Errors and omissions insurance, or E&O insurance for short, is the principal business insurance coverage that architects should have. It is also known as professional liability and, less typically, professional indemnity. Errors and omissions insurance and professional liability insurance are designed to protect architects from customer claims such as accusations of faults or errors in their work. As a result, the most significant sort of business insurance that an architect takes is errors and omissions or professional liability. The next type of insurance is general liability insurance, which is typically carried by architects to meet contractual obligations with clients or landlords, but may also be required to be adequately covered against specific sorts of claims, as stated below. Workers compensation and business auto plans may be required by larger architectural firms with employees and/or commercial cars. Contracts with an architect’s clients may also need commercial umbrella insurance, or excess liability coverage, in which case an umbrella/excess policy may be necessary. Architects who own property such as the building they work in, as well as office contents such as computers and furniture, can get commercial property insurance. Architects who work with sensitive client information should consider purchasing cyber liability insurance.
What insurances do architects need?
What kind of insurance do architects require? Architects must have professional indemnity insurance. If you are out and about, public liability insurance (for third-party bodily damage or injury claims against you) is a good idea. Coverage for portable equipment is also available.
How much professional indemnity insurance should an architect have?
Depending on the regular risk variables and market competition, rates for architects’ professional indemnity insurance normally vary between.5% and 3% of fee income in normal market conditions. Rates may be greater or lower depending on the job performed, the claims history, and other factors. Because there is no history or legacy to insure, rates are reduced for new start-up businesses.
It’s also important to keep in mind that minimum premiums will apply, which might vary significantly amongst insurers. A minimal premium for an architect, for example, may be £500 or £1,000, depending on the insurance chosen. The starting premium for covering any risk is the minimum premium charged by the insurance firm.
What is architects professional indemnity insurance?
IndemnityTM architects insurance is available. Architects PI Insurance protects against the failure to provide professional or advisory services with appropriate competence and care. Architects’ professional liability insurance protects firms by providing legal defense and covering the cost of damages resulting from a client claim.
How long do you need professional indemnity insurance?
The key to comprehending run-off cover is to comprehend the “The protection’s “claims made” nature. Given that you’ve presumably been buying professional indemnity (PI) insurance for a while, you’ll be aware that all PI plans are underwritten on what’s known as a risk basis “on the basis of claims made”
Because professional indemnity insurance is based on ‘claims made,’ you must always have a policy in existence to ensure that you are covered if a claim is filed now for work done in the past. This is especially crucial in partnerships because liability isn’t limited and the partnership can’t easily be dissolved.
Because a business’s or partnership’s prior liabilities do not go away when it closes, insurance must be maintained long after it has ceased operations to ensure that any future claims are covered. Here’s where run-off insurance comes in handy.
One issue with run-off insurance is that a premium must be paid each year despite the fact that there is no more income flowing into the company to pay it.
In most cases, the premium in the first year following closure is the same as in the previous year of trade. That’s when the chances of a claim being notified are greatest.
From the standpoint of the insurers, the risk will gradually reduce year after year. Premiums should start to drop after the first year, and we would generally expect them to drop by 10% to 20% per year, assuming no claims are filed and market rates do not rise.
Statistically, this sort of insurance has a larger risk, yet it is of little value to insurers. People may only buy insurance for a year or so after the company closes, when they believe the danger of a claim is the greatest. As a result, there is no interest or competition in the insurance market to provide this coverage, and the incumbent insurer at the time of closure is usually the one who provides it on a “accommodation” basis.
Some regulators make it a condition of insuring its members (e.g., accountants and solicitors) that the insurance firm offer a specific number of years run-off protection after their member ceases to practice, but the incumbent insurer is normally free to do so.
PI insures businesses, whether they are limited liability companies, partnerships, LLPs, or single traders.
It includes the company’s principals or partners, directors, and current and former employees.
