TSPS MAY 2025 FINAL - Flipbook - Page 21
INSURANCE
the technical nature of the work and potential for claims years after
project completion.
TAIL COVERAGE
When selling a 昀椀rm or closing a 昀椀rm, the seller typically needs
to purchase “tail coverage” to protect against claims arising from
work performed before the sale. Standard tail coverage periods
range from 3-5 years and must be paid as a lump sum (昀椀nancing
is not an option).
Tail coverage options can be found in your current policy. Note,
if you are looking for a full ten years, it may be available, but not
listed on your policy. Work with your agent to secure terms.
A common structure for tail coverage pricing looks like this:
• 1 year: 100% of the annual premium
• 2 years: 175% of the annual premium
• 3 years: 225% of the annual premium
RETRO DATE CONTINUITY
As an alternative to tail coverage, it may be possible to negotiate
for the purchasing company to continue the seller’s policy with the
original retroactive date intact. This requires carrier approval and
should be discussed with your insurance representative.
STRUCTURING THE DEAL
When negotiating the purchase or sale:
1. Clear De昀椀nition of Transferred Assets: Explicitly identify
which assets and liabilities are being transferred.
2. Insurance Responsibilities: Clearly outline who bears responsibility for existing and future claims.
3. Employee Transition: Address how employment relationships will be handled post-sale.
4. Client Noti昀椀cation: Establish protocols for informing clients
of the ownership change.
5. Non-Compete Provisions: Consider appropriate terms to
protect the value of the business.
Purchasing, selling a land surveying 昀椀rm involves signi昀椀cant
technical, 昀椀nancial, and legal considerations. The transaction
structure will determine liability responsibilities, which directly
impact insurance needs. By conducting thorough due diligence
and clearly de昀椀ning terms, both buyers and sellers can protect
their interests and ensure a successful transition.
Working with experienced legal counsel, accountants, and
insurance professionals who understand the unique aspects of
surveying businesses is essential for navigating this complex
process. Proper planning and attention to detail will help ensure that the transaction meets the goals of all parties involved.
DUE DILIGENCE BEST PRACTICES
FOR BUYERS
1. Review Insurance Documentation: Request copies of the seller’s professional liability insurance policies, paying special attention to:
• Retroactive date
• Coverage limits
• Deductibles
• Current premium costs
2. Obtain Loss Runs: These reports detail the claims history of
the 昀椀rm and can reveal potential liabilities or issues with quality
control.
3. Evaluate Existing Projects: Review ongoing projects for potential issues that could lead to future claims.
4. Assess Staff Quali昀椀cations: Evaluate key personnel and their
credentials, as they represent a signi昀椀cant asset of the 昀椀rm.
5. Review Business Financials: Examine 昀椀nancial statements, tax
returns, and accounts receivable/payable.
FOR SELLERS
1. Organize Insurance Documentation: Compile comprehensive
records of your insurance coverage history.
2. Clean up Outstanding Issues: Resolve any pending claims or
known issues before sale.
3. Plan for Tail Coverage: Budget for the substantial one-time cost
of tail coverage if pursuing an asset sale.
4. Consider Retention Agreements: For key personnel whose expertise is vital to the 昀椀rm’s value.
5. Prepare Client Transition Strategy: Develop a plan to introduce the new owner to important clients.
HIGHLIGHT
TSPS ENGAGES LOCAL
CONGRESSMAN
A TEXAS SOCIETY OF PROFESSIONAL SURVEYORS (TSPS)
delegation from Fort Worth, Texas, recently met with U.S.Representative Craig Goldman (R-TX) of the 12th Congressional
District of Texas. Congressman Goldman is serving his 昀椀rst term
in Congress and landed a seat on the powerful House Energy &
Commerce Committee. After consulting with NSPS Registered
Lobbyist John “JB” Byrd, TSPS members discussed professio0nal
licensing and asked Rep. Goldman to cosponosr federal legislation
to be re-introduced soon by Rep. John JOyce (R-PA). Attending
this dialogue and discussion with Rep. Goldman were Gerry Curtis,
Jim Brittain, Brandon Hurtado, Bob Viscome, and Paul Ward.
May 2025 THE TEXAS SURVEYOR
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