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.
Does an architectural designer need insurance?
Even for a simple house expansion or renovation, it’s very crucial that your architect (or other architectural designer) have professional indemnity insurance. It will be much easier to recover any financial losses you may incur as a result of their advice or work if anything goes wrong with your project as a result of their advice or work.
Why is Professional Indemnity Insurance (PII) necessary?
We live in a society that is more concerned with remuneration. Anyone who has had to defend a negligence claim knows how stressful it can be, with potentially catastrophic financial consequences.
Insurance against such occurrences is a legal necessity of professional work, and you may and should use it as a marketing strategy to differentiate yourself from many of your non-professional competitors.
Who needs PII?
Any professional who performs work for a living may be held liable. The possibility of being sued for professional carelessness has increased in almost every profession.
Whether you own your own practice, are an employee, work part-time, are mostly retired, or just provide free or low-cost advice, you may be held responsible if something goes wrong, and you may face a compensation claim.
Any member of the public who engages an architect’s professional services has the right to anticipate that their work will be covered by PII.
Why has ARB issued Guidelines that set indemnity levels?
The Architects Act of 1997 empowers the Board to issue a Code that establishes professional conduct and practice standards. The present Code requires architects to keep “sufficient and acceptable” PII on hand, and the Guidelines are intended to help practitioners by encouraging adequate and appropriate coverage.
The Board recognizes that each person’s practice and the circumstances under which claims can arise are unique. It also recognizes that assuming that the level of gross fee income is proportional to the possible magnitude of a claim is correct may be incorrect.
It’s crucial to remember, though, that it’s a professional’s obligation to make sure they have adequate and proper insurance. This should be done with the help of an expert broker, but in any case, an architect should have a limit of indemnity of at least £250,000.
Why are the indemnity limits so high for architects?
Simply put, they aren’t. They are in line with other professionals and only fulfill the bare minimum of expectations from people who work in the construction industry.
How can I decide what level of cover is ‘adequate and appropriate?’
The Board recognizes that each person’s practice and the circumstances under which claims can arise are unique. After considering the scope and type of the job you want to do, as well as discussions with both relevant clients and your insurance broker, you should decide on what level of indemnity to carry. “What is the extent of loss that could arise from a mistake on any particular project?” is the question that must be considered. Finally, it is your obligation to ensure that you have adequate insurance coverage to protect yourself in the event of a loss.
It is vital to note that the Board does not consider any insurance coverage less than £250,000 to be suitable and reasonable. After consulting with insurers and others, this figure was established as a reasonable minimum level of indemnification.
My turnover is below £10,000 per year so why do I need £250,000 cover?
Even a small endeavor can result in a substantial claim. A project worth £30,000, for example, could result in a claim of £159,000. The architect, with a fee income of less than £10,000 and a ceiling of indemnity of £100,000, appeared to be well covered in theory, but in practice, this was proved to be catastrophically inadequate.
There’s also the risk that, even if clients agreed to a maximum amount recoverable in the case of a problem, third parties won’t be obliged by it. There are additional technical legal reasons why a contractual limit on liability might not be effective.
What if I am only carrying out work on my own property?
Although architects who carry out architectural work on their own premises cannot claim for loss or damage that they may suffer arising out of deficiencies or faults that is they cannot bring claims against themselves – then they would remain responsible for claims by others.
The ARB recognizes that architects may not be able to get PII to protect themselves against third-party claims on their own premises, and hence cannot impose such a requirement. However, architects in such instances are highly urged to have enough coverage for such third-party risks through building/public liability insurance.
What if I am retired from practice?
There is no need to keep PII if you have completely retired from business and practice (except for run-off cover, which is discussed later). However, if you continue to work on little or irregular assignments, this is still professional labor that requires insurance coverage.
I don’t charge for the small amount of advice I give in my local community. Do I still need PII?
Whether a professional delivers advice for a price, in exchange for benefits in kind, or for no charge, they still owe their client a duty of care. They may be sued for carelessness if they are exposed to possible liabilities.
Those instructing you as an architect should understand your duties and be asked to give cover/protection on your behalf if you are providing professional advice that can be trusted.
I am employed by a practice so surely I do not have to worry about Professional Indemnity Insurance?
Wrong. Employees should be informed that if adequate insurance is not in place, they may be held personally liable for losses at some point in the future. As a result, it is critical for employees to ensure that adequate coverage has been put in place.
Similarly, if you work as a consultant or through an agency, it is your responsibility to make sure you have adequate insurance before starting any job.
Do I need cover for private work I do outside my employment?