A run-off PI insurance will offer continued coverage for the expense of defending any claim brought against individuals covered by the policy, as well as reimbursement for any losses incurred if the claim is upheld against the insured parties.
The most common cause for run off insurance, which is required by small businesses and single traders, is retirement. In larger enterprises, the business is frequently sold or taken over by a younger principal who keeps the PI Insurance and the PI policy. This isn’t always the case, as the new owner might not be willing to assume the company’s inherited liabilities.
As a result, it may be required to have a run-off insurance in place after closure to cover any future claims.
When a professional practice closes, it’s important to keep PI insurance in place to cover any claims that may arise after the practice has shut down.
There are a variety of reasons why a professional firm may close, including foreclosure, sale, merger, or acquisition, or the proprietor just deciding to stop trading and retire or do something else instead.
In all of these circumstances, run-off insurance is either beneficial, prudent, or required by law.
Claims for losses caused by a negligent act can be made under contract law or tort law, and a professional’s duty to their client does not always end when the corporate entity does. Long after the business has closed, a client can file a claim against the professional.
The professional’s responsibilities, which were formerly clearly defined and distinct, have evolved with time. Accountants, surveyors, engineers, solicitors, and architects were once considered ‘professionals,’ but now anyone who provides a wide range of services is considered a professional.
Clients who claim reliance on the services or advice supplied could hold anyone posing as a specialist, expert, or consultant liable for negligent acts, errors, and/or omissions.
Once you’ve concluded that you need run-off insurance for your company, you’ll need to notify your present insurer.
If your policy isn’t due to be renewed for a while, you’ll need to notify your insurer that you’ve stopped trading. They will add an endorsement to your policy saying that any service or work performed after that date will not be covered. The insurer may give run-off renewal conditions at the next renewal and may require you to submit a proposal form, as in the past, to establish what work you did from the previous renewal to the date your firm closed.
You can then choose whether to continue with the run-off policy for another twelve months or not.
If you renew the policy, it should have the same terms and conditions as before, but it will also have the updated endorsement specifying the run-off date. As long as the work was completed prior to the run off date, insurers will respond to any claims informed or made against you during this new policy year.
If you do not take up a new policy or make other arrangements, your professional indemnity insurance will expire, and any claims made against you for previous work will be uninsured. Even fictitious or speculative allegations necessitate a defense, and without Professional Indemnity Insurance coverage, they can be costly.
Historically, run-off insurance was maintained in this manner every year for up to six years. Many professional bodies require their members to keep run-off PI for six years, thus this is a suitable baseline to utilize for all professions. However, there are other considerations to be made when determining the length of time that run off must be maintained, and these considerations may lead to a shorter or longer period of cover being more appropriate.
There is no one-size-fits-all answer to this question, and it will differ from person to person. Aside from the advice supplied by the various professional organisations, the applicable limitation period set by law – the time limit within which any claimant must initiate proceedings against a professional – is a crucial factor in deciding the length of coverage.
A professional indemnity policy may cover both contractual and tort liability. Clients can sue for negligent conduct up to six years after the job is completed, which is the time limit for a breach of contract claim. Clients can also sue if they have been harmed or lost money as a result of negligent counsel or other activity within the six-year time limit set by tort law. If the professional in question is deemed to owe them a duty of care, non-clients can file a tort suit.
Because of the time lag between a negligent act and the resulting loss or harm, a tort claim can be filed several years after the contract-based claim deadline.
If the parties’ agreement is written as a deed, the time limit for filing a contract claim can be extended to 12 years after it is completed, while the time limit for filing a tort claim can be extended to 15 years if claimants can show there was hidden damage that they were unaware of and could not reasonably be expected to discover at the time.
Collateral and Appointment Many of these contracts state in contract what the professional’s obligations with regard to coverage and periods, and if signed as deeds, they can extend the time that Run off insurance needs to be held after the practice closes. Such interactions should be carefully considered, and legal advice is always recommended.
