Jump to content

 
Photo

liability insurance

- - - - -

  • Please log in to reply
4 replies to this topic

#1
Mike H

Mike H

    Master Contributor

  • Validated Member
  • PipPipPipPip
  • 168 posts
  • Location:State College, PA
  • United States

I'm curious who has general liability insurance, and what that actually does for the costs incurred. I've never had personal liability insurance attached to my consulting, freelance or publishing endeavours. But I've never really asked about it. Can I be sued for bad advice? Or be responsible for a lethal papercut from one of my retail maps?

m.
Michael Hermann
mike [at] purplelizard.com


www.purplelizard.com

#2
BEAVER

BEAVER

    Master Contributor

  • Validated Member
  • PipPipPipPip
  • 185 posts
  • Location:Middletown, NY
  • United States

I went to see a lawyer this summer with the same concern. I was told that as long as I stay small, chances of anybody suing me are vary slim.

First thing you have to do is to incorporate. This limits the liability to the corporation and you will not be personally responsible. Any of the corporation type will work just fine ( C, S, LLC, PLLC). Make sure you run your corporation by the book so that no one can pierce the corporate vail (go after your personal assets). Liability insurance for a retail maps can be very expensive. Sometimes it's good to get it for small claims, say up to $50,000. This way you will avoid those small crazy claims. Most of the claims are filed by someone trying to get money out of you by hoping you will settle outside the court. They have a silly claim that will most likely be rejected by the judge, but that requires for you to get a lawyer to show up in court, which could cost some significant amount of money. By having low limit liability insurance, anybody who is going after you will have to deal with large insurance company first and in most cases will drop the case.

Here are few tips given to me by the lawyer, regardless if you buy the insurance or not.

1. Incorporate

2. Have separate accounts for your business

3. Keep up with all the paper work and meetings

4. Keep the corporate assets as small as possible

5. Have the mailing address of the corporate agent up to date

6. Transfer money from the corporation to your self as often as possible in small amounts and keep most in cash/gold

7. If you business takes off, start a second corporation from scratch (do not split the existing corp into two)

8. If your business really takes off, get a Jewish lawyer (they are the best when it comes to hiding money so none are available when lawsuits come)

9. Incorporate in States that have the best laws for businesses and keep an agent in that state (Nevada, Delaware) avoid NY and CA

10. Keep all the financial corporate data to your self, unless you've gone public and have to report

This might sound paranoid, but remember, we are in USA, the country with most lawsuits and the highest amount of lawyers per population. As long as you do not own anything and have nothing to take from, they will leave you alone. Most lawyers will tell you that if you have a law suit on your hand, then you know you made it big. Insurance companies love rich people and large corporations. The more assets they have the higher the insurance premiums they pay to protect them. Ideal one person mapping corporation should own just a PC workstation, printer/plotter, a laptop and the software. The space should be leased from you to the corporation. The only thing they can go after is the computer setup and your past and future revenue from the map sales. Make sure you are an employee of your corporation and if you married have your wife on the payroll as well. They can not go after the money that your corporation paid you as income. If your corporation is still making profits after you paid all the expenses and salaries, have the corporation pay you dividends in small amounts where you can just cash the checks. They can not trace where the money went, (you blew it in the casino). The worst thing you can do is cut your self a $500,000 from the corporation and buy a house or 50' boat. Even though those items are your personal assets, they can still go after them since the money was made from map sales. If they can not trace where the past money went they will try to go after future income from you business at which point you phase out the products, file a bankruptcy and start a new corporation.

None of those things are illegal. There are plenty of books out there written on this subject. Read as much as possible and see a lawyer in your home state to get the best advice.

#3
Derek Tonn

Derek Tonn

    Legendary Contributor

  • Validated Member
  • PipPipPipPipPip
  • 452 posts
  • Gender:Male
  • Location:Springfield, Minnesota, USA
  • United States

#8 isn't "kosher" (PC), but other than that, EXCELLENT post, Beaver!

