Chapter 3: Special Insurance Considerations for Freelance Architects, Engineers, and Designers
Part 1: Common Limitations of Insurance Policies for Architects and Engineers
Additional Insured Endorsements for Design Professionals Collaborating with Other Professionals
As a design professional, you're probably familiar with contracts that require one party to be listed as an Additional Insured on another's liability policy. An Additional Insured is anyone other than the policy holder who receives the policy's coverage (in a limited way).
For example, if you work with a contractor to design a project, he may require you to add him as an Additional Insured on your firm's General Liability policy. After all, if something goes wrong with the design, the client could sue you both, and Additional Insured status covers the contractor's liabilities. You can read more about this type of Additional Insured endorsement in our blog post "What Is an Additional Insured?"
But as a solo practitioner, you probably