Although run-off is typically obtained from the incumbent Insurer as a 12-month policy each year, it is also feasible to purchase a longer-term insurance with a single up-front cost.
Only a few insurers offer run off cover on this basis, which can be purchased for up to six years. We always recommend that businesses and its founders obtain legal counsel regarding their business’s duties and obligations, including any ongoing contractual obligations. They can then choose the length of coverage they want.
- Premiums paid in advance from the closing business, which has shown to be more efficient on occasion.
- If you have to file a claim or inform a circumstance, your premium will not increase.
- Because your premium has already been paid, any changes in market rates will have no effect on you.
- This strategy is frequently less expensive and more cost-effective (over time) than purchasing annually.
- The biggest danger is that the insurance may not be around for another six years. However, before submitting any proposal, we conduct due diligence on the insurer’s financial strength and stability.
- In the short term, the strategy will certainly be more expensive than acquiring run off for only a year.
- If the principle returns to work, the option of covering earlier work on a new PI policy is no longer available, which could have been a more cost-effective choice.
Why do architects need PI insurance?
Every architect must have professional indemnity insurance as a legal necessity. Every architect must carry at least £250,000 in professional indemnity insurance, according to the architect registration board (ARB). Architects need professional indemnity insurance because it protects both their business and their clients. Many customers will put their trust in you not just with their money, but also with their hopes and desires. It’s likely that they’ll be investing their life savings in the projects on which you work, thus it’s only reasonable that you protect their investment in the event of a mistake, error, or omission.
Are architects personally liable?
You’ve asked us to figure out what legal and administrative ramifications a California licensed architect might face if he signs designs that weren’t created under his supervision. You want to know if the architect could be held legally responsible and/or face administrative penalties from the California Architects Board or another state agency. You’d also like to know what, if any, defenses the architect would bring up.
A set of plans for the construction of a condominium development were signed by a California-licensed architect.
He did neither prepare the plans nor did he supervise their preparation.
Designers who are not licensed architects created the plans.
The blueprints were later found to be flawed and in violation of the building code, preventing them from being used to construct the development.
The blueprints were eventually reworked at great expense by others, and the project was significantly delayed as a result.
- If a damage is proven, the architect may be sued for carelessness, and an injunction may be granted. The architect’s license may be cancelled or suspended administratively, and/or penalties of up to $5000 may be imposed.
- The architect’s license could be revoked if there is a violation. Anyone, including the CAB, can file a written complaint with the Board to have the license suspended or revoked.
- There isn’t enough evidence to back up claims that he didn’t supervise the plans’ preparation.
- Revocation or suspension of a license is an overly punitive penalty in light of the wrongdoing.
The term “architect” refers to a person who holds a license to practice architecture (Cal. Bus. & Prof. Code Sec 5500). As a profession or calling, architecture is governed by its own set of rules and regulations, which are enforced by the State Board of Architecture. The California Business and Professions Code governs the practice of architecture in the state of California.
As a result, obtaining a license to practice architecture is essential for the authorized practice of architecture. This license is conditional on the practice of architecture in accordance with the California Business and Professions Code (“Code”) sections that govern architecture. Any breach of the requirements might result in the issuing authority suspending or revoking the license, as well as deterrent and punishing action from the jurisdictional courts.
Only licensed architects are permitted to practice architecture in California, with a few exceptions outlined in the Code.
Section 5537 has the following exceptions:
(a) No one is prohibited by this chapter from drafting plans, drawings, or specifications for any of the following:
(1) Woodframe single-family homes with no more than two floors and a basement in height.
(2) Multiple houses with no more than four dwelling units made of woodframe construction with a maximum height of two floors including basement. This provision, however, will not be read to allow an unlicensed person to construct several clusters of up to four dwelling units each to form apartment or condominium complexes on any properly divided land where the total exceeds four units.
(3) Garages or other structures attached to buildings mentioned in subdivision (a), of woodframe construction with a maximum height of two floors and a basement.