Mike, I've been facing a lot of the same issues that you and Beaver have raised during the past year. Our team has grown from 6 to 10, and our revenues tripled this year. Staying small is definitely one HECK of a lot less complicated...and will generally insulate you from personal/general liability (depending upon the type of work you do and your type of clientele), but if you do decide to try and grow into a larger operation, S-Corp or LLC/LLP is the only way to go. Even if somebody sued the PANTS off you for some reason, that provides a LOT more protection than being a sole prop or some other smaller form of organization. Probably even more protection than any non-incorporated status with general liability insurance, if you really think about it....as your general liability policy will having a ceiling on the protection amount, exposing you to financial loss after that ceiling has been reached. ;)

I don't know that you can be sued for bad advice, particularly if you put in language such as "to the best of my/our ability", "with the best information available to me/us during the project" or other similar types of disclaimers. I've yet to encounter the "perfect" map with zero errors or deficiencies....so as long as folks understand that they are receiving the best information/output possible under the circumstances, I would think it would be tough for you to be found personally liable unless something went very, VERY wrong on a particular project.

<sarcasm>As for the "lethal papercut", I learned my lesson the hard way several years ago.....as I've still got two years probation left to serve before the courts will allow me to go back to using paper instead of just Flash, .png and .pdf.</sarcasm> :D
Derek Tonn
Founder and CEO
mapformation, LLC

datonn@mapformation.com
http://www.mapformation.com

#4
merft

merft

    Key Contributor

  • Validated Member
  • PipPipPip
  • 86 posts
  • Location:Colorado
  • United States

You need to be sure to differentiate General Liability insurance from Professional Liability (Errors/Omissions) Insurance. They are two completely different beasts.

General Liability insurance is only going to protect you if someone injures themselves at your office. Say they slip and fall on a patch of ice or trip over something in the office. General Liability insurance tends to be fairly cheap.

Professional Liability insurance protects you financially from lawsuits for negligence, errors, omissions, or wrongful acts. This insurance is EXTREMELY expensive. The absolute minimums I have seen are $3500/month with the average around $5000/month. This type of insurance is commonly known malpratice insurance. It is required for doctors, architects, engineers, etc.

We are a small business (8 full-time employees) and maintain General Liability, Property Insurance (for office space we rent), commercial automobile (because it is part of a package), Product Liability, and Umbrella insurance. We DO NOT have Professional Liability insurance. We have had one client request it with $5 million coverage. The only way we could afford it was if that client guaranteed $100k in work a month. BTW $5 million professional liability coverage was around $13k/month in premiums.

I agree with the previous posts. Incorporate your business. It separates your personal assets from your business assets. As for insurance, I would shop around. Take a day or two and talk to several insurance agents from a variety of insurance companies. Explain what your business does and ask for their professional opinion and quotes for coverage. Find someone that you are comfortable with.

The other piece of advice is to watch how your business is classified. Insurance quotes will range greatly. I have received quotes where insurance companies have classified cartography with engineering/architecture, VERY expensive. Others quotes where we were classified as graphic design/artist tend to be more affordable. The trade off is that the eng/arch insurance tends to be more comphrensive.

Good Luck,
-Tom

#5
melon_mapper

melon_mapper

    Contributor

  • Validated Member
  • PipPip
  • 23 posts
  • Gender:Male
  • Location:Dayton, Nevada (east of Carson City)
  • Interests:Martial Arts-I am a 3rd degree Black Belt and run my own program through the local park and rec department<br>NASCAR<br>Footbal (Badgers and Packers)<br>My kids and my family<br>I was just intorduced to geocaching<br>
  • United States
I appreciate all the input on this subject. My wife and I are creating some delivery maps for a friends flower shop and are thinking of creating street maps. We live in one of the fastest grwoing areas in Nevada and the existing road maps are way out of date.

We do have a LLC in Nevada that we have established for me to teach the martial arts and right now, just plan to use this LLC

Thanks again for the input




0 user(s) are reading this topic

0 members, 0 guests, 0 anonymous users

-->