Crystal Ball: Insurance Costs to Rise

Professional’s Risk Management Strategy

Every professional who delivers a service to a client is vulnerable to being sued, particularly when the client feels that they have been let down. Surprisingly, this is also true in the case of design professionals such as architects and engineers, who can be sued if they are seen to have practiced below the “standard of care” – or those prudent and reasonable actions another design professional would have done under the same circumstances – resulting in consequences detrimental to the client and to society at large. In concrete terms, this means that architects are expected to design buildings that are reasonably safe for human use and should keep their knowledge up-to-date so that they can keep practicing at the highest professional standard.

This is why architects must design and implement a risk management program in their firms so that they can achieve the best standard of care. Some of the important elements of a risk management program include risk assessment both at the planning and the implementation stage; risk allocation and documentation and record keeping. Taking out an architects insurance policy is an important part of risk management since it transfers some of the risk to an insurance carrier.

Architects insurance is a specialized type of professional liability (also known as errors and omissions) insurance. Professional liability coverage protects you and your firm in case a client or third party sues you for damages resulting from errors accidentally committed while working on a project, as well as omissions and acts of negligence. The policy covers both the cost of defending the suit in court as well as any damages awarded, up to the coverage limits and is generally renewable on an annual basis. Taking out general liability insurance ensures that your business will continue running even if you are sued and you will not suffer from catastrophic financial losses. Being covered also makes it more likely that you will be hired for jobs as it indicates that you are financially responsible and you have the financial resources to reimburse the client if they incur any losses from the project. As part of your contract with your client, you may be required not only to maintain coverage during the duration of the project, but for several years afterwards in case problems with the project should arise.

Timothy Esler’s original articles are published in The Zweig Letter.