Proximate Cause – Contract Tip of the Week

Q: What does “proximate cause” mean and how does this affect my professional liability insurance coverage?

A: Proximate cause in the realm of professional liability means that there is a direct line of causation from your firm’s negligent act to another party’s damages. The RLI professional liability insurance policy covers damages caused by the named insured’s negligence in the rendering of professional services. Be wary of contract language referencing damages that “arise out of,” “are in connection with,” or “occur as a result of,” because language along these lines can extend your responsibility beyond those damages that were proximately caused by your negligence.

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.