Do we need insurance?

[Wayland]

What is the name of your state? AZ

We have started a consulting company that does the following. We contracted with XYZ Company to provide design calculation packages. We are only supplying labor, because their staff does not have the time. Our client checks are work and signs our work. Therefore no risk if we make a mistake.

We don't have employees. We hire consultants to do the calculations. Yes all we are is a middle man that holds a contract with XYZ to perform work with NO risk and have someone else do the work.

Our client is asking if we have general liability insurance.

Do we need it? If so why? The company is not worth anything because every job we do we pay the consultants 90% of what the client pays us. The other 10% goes to me and my partner as a salary.

We are an LLC.

Please let us know.

 

[moburkes]

Yes, GL protects you if you're sued for just about any reason (except intentional lying). When you have subcontractors, and they are sued, then you are going to be listed on the lawsuit too. You will also need to ask your subcontractors for copies of their GL insurance, and require that you be listed on the policy. Talk to your local insurance agent. They can tell you lots of horror stories if they write a lot of commercial business.

 

[Wayland]

I understand what the insurance protects you against, but is it required by law.

We are not worried about a lawsuit, because the company is not worth anything. Not even a $1.00. Since it's an LLC they can't come after the 2 members.

So my concern is if I need to have it to be legal.

Please tell me what the law says

 

[moburkes]

The law doesn't require insurance.

You'd better read up on LLCs. You are not protected.

Your customers might require insurance.

 

[ecmst12]

Whether or not the company is worth anything does not matter. If you get sued, you will need a defense, and lawyers are expensive - probably more expensive then your liability premium would be.

 

[VeronicaLodge]

Whether or not the company is worth anything does not matter. If you get sued, you will need a defense, and lawyers are expensive - probably more expensive then your liability premium would be.

sounds like if he causes someone harm and gets sued, he'll just let them get a default judgment then file bankruptcy on the company and close it and walk away, at least that is what he wants to do.

 

[Wayland]

In this case.... yes.

No body can get hurt because it's someone sitting in their house adding up some numbers then giving it back to the client. The client approves the numbers and takes the risk.

Why are we not protected under an LLC.

 

[VeronicaLodge]

i wasnt just talking about physical harm, you can cause other harms to people, financial being one.

 

[ecmst12]

As mentioned, liability insurance protects you from all kinds of liability (provided you get the right kind of coverage). And don't think that if the client suffers harm due to those numbers, they won't sue the subcontractor AND your company. The fact that they have to approve the numbers does NOT mean you won't be liable in case of an error. You need to find a good business insurance agent and discuss your options with him/her. Not carrying ANY liability coverage is really, really not smart.