Q: What liability insurance do architects and engineers need?
A: Most architecture and engineering businesses need General Liability Insurance to cover common liabilities and Professional Liability Insurance to address lawsuits related to their work. Your client contracts will probably require that you have both policies in place before you begin work. And if you have employees, you'll likely need Workers' Compensation Insurance, too, which accounts for lawsuits over employee occupational injuries. Most states require employers to carry this coverage, even if they only have one employee.
Core Liability Insurance Policies for Architects and Engineers: Details
Let's recap when you may need to draw on your liability coverage:
- When your business is responsible for someone's bodily injuries or property loss. General Liability Insurance covers lawsuits over third-party injuries and property damage that happen on worksites or in your company office. It's a common policy for most businesses, but it's especially useful for industries that are involved in construction.
- When your work causes someone a financial loss. Professional Liability Insurance (aka Errors and Omissions Insurance) provides coverage when your business is accused of negligence or defects in your work. For example, if a client alleges that your business didn't do its job properly when tasked with designing a building, Professional Liability Insurance can help cover legal defense costs and settlements or judgments.
- When your employee waives their Workers' Comp benefits and sues your business instead. Most Workers' Comp policies include Employer's Liability coverage for these occasions.
- When you're sued for no good reason. Even a meritless claim can cost a business thousands of dollars in attorneys' fees.
Architects and engineers can be sued for their work on a project years after it was completed, which can be a nasty financial surprise. That's why most architects and engineers carry the same commercial liability insurance policies throughout the lives of their businesses. If an unexpected lawsuit crops up, they'll have the means to handle it.
Other Insurance Policies that Protect Architects & Engineers
The specifics of your work may affect your insurance needs. For instance, if you own an office building or fleet of company vehicles, you'll need coverage to protect those assets. Here are a few policies you may need:
Plus, certain projects might require different coverages. For more information, see our article, "Insurance Considerations for Engineering / Construction Projects."
Ways for Architects and Engineers to Reduce Risk
Think of insurance as a last line of defense. It's great that you have it in place, but the goal is that you won't have to use it. You can minimize the chance of lawsuits and losses by creating a strong risk management plan. To get started, you can…
- Implement internal policies for safety procedures and quality control.
- Draft strong contracts that protect your business from extra liabilities and deter frivolous claims.
- Keep the lines of communication open with your client to manage expectations.
- Educate clients on the scope of your services.
Most lawsuits that architects and engineers face are filed by their clients. That's why it's crucial to address client concerns as soon as possible and manage expectations from the outset. For more information, check out the following articles: "Architects: Professional Liability Considerations When Working with Clients" and "Engineers: Professional Liability Concerns When Working with Clients."