Q: What does architect Errors and Omissions Insurance cover?
A: Errors and Omissions Insurance (aka Professional Liability Insurance) covers lawsuits over alleged mistakes that you made in the performance of your architecture services. In other words, if the client believes you've done something wrong and sues you over it, this policy can cover the cost of your legal defense and settlements or damages you may owe. Even if the lawsuit is completely meritless, your policy can still spare you from paying attorney fees out of pocket.
A Closer Look at Architect Professional Negligence Lawsuits
A lawsuit alleging professional negligence can arise from many different scenarios:
- A client might be unsatisfied or feel misled about certain aspects of the project.
- A client might experience economic loss and conclude you are to blame.
- If someone other than the client is injured because of a design flaw or defect in construction material, they might be allowed to sue for damages.
An architect's major liability concerns stem from clients' unmet expectations. You can read more about these exposures in the article, "Architect Professional Liability Considerations When Working with Clients."
But third-party professional liability lawsuits aren't unheard of, either. Tenants are finding success in filing claims against architects for professional negligence. And frivolous lawsuits are a threat, too. Unscrupulous lawyers may look to get an easy settlement out of your firm, which can take up your business's valuable time and resources.
And if you need more inspiration to purchase an E&O policy, consider this: if you hire contract architects to help with a project, you can be held liable for the professional mistakes they make. To learn more about that, check out our article, "Professional Liability Concerns When Working with Contract Architects."
The Devil's in the Details: E & O Coverage Varies from Carrier to Carrier
As you may already know, the coverage included in E&O policies may vary from insurance provider to insurance provider. For example, some E&O policies may exclude coverage for design-build projects or joint ventures.
One the other hand, some policies might extend coverage to predecessors of your firm, which can come in handy if an old project comes back to haunt you. Other policies might offer benefits if a case is settled through mediation. (You can learn more about dispute resolution in the article, "Contracts to Manage Architects' Professional Liability.")
Be sure to carefully read your policy and ask questions so you know exactly how you're covered.
Risk Management for Architects: Ways to Prevent E&O Lawsuits
Let's face it: it's good to have adequate insurance coverage, but the hope is that you don't have to use it. After all, no one likes being sued.
That's why it's important to do everything in your power to prevent client complaints from becoming lawsuits. To keep clients satisfied, make sure you…
- Manage client expectations by educating them about your services (e.g., what you will and won't do).
- Develop clear communication channels with clients to deter misunderstandings and frustration.
- Use lawyer-reviewed client contracts that limit your liability.
For more risk management tips, check out the article, "Managing Professional Liability with Internal Policies: Architects and Engineers."