: Commercial Liability Insurance - Who Should Pay for It?

 

In response to Dr. Constantine Daskalakis --  

I hope you are assuming that all those resources are used only for the benefit of the client requiring them or that you are given permission by that client to make other use if them,  Surely, if that project ends, you do not expect that client to continue to pay for them.

Consider a simpler version of this question as a legal question.  A client requires you to use specific software that you do not have.  It costs $1,000/user license and the client agrees to pay for one user license so that you may use it.  Absent prior specific agreements, when the project ends, who gets possession of that license -- you (to use for other clients) or your client to use (for other consultants)?

Also, who decides whether you may use that software for another client, or even your personal work, during the period that you are using it for the client paying for it? 

41,000

------------------------------
Charles R. Mann, Ph.D.
Charles R Mann Associates, Inc.

Reply to Dr, Daskalakis 

I have worked in both arena's and question your extrapolation from a government agency's treatment of a grant recipient to the private sector's treatment of a private consultant.  The differences are many,

See?.     

------------------------------
Charles R. Mann, Ph.D.
Charles R Mann Associates, Inc.

Original Message:
Sent: 04-09-2016 00:14
From: Constantine Daskalakis
Subject: Commercial Liability Insurance - Who Should Pay for It?

My point was that it is FAR from unethical. Particularly if it's clearly agreed upon up front. Whether insurance, car, computer, or whatever, how it can/cannot be used depends on the contract.

NIH grants to individual investigators sometimes cover such things (typically equipment) for the use of that specific grant. Can they also be used for other purposes besides the grant that paid for them? Maybe yes, maybe no. If yes, there's sometimes cost sharing. Also, the investigator often gets to keep the equipment after the grant ends and use it as he/she sees fit (with relatively few restrictions). But all these things are agreed upon up front and I've never heard anyone say those practices are unethical.

See

http://grants.nih.gov/grants/policy/equipment_faqs.htm

------------------------------
Constantine Daskalakis
Thomas Jefferson University, Philadelphia, PA

There are usually two things to consider in billing:  direct and indirect costs.

For direct costs, these could include textbooks, software, hardware necessary to complete the task that you and the client negotiated to solve.  These are usually line items on an invoice.

For indirect costs, this includes your business costs of running your office: heating/AC, internet, power, INSURANCE, etc.  That is usually rolled up into one item (indirect costs) and expressed as a percentage of the bill.  You figure out a reasonable rate to cover all your additional expenses of running a business, and charge all clients that rate.  As a single item, that rate can also be negotiated with your client if they think it is too high.

I hope this helps...

------------------------------
Mark Lancaster
Northern Kentucky University

Original Message:
Sent: 04-08-2016 22:40
From: Charles Mann
Subject: Commercial Liability Insurance - Who Should Pay for It?

 

In response to Dr. Constantine Daskalakis --  

I hope you are assuming that all those resources are used only for the benefit of the client requiring them or that you are given permission by that client to make other use if them,  Surely, if that project ends, you do not expect that client to continue to pay for them.

Consider a simpler version of this question as a legal question.  A client requires you to use specific software that you do not have.  It costs $1,000/user license and the client agrees to pay for one user license so that you may use it.  Absent prior specific agreements, when the project ends, who gets possession of that license -- you (to use for other clients) or your client to use (for other consultants)?

Also, who decides whether you may use that software for another client, or even your personal work, during the period that you are using it for the client paying for it? 

41,000

------------------------------
Charles R. Mann, Ph.D.
Charles R Mann Associates, Inc.

Agree with those stating this is the price of doing business in many fields.  I don't think it's unreasonable they ask, and I think it's strange to pass that cost on to the client directly (yes, overhead cost things may go in to your hourly rate).  But this is not like the need to have special software. My view is it will look "small" if you try to charge them for that insurance (they may have an expectation you have it).

O&E insurance costs will be a function of your revenue.  It can be very pricey, and the process to get it is painful.  If you do healthcare stats for example you spend a lot of time explaining that you don't actually treat patients... (of course a much higher level of risk).

But, there are many things in contracts from companies that you can push back on.  Many of these are boilerplates that need editing, and almost all clients are flexible on these.  They may send the same contract to a stats person as a manufacturing company, instrument supplier, etc.  So, its very reasonable to make edits and ask for these being removed.  That said, you will see this more and more, and may very well be worth the effort to get now (its not a fast process when you need it).  I suspect single person, vs LLC, etc, are probably different.