(4) Woodframe agricultural and ranch structures, unless the building official in charge determines that there is an unacceptable risk to public health, safety, or welfare.
(b) If any portion of a structure exempted by this section does not comply with the most recent edition of Title 24 of the California Code of Regulations or tables of limitation for woodframe construction, as defined by the applicable building code duly adopted by the local jurisdiction or the state, the building official having jurisdiction shall require the preparation of plans. The licensee who is responsible for their preparation must stamp and sign the paperwork for that portion. For the purposes of this section, substantial compliance does not limit the power of building inspectors to approve plans under existing law; rather, it clarifies the intent of Chapter 405 of the 1985 Statutes.
The Chapter also permits licensed architects to form partnerships with unlicensed individuals in order to benefit from the business skills of an unlicensed individual who may not be licensed to practice architecture but possesses the necessary business skills to run an architectural firm successfully.
- 5535.2.Partnerships with unregistered individuals; names used This chapter does not prohibit an architect from creating a partnership with non-architects, but the architect’s name must appear as the architect on all instruments of service, and the other members of the partnership may not be recognized as architects in any way.
The exception in Section 5535.2, on the other hand, does not absolve the architect of his or her obligation to exercise reasonable control over the profession of architecture as rendered. Control that is reasonable is defined as “that level of control over the substance of technical submissions during their preparation that is normally exercised by architects adhering to the professional standard of care.” Section 5535.1
In Joseph v. Drew, 36 Cal.2d 575 (Cal. 1950), the court held that, while there is no obstacle to a licensed architect and an uncertified person forming a partnership for the purpose of conducting a legitimate business, the policy is clearly stated that the partnership entity may not be used as a facade behind which unlicensed persons may offer and furnish architectural services without compliance with the statute.
While such a partnership is not required to notify its clients in writing that one of its members is unlicensed, a client contracting with the partnership for architectural services has the right to expect that those services will be performed by the licensed member, or at the very least under his responsible direction, and that those services will be performed in accordance with the partnership’s policies “The other members of the partnership will not be designated as architects in any way.
The Court held in Palmer v. Brown, 127 Cal. App. 2d 44 (Cal. Ct. App. 1954), that when an architectural work is directed, overseen, verified, and approved by a licensed firm member, it is likely to be deemed the output of the company whose professional services a customer has hired. That is, where an unlicensed member of the firm performs work under the responsible direction and supervision of a licensed architect, the dual intent of the Legislature to protect the public from the harmful effects of unskilled work while also allowing a partnership for the practice of architecture between an architect and an unlicensed person may be met. Meyer & Holler v. Bowman, 121 Cal.App. 112, 116 (Cal. Ct. App. 1932); American Trust Co. v. Coryell, 3 Cal.2d 151, 154; Meyer & Holler v. Bowman, 121 Cal.App. 112, 116 (Cal. Ct. App. 1932); Meyer & Holler v. Bowman, 121 Cal.App. 112, 116 (Cal. Ct (Cal. 1935).
When the negligent acts or omissions of two or more individuals, whether committed independently or in the course of jointly directed conduct, contribute concurrently and as proximate causes to the injury of another, each of these individuals is liable, regardless of the relative degree of contribution.
Id. Palmer.
Even while unlicensed individuals can create plans and drawings in the field of architecture, such planning and drawing should be done under the supervision of a licensed architect.
Failure to comply with this obligation exposes both the unlicensed person and the licensed architect’s practice to legal liability.
When a licensed architect fails to exercise responsible control over the plans and drawings of a non-architect with whom he is in partnership, disciplinary procedures may be brought against him.
In accordance with Section 5578 of the Code, “Disciplinary action may be taken if a practice is found to be in violation of the chapter. The fact that a license holder is practicing in contravention of this chapter’s provisions is a reason for disciplinary action.”
A licensed architect is liable under Section 5582 of the Code if he stamps plans that were not created under his reasonable control and supervision, as this may be considered practicing architecture in violation of the chapter.