Yes. You will need to get your own insurance unless you are protected by your employer’s PII for your own private employment (which is exceedingly doubtful).
What is Run Off cover?
Even if you are retiring from practice, you may still be able to make a claim for projects you performed in previous years. While the majority of claims are filed within a few years of practical completion, a claim can still be filed years later, which is why the Board advises a minimum of six years’ run-off coverage (five years if you practice in Scotland). If you don’t have a policy in place when a claim is filed, you could be held personally liable, which can be both emotionally and financially disastrous.
In the case of your death, you should also consider making the required provisions for run-off coverage. A claim against a deceased person’s estate is possible.
What if I want to work abroad? Will I be covered?
If you want to work in another country, check the terms of your policy to determine if you’re protected, and if you’re not, engage with your broker to make the necessary changes. If a claim arises, you should also contact with your broker to identify which nation will handle the procedures.
What if I have been, or will be, working on projects involving asbestos?
Concerns have been raised with the Board about the position of architects who have worked on asbestos-related projects in the past or may do so in the future. These concerns arose as a result of the removal of asbestos-related insurance and the introduction of the Control of Asbestos at Work Regulations 2002.
The Board understands that at present cover for asbestos continues to be either limited or excluded outright. The Board recognizes and appreciates the hardship this continues to give Architects, and it recognizes that it cannot expect Architects to carry and maintain Professional Indemnity Insurance for a risk if coverage is no longer available on the market.
Where coverage is provided, the Board is cognizant that it will most likely be limited in scope. Generally, cover would be limited indemnity, limited to UK work only, and would usually exclude liability for bodily injury and property damage. Architects should check with their broker to determine if asbestos coverage is available. Before accepting an asbestos-related assignment, legal counsel on possible contractual responsibility restrictions should be sought.
Finally, Architects should be aware that Professional Indemnity Insurance is a claims-made policy, which means that it responds to the policy in force at the time a claim is first notified to insurers, not the policy in force at the time the work was originally performed. As a result, any exclusion or restriction under your policy may apply to work completed in previous years.
What are the implications regarding mould?
Professional indemnity insurers in the United Kingdom began to exclude coverage for ‘toxic mold’ in the later half of 2002. Mold-related illness had been the subject of a number of large legal actions in the United States, and UK insurers were concerned that mold could become the next ‘Asbestos.’ Exclusions relating to ‘Mould’ as described in the policy wording were included to UK PI Policies as a result of their reaction.
Mold claims are now less of a concern for PI insurers (at least for work done outside of the United States and Canada), and a small number of PI insurers for architects will consider granting some coverage, sometimes in exchange for the completion of a satisfactory questionnaire. Claims resulting from work in the United States or Canada are usually not covered. Mold claims are still completely excluded by some PI plans.
This general advice does not replace the need for specific expert advice when it is needed, nor does it absolve an architect of responsibility for specific project decisions.
Do architects need general liability?
Architects and engineers who design commercial and/or residential buildings should have professional and general liability insurance to protect themselves from claims and lawsuits brought by clients, vendors, or even employees.
What is architect liability?
Designers and design firms that provide professional services to customers are protected by Professional Liability Insurance for Architects. When an architect or architectural firm makes an unintentional mistake that causes harm to their client, professional liability insurance can help. General Liability policies, on the other hand, cover claims such as false advertising, slip and falls, and property damage.
How much professional liability insurance should my architect have?
For architects, professional liability insurance costs roughly $145 per month, or $1,730 per year.
This coverage, commonly known as errors and omissions insurance (E&O insurance), defends architects against claims that their work was erroneous, late, or never delivered.
On Insureon’s professional liability insurance cost analysis page, you can learn how to save money on your policy, which coverage limits to choose, and more.
Why do architects need PI insurance?
Every architect must have professional indemnity insurance as a legal requirement. 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 clients will be trusting you not just with their money, but their aspirations and dreams too. It’s likely that they’ll be investing their life savings in the projects on which you work, so it’s only fair that you protect their investment in the event of a mistake, error, or omission.
Do architects owe a duty of care?
Contractual responsibility of care An architect has an obligation to apply reasonable skill and care in the course of employment. An architect will be tested against the conduct of other architects.
Is the architect liable for a building?
Article 1723 of the Civil Code states that “The engineer or architect who drew up the plans and specifications for a building is liable for damages if within fifteen years from the completion of the structure, the same should collapse by reason of a defect in those plans and specifications, or due to the defects in the
Can I sue an architect?
Architects are frequently tasked with making people’s aspirations come true, whether they are renovating houses or commercial buildings. Even if the builder looks to be at fault, it is sometimes permissible to sue the architect.