I think the $1M/$2M is pretty standard.  We were asked for substantially more and we couldn't get it -- insurers would not create that coverage for our revenue.  The client was able to lower it.  

------------------------------
Scott Berry
Berry Consultants

Original Message:
Sent: 04-08-2016 15:40
From: Isabella Ghement
Subject: Commercial Liability Insurance - Who Should Pay for It?

Thank you all very much for your helpful answers!  

It looks like the best course of action is to find out exactly how much the insurance costs and then ask the client if it would be possible for me to update the cost listed in the proposal without risking the loss of the project. This would seem fair to me given that I only found out about the insurance requirement (long) after submitting the proposal, so my hourly charge out rate doesn't incorporate the cost of this insurance.  

If the client is not amenable to my request, I will have to consider whether it's feasible for me to absorb this cost given that this is the first client to insist on me having this type of insurance in my 9+ years  of consulting.  

All the best, 

Isabella 

------------------------------
Isabella Ghement
Ghement Statistical Consulting Company Ltd.

Commercial Liability- Liability insurance for you injuring someone or breaking something.  It does not have to do with the content of your work.  Typically consultants are asked to carry this type of insurance if they use the clients equipment or work onsite.  This policy is a few hundred dollars typically.  Also you should check what your auto liability covers in case you run over the client's flowers or something.   I added a clause to say that I use my car for business.   

Errors and Omissions - More like malpractice insurance.  This costs thousands and may not be required.  It depends on what your contract is with your client and the impact of your work.  

I ran into a start-up that is looking to sell lower cost policies for solo entrepreneurs.  I am sure there are other companies as well.  

Georgette Asherman

Direct Effects, LLC

------------------------------
Georgette Asherman

Original Message:
Sent: 04-10-2016 10:27
From: Scott Berry
Subject: Commercial Liability Insurance - Who Should Pay for It?

Agree with those stating this is the price of doing business in many fields.  I don't think it's unreasonable they ask, and I think it's strange to pass that cost on to the client directly (yes, overhead cost things may go in to your hourly rate).  But this is not like the need to have special software. My view is it will look "small" if you try to charge them for that insurance (they may have an expectation you have it).

O&E insurance costs will be a function of your revenue.  It can be very pricey, and the process to get it is painful.  If you do healthcare stats for example you spend a lot of time explaining that you don't actually treat patients... (of course a much higher level of risk).

But, there are many things in contracts from companies that you can push back on.  Many of these are boilerplates that need editing, and almost all clients are flexible on these.  They may send the same contract to a stats person as a manufacturing company, instrument supplier, etc.  So, its very reasonable to make edits and ask for these being removed.  That said, you will see this more and more, and may very well be worth the effort to get now (its not a fast process when you need it).  I suspect single person, vs LLC, etc, are probably different.

I think the $1M/$2M is pretty standard.  We were asked for substantially more and we couldn't get it -- insurers would not create that coverage for our revenue.  The client was able to lower it.  

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Scott Berry
Berry Consultants

I carry Worker's Compensation and a Statistician liability policy. I do that since many clients require me to carry it if I am to be hired for the contract. That way they cover themselves especially if you go through an intermediate agent who hired you for a client of his.  Here in NJ it comes to about $1500/year for both policies. I use The Hartford for both policies. 

HTH

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David Guy
Statistical Consultant
R Statistical Consulting

Original Message:
Sent: 04-12-2016 10:47
From: Georgette Asherman
Subject: Commercial Liability Insurance - Who Should Pay for It?

Commercial Liability- Liability insurance for you injuring someone or breaking something.  It does not have to do with the content of your work.  Typically consultants are asked to carry this type of insurance if they use the clients equipment or work onsite.  This policy is a few hundred dollars typically.  Also you should check what your auto liability covers in case you run over the client's flowers or something.   I added a clause to say that I use my car for business.   

Errors and Omissions - More like malpractice insurance.  This costs thousands and may not be required.  It depends on what your contract is with your client and the impact of your work.  

I ran into a start-up that is looking to sell lower cost policies for solo entrepreneurs.  I am sure there are other companies as well.  

