A Complete Guide to Architect Professional Liability Insurance
Are you one of the 126,700 architects practicing in the United States? If so, the importance of having architect professional liability insurance cannot be overstated. Without it, you could be left exposed to lawsuits that could be catastrophic for your practice.
Architect errors and omissions insurance is a niche product. Not all policies provide the same level of coverage. If you’re put off by the initial cost of this insurance, it’s good to compare that with the potential cost of not having it.
Join us as we take a deep dive into architecture insurance coverage and why it’s vital for your business to thrive.
What is Architect Professional Liability Insurance?
Architect professional liability insurance protects you and your firm from claims over the quality of your work. This is also known as architect errors and omissions insurance. It protects you from claims regarding:
- Negligent acts
If clients feel that they have suffered a financial loss for any of these reasons, they may begin legal proceedings against you or your company. This could lead to costly legal bills and potentially sizeable compensation payments if things don’t go your way.
A single case could potentially bankrupt a small practice. It’s a false economy to go without this insurance. Clients may also make these claims years after the completion of the project.
What Types of Claims Can Clients Make?
For example, your client may have employed you to oversee construction or perform periodic evaluations. It was your duty to report any defects or deviations from the plans that you find, in accordance with your contract.
Prompt reporting should protect you in the event that problems with the contractor’s work come to light at a later date. If you do not find and notify the client of the contractor’s errors, you leave yourself open to the client suing you in the future.
Clients and contractors may be keen to shift liability onto architects if problems arise in the future. Review the wording of all contracts with your attorney before signing. This can protect you from claims that arise from other people’s negligence or errors.
It’s not uncommon for large-scale construction projects to run into delays and difficulties. If you as an architect don’t work closely with the client and communicate about delays, it can lead to ill-will. If the client feels they have been financially disadvantaged, this could lead to a lawsuit.
How Long Are Architects Liable for Projects?
In the United States, the answer to this question varies from state to state. In some cases, it is 7 years from completion. In others, the liability period may begin when the defect is found, not when the building is completed.
This underscores the importance of carefully assessing the risks of each project. Make sure you have sufficient architect professional liability insurance in place before it commences.
Claims-Made and Occurrence Liability Insurance – What’s the Difference?
Architects hope the buildings they design will stand for years, if not decades or centuries. The problem is that this can come back to bite you if someone makes a retrospective claim about your work.
There are two types of insurance – claims-made and occurrence – and they handle this situation differently.
Under the terms of a claims-made policy, your current insurer will respond to the claim. This is even though you were with a different insurance carrier back when the work was carried out. This is typical of professional liability insurance.
Under an occurrence policy, the claim would be referred back to the company that was insuring you at the time. This is the case even when you are no longer covered by that insurer. This is characteristic of general liability insurance.
General liability insurance policies do not usually include professional liability. To ensure that you are covered, you will need both types of insurance.
How Much Does Architect Insurance Cost?
When evaluating your architect insurance options, costs may vary considerably. This is usually down to the level of coverage you’re requesting. Always ensure that you’re comparing like for like before deciding on a policy.
Rates for 2022 are expected to rise, due to increases in claim severity and frequency during 2021. One survey found that 63% reported that claim severity had increased in 2021. 31% reported greater claim frequency.
The result is higher insurance costs all around. Certain projects, such as condos and schools, are riskier, so expect to pay higher premiums for these projects.
Working with an agent specializing in risk management and professional insurance can help you to find a product that is tailored to your unique needs.
Coverage for Unique Situations
The golden rule of professional insurance is never to assume that you’re covered.
If you take on additional side projects in your own time, make sure that you have insurance in place to cover this. It is unlikely that your employer’s policy will cover it. That’s especially true as moonlighting is usually contractually forbidden.
If your boss allows you to take on extra work, take out your own architecture insurance coverage.
Also, take care if you’re working in collaboration with other architects or other professionals. Contact your insurer to check that your current coverage is adequate.
What Other Insurance Do Architects Need?
Architect professional liability insurance is only part of the insurance coverage architects need. You must also put the following in place:
- General liability insurance
- Business owners’ insurance
- Workers’ compensation insurance
As the risks of the design industry are varied and unique, it’s good to work with an insurance agent who has an in-depth understanding of the industry. They will be able to find the right level of coverage that won’t leave you exposed.
Time to Take Out Architect Professional Liability Insurance
If you’re a practicing architect and do not have architect professional liability insurance in place, now’s the time to act.
Talk to a specialist adviser at the Risk Specialty Group. We take the time to get a detailed understanding of the unique needs of your firm. We’ll then work with a range of insurers to find you the most suitable coverage at the best price.
Contact us today to get the process started.