A licensed architect’s action is referred to in Section 5582 as “assisting and abetting”a person who is not licensed.
Section 5582 reads as follows:
assisting and abetting an unlicensed individual. The fact that a license holder helped or enabled any individual not permitted to practice architecture under the provisions of this chapter in the practice of architecture is grounds for disciplinary action.
The California Code of Regulations (CCR) defines aiding and abetting in Title 16 of the California Code of Regulations (CCR).
- 151.Aiding and Abetting(a) For the purposes of Sections 5582 and 5582.1 of the code, aiding and abetting occurs when a California licensed architect signs any instrument of service prepared by anyone who is not:(1) a California licensed architect, civil engineer, or structural engineer, or (2) a California licensed architect, civil engineer, or structural engineer.
(2) a subordinate under his or her direct and accountable supervision, or
(3) an individual, as defined in paragraph (b) of this section, who is connected with the architect by written agreement and is under the architect’s immediate and responsible management.
(b) The requirements of “immediate and responsible direction,” as defined in this section, are met when the architect:
(1) teaches the person mentioned in this section’s subsection (a) in the preparation of service instruments, and
(2) In examining all stages of the design papers and other aspects of the work, the architect has exercised the same judgment and responsibility as is required by law and would typically be exercised if he/she personally performed the relevant tasks.
In this case, the architect stamped designs created by an unlicensed architect with whom he had a contractual arrangement.
There is no evidence that the licensed architect oversaw the plans preparation at any point.
While the architect and the unlicensed designers agreed that the architect would visit the project site on a regular basis, there was no mention of the architect’s responsibility to monitor the plan preparation. As a result, by intentionally marking an unlicensed person’s blueprints as his own, the architect has engaged in dishonesty and plainly falls into the category of abetting and helping an unlicensed person.
Stamping of designs by an architect that he knows were not made by him or under his reasonable supervision or control is also a grounds for disciplinary action, according to Section 5582.1 of the Code.
(a) The fact that a license holder has signed plans, drawings, specifications, or other service documents that were not prepared by him or under his or her responsible supervision is grounds for disciplinary action.
(b) The fact that a license holder has allowed his or her name to be used for the purpose of assisting anyone in evading the restrictions of this chapter is cause for disciplinary action.
If the architect’s intentional signing and stamping of others plans can be shown to be fraud or deception, negligence or recklessness, and the third or other party acts on the belief that the plans were prepared by the architect because his stamp is shown on the plans, the architect’s act may also fall under the purview of Sections 5583, 5584, and 5585 of the Code. As a result, third parties who acted on this notion can sue the architect for damages sustained as a result of reliance on the plans, as it constitutes deception or fraud. Disciplinary action may also be taken under the Chapter. Sections 5583-5585 read as follows:
The fact that a license holder has been found guilty of fraud or deception in the practice of architecture is grounds for disciplinary action.
- In practice, 5584.Negligence or wilful misbehavior The fact that a license holder has been found guilty of negligence or willful misconduct while practicing architecture is grounds for disciplinary action.
The fact that a license holder has been found guilty of incompetence or recklessness while practicing architecture is grounds for disciplinary action.
Any of the aforementioned actions would be considered dishonest in the field of architecture, and as such would be subject to disciplinary action.
Activity sufficient to justify discipline would have to be discovered with such certitude and certainty that any infraction would be obvious to all. 130 Cal App 343, Coffman v. California State Board of Architectural Examiners (Cal. Ct. App. 1933). In this situation, actions speak louder than words, as the condominium development was plainly badly designed without the oversight of an architect, resulting in significant time and financial losses for the developer.
If any of the grounds for disciplinary action are present, the Board may take disciplinary action against the defaulting architect on its own initiative or in response to a written complaint from any individual. Section 5560 of the Act states:
The board may investigate the actions of any architect, and may temporarily suspend or permanently revoke the license of any architect who is guilty of, or commits one or more of the acts or omissions constituting grounds for disciplinary action under this chapter, on its own motion or upon the verified complaint in writing of any person.