Georgette Asherman

Direct Effects, LLC

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Georgette Asherman

Everyone,

This is an excellent practical discussion on consulting business requirements.  Thanks for all of the advice born of experience.

So far, none of my clients have asked for any type of insurance but there will be a first time at some point.  

A related question to the original question:  Where have you purchased professional liability insurance?  

One of the ASA membership benefits is various types of professional liability insurance.  Has anyone ever used this option?

Linda

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Linda A. Landon, PhD, ELS
President

Research Communiqué

Improving decisions and solving problems by making sense out of uncertainty

Email: LandonPhD@ResearchCommunique.com
Phone: 573-797-4517
Website: www.researchcommunique.com
Jefferson City, MO
Central Standard Time ( CST ) = GMT-6 (November – February)
Central Daylight Time ( CDT ) = GMT-5 (March –October)

I have had a statistical consulting practice for 20 years and have just retired.  I have had E&O insurance most of that time, and I purchased that through a joint program sponsored by the American Chemical Society and the American Institute of Chemical Engineers. (I am a member of the latter organization as my BS is in Chemical Engineering, and you have to be a member of at least one organization to participate.)  Initially I had $1,000,000 coverage at about an $800 annual premium., but over the years the costs increased to $1600 for $500,000 coverage.  The program has options for lower coverage at a reduced premium.  I was not aware that ASA now has a program for this. I just included the E&O insurance cost in my overhead as part of my hourly fee, which has also increased over the years.  During my consulting I haven't even come close to a law suit, but I felt that it was a good barrier to opportunistic lawyers, and I also operated as an LLC for the same reason..

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Thomas Murphy

Original Message:
Sent: 04-09-2016 11:21
From: Linda Landon
Subject: Commercial Liability Insurance - Who Should Pay for It?

Everyone,

This is an excellent practical discussion on consulting business requirements.  Thanks for all of the advice born of experience.

So far, none of my clients have asked for any type of insurance but there will be a first time at some point.  

A related question to the original question:  Where have you purchased professional liability insurance?  

One of the ASA membership benefits is various types of professional liability insurance.  Has anyone ever used this option?

Linda

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Linda A. Landon, PhD, ELS
President

Research Communiqué

Improving decisions and solving problems by making sense out of uncertainty

Email: LandonPhD@ResearchCommunique.com
Phone: 573-797-4517
Website: www.researchcommunique.com
Jefferson City, MO
Central Standard Time ( CST ) = GMT-6 (November – February)
Central Daylight Time ( CDT ) = GMT-5 (March –October)

All, just got this conversation as I get the digest and not the individual emails :) I wanted to add a couple of things:

1) Everyone's practice is different, and while for some people liability insurance is a must, for others, it probably isn't. I just started my own practice this year and decided to get a low level ($250,000) of coverage to "see what happens". So far none of my clients, who are largely academic, have asked me about this insurance. I told one potential client that I carry this insurance as a "bragging point" and the response was "What's that?" and after I explained it "Oh yeah, I'm not really a business person, I don't really care about that". Some people have practices where they work with a lot of high profile, high risk clients, and need it. Other people don't, may not want to grow to be that kind of practice, and may have one or two clients who want that coverage--and it may be worth it to those clients to pay the extra. Clearly there is something about you they like if they are not your typical client but came to you anyway.

2) One principle I used when setting up my practice, which I have no evidence to back up its effectiveness but it seems logical, was along the lines of this common job searching advice: dress for the job you want, not the job you have. I'd like to potentially grow my practice into one with clients who view liability coverage as important, so I got liability coverage. I wanted to have a practice where clients visit me in my office as well as work with me by phone/web, and so I got an office even though I probably could have squeaked by without one.

Comments/criticism more than welcome!

Kim

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Kim Love
Owner and Lead Consultant
K. R. Love Quantitative Consulting and Collaboration

When in business, you have a number of costs.  They are all of your overhead costs.  As a smart business person, you should consider all of your costs, and then look at your potential income for the year.  Once all is considered, you can then decide how to set your fees to ensure that you make a profit and also pay your expenses for doing business.  To place those costs on one customer is not smart business, and will likely lose you the opportunity to do business with that person.

In a simpler but exaggerated case it would be like McDonald's charging me for the repaving of the parking lot along with my order.

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Jeffrey Davidson
V.P. Biometrics
Endo Pharmaceuticals