Assuming Liability – Contract Tip of the Week

Q: What are the various ways in which my firm can assume liability, and how does my insurance coverage respond in those circumstances?

A: Depending on where you practice, you may assume liability under common law, tort law, statutory law, by contract, or by your conduct. Insurance is designed to cover your obligations under common law, tort law, and statutory law. If you assume additional liability under your contract or by your conduct, that additional liability can pose insurability problems. We hope that two quick examples can help to illustrate this. First, if you agree by contract to defend your client, you have likely assumed an uninsurable obligation. Second, even if your contract states that you’re not responsible for construction means, methods, techniques, sequences, procedures, or site safety, if one of your employees directs contractors at the site to take specific actions, you may be assuming liability by your conduct that is not contemplated in the underwriting of your insurance policies.

The Risk Specialty Group and RLI Design Professionals are pleased to feature our Contract Tip of the Week series. Each week, we’ll review a question submitted by a design firm relating to the subject of contracts. Keep in mind, though, that these discussions are general in nature and in making specific business decisions, it’s important to review your options with a knowledgeable attorney.