To err is human. And while forgiveness may be divine, it’s never how allegations of negligence are resolved in our litigious society.
Architects and engineers know this truth firsthand. Liability claims against architecture and engineering firms have been on the rise, according to Insurance Journal, and “Juries are handing down larger and larger awards.”
Architects and Engineers (A&E) Professional Liability Insurance is essential for those who design and build buildings. Construction managers, surveyors, and general contractors should also carefully consider it.
At ProWriters, we’ve seen even small building projects lead to large liability claims involving many people. If your clients in building design and construction don’t acquire and maintain professional liability insurance, they’re risking their reputation, revenue, and possibly even their business’s existence.
Below, we answer five questions we’re frequently asked about A&E professional liability coverage. We hope this information helps you explain to your clients why investing in it is one of the smartest moves they can make for their company.
What does a professional liability policy cover for architects and engineers?
No matter their expertise and efficiency, architects and engineers are always vulnerable to claims of negligence, error, or omission. A professional liability insurance (PLI) policy protects them against the full costs of these expensive and potentially career-ending claims.
General liability policies cover such physical risks as property damage and bodily injury, but only PLI covers the intangible hazard of making a mistake.
A strong A&E professional liability policy will:
- Cover a wide range of possible claims
Claims include allegations of negligence, accidental or perceived errors, breach of duty, misleading statements, and unsatisfactory services rendered.
- Cover legal expenses related to claims
Expenses include attorney fees and mediation or court costs, as well as any settlements, judgments, or penalties.
- Limit liability amounts
Policies should cap liability at designers’ maximum fees for certain approaches to avoid coverage gaps caused by implied warranties and guarantees.
- Define liability for pollution incidents and cyber errors
More contracts today reflect our changing world by requiring attention to the environmental costs of construction and the security of sensitive data. A strong PLI policy will address these issues, too.
- Ongoing risk management opportunities from the insurer
The insurance company may offer contract reviews, continuing education about liability issues, and other ways to reduce exposure to risk.
Are there issues and situations A&E PLI policies cover?
Even when architects and engineers have robust professional liability policies, they need to know about common coverage gaps, including:
- “Design-build” projects
In these projects, architects and contractors collaborate throughout as a single entity. It’s an approach popular for faster construction, but it has “A reputation for being more prone to professional liability claims,” as Timothy Prosser tells The Rough Notes Company.
- Customized technology solutions
Especially in engineering, innovative but unproven solutions could exponentially increase professionals’ exposure to risk. A single coding mistake could prove catastrophic.
- Damages related to overseas projects
Liability standards vary from country to country. Even policies providing “worldwide coverage” often only use the U.S. definition.
Is professional liability insurance the same thing as E&O insurance?
Strictly speaking, E&O insurance is one type of professional liability insurance. Directors and officers (D&O) and discrimination insurance are others. But among architects and engineers, PLI and E&O insurance are synonymous.
Are architects and engineers legally required to carry E&O insurance?
Although most state laws do not require PLI for building design professionals, federal law frequently mandates it for architects and engineers on government contracts.
And, increasingly, most contract design firms require PLI—commercial, industrial, or residential. If a client wants their architect, engineer, or contractor to carry E&O insurance, the legal question is moot, assuming the professional wants the job.
Do individual architects and engineers buy their own professional liability coverage?
In most cases, architectural and engineering firms buy the policy, which protects its individual professionals. The firm also handles annual policy renewal.
“Some firms decide not to purchase professional liability insurance,” Ann Casso and Fredric Schultz write for the American Institute of Architects, “A business decision usually based on the cost of the coverage, which could ultimately put the firm and its architects in jeopardy.”
Investing in PLI may seem expensive. But, annual premiums pale in comparison to an expensive settlement or judgment arising from an allegation of negligence successfully proved against your A&E clients in court.
ProWriters Has Professional Liability Coverage Your A&E Clients Need
Architecture and engineering are complicated professions. Mistakes happen. Not all claims of negligence, error, or omission are baseless.
ProWriters has underwriting authority for several leading companies that offer A&E Professional Liability Insurance, and broker arrangements with many others. We can design solutions you can offer your architectural and engineering clients that will give them comprehensive coverage—along with the financial stability and peace of mind that come with it.
To get started, simply schedule a time online to talk with us, or call us at 484-321-2335.