The Board may make a decision based on such disciplinary processes, which may involve one or more of the following steps, as set forth in section 5565:
(a) Provide for the immediate and total suspension of all operations as an architect by the holder of the license for the term specified in the decision.
(b) Permit the holder of the license to complete any or all contracts for the execution of architectural services that are currently unfinished as evidenced by evidence presented at the hearing.
(c) Impose any specific conditions on the holder of the license that are just in connection with his or her operations as an architect as disclosed at the hearing, and may further provide that no application for restoration of the suspended or revoked license will be accepted by the board until those conditions are met.
(d) Impose a fine of not more than $5,000 on the holder of a license for any of the reasons listed in Section 5577. A fine may be imposed instead of, or in addition to, a suspension or revocation of your license. All fines received under this subdivision are to be paid into the California Architects Board Fund.
In addition to the aforementioned remedies, the Board may seek an injunction against the defaulting architect in the superior court of the county in which the act occurred. Section 5527 states:
On the board’s application, the superior court of the county in which the offense occurred or is about to occur may issue an injunction or other appropriate order restraining any person who has engaged in or is about to engage in any act or practice that constitutes or will constitute an offense against this chapter.
“Experts’ services are desired because of their specialized knowledge.
They have a responsibility to exercise the customary skill and competence of members of their profession, and if they fail to do so, they may be held liable for negligence. 43 Cal.2d 481, 489; Gagne v. Bertran, 43 Cal.2d 481, 489; Gagne v. Bertran, 43 Cal.2d (Cal. 1954)
While it appears that the developer would have tort remedies against the architect, the architect might counter with a claim of privity of contract, denying the developer damages.
The history of legal action against architects reveals that courts have a tendency to deny damages to architects in cases brought by third parties because architects are not held liable for a duty of reasonable care and supervision owed to them. However, courts have recently overturned this protection, holding architects accountable to third parties if they fail to exercise the reasonable degree of care and oversight required of them by their trade.
The extent to which the transaction was intended to affect the plaintiff, the foreseeability of harm to him, the degree of certainty that the plaintiff suffered injury, the closeness of the connection between the defendant’s conduct and the injury suffered, and the moral blame attainment are all factors that must be considered when determining whether the defendant will be held liable to a third person not in privity.
The architect who was admittedly responsible for inspecting the work of testing laboratories and supervising construction to ensure conformity with specifications was held liable by California courts for negligent representation. Rogers v. United States, 161 F. Supp. 132 (D. Cal. 1958).
A plaintiff seeking damages for economic loss, physical harm, emotional anguish, medical expenses, lost pay, and so on may suit based on architect or engineer misconduct. Punitive damages may also be sought if necessary.
An architect may be held accountable to a third party for economic loss if a number of elements are present. Cooper v. Jevne, 128 Cal. Rptr. 724; Cooper v. Jevne, 128 Cal. Rptr. 724; Cooper v. Je (Cal. Ct. App. 1976). In one example, a contractor sued an architect for monetary damages, alleging that the architect drew blueprints for the structure’s foundation negligently.
The following defenses are available if such action is taken against the architect:
- Once granted, a person’s right to practice his profession is extremely precious and cannot be taken away without adequate evidence. 130 Cal App 343, Coffman v. California State Board of Architectural Examiners ( App. 1933).
- Because the statute refers to a single dishonest act, the legislature could not have intended to give the board the ability to revoke a license for a single dishonest act “As a result, a single act could not be considered grounds for punishment. 177 Ill App 527, Kaeseberg v. Ricker (Ill. App. Ct. 1913).
- The suspension of an architect’s license for a year on the grounds that he signed and sealed plans and drawings that were not prepared by him or under his responsible supervising control was improper because only two witnesses testified against him and there was no competent circumstantial evidence to back up the charges. 290 So. 2d 494, Floyd v Florida State Board of Architecture (Fla. Dist. Ct. App. 1974)
- There is insufficient evidence to indicate that the architect was not directly supervised. By reviewing drawings prepared by trained draftsmen, the architect did not aid in the unauthorized practice of architecture, and the architect’s sealing of the drawings was proper, since the architect had signed the drawings “Drawings require “direct professional knowledge and direct supervisory control.” Clark v. State Board of Architects, 114 App. 247, 689 A.2d 1247 (Md. App. 1997).
- The architect endeavored to comply with the legislation, albeit belatedly, because designs were brought to him for review and approval as they were nearing completion. The architect’s aim to supervise the work is hinted at in the second paragraph of the Agreement of Association. 268 So 2d 374, 58 ALR3d 538 Markel v Florida State Board of Architecture (Fla. 1972).
The architect has plainly broken several parts of the California Business & Professions Code, and he might face administrative penalties such as license revocation and a fine of up to $5,000. Only licensed architects are allowed to practice architecture in California, according to the Code. Even if licensed architects collaborate with or stamp unlicensed individuals’ blueprints, those plans should be developed under the architect’s reasonable supervision and control. In the case at hand, there is no evidence that the architect was involved in the drafting of the stamped plans in any way. As a result, the architect may face disciplinary action under the Chapter, which could result in his license being suspended or revoked, as well as a fine. The board may petition a court of law for an injunction against the architect, or if a court of law takes action against the architect, the Board may use the conviction as a basis for revocation of the architect’s license. Furthermore, the architect may be held accountable for carelessness under California tort law.
Legal costs
Regardless of the merit of the claim, professional indemnity insurance protects you against charges of carelessness and the legal costs of defending yourself.
That’s crucial because even if you’re certain you didn’t make a mistake, clients or third parties can nonetheless accuse you of doing so. And if that happens, staying silent is not an option.
It will be costly to hire a lawyer to assist you. If the claim is complicated or long-running, the expense of your defense might quickly climb into the tens (or even hundreds) of thousands of pounds.
‘In the aggregate’ or ‘any one claim’?
The sort of professional indemnity policy you choose is almost as significant as the amount of coverage it provides. This is why:
If you acquire a policy with £250,000 ‘in the aggregate’ coverage, that’s the maximum amount the policy will pay for any claims made against you in a single policy period.
You’d be in a bit of a pickle if you had, say, three claims against you and their aggregate costs totaled more than £250,000.
If you bought £250,000 of ‘any one claim’ coverage, on the other hand, you’re insured for an unlimited number of claims, up to a maximum of £250,000 per claim.
Past work
A word of caution regarding lowering your level of protection. Customers who have worked on high-value contracts that have come to an end occasionally inquire about this.
Reducing your level of coverage has the side effect of changing your policy retrospectively. Always assess your previous work and whether your insurance is adequate to cover any claims that may emerge as a result of it.
The majority of claims stem from jobs and contracts you’ve already finished, and they’ll be subject to your current level of coverage, not what you had when the work was performed.
Specific PI requirements
However, not everyone is forced to make an educated judgment regarding the amount of professional indemnity insurance they require. Some contracts, particularly in the public sector, specify a minimum level of performance.
Stipulations are also in place for certain professional bodies, such as those for architects and accountants. Accountants and accounting firms normally need coverage equal to at least two and a half times their gross fee income for the previous financial year to be eligible for membership.
How does PI run off cover work?
Run-off insurance protects the company’s owners, partners, directors, and employees by covering the expense of defending any claim brought against persons covered by the policy and reimbursing any damages incurred if the claim is upheld (within the limits of the policy).
Do architects need general liability?
Architects and engineers who design commercial and/or residential structures should obtain professional and general liability insurance to protect themselves from claims and lawsuits made by customers, vendors, or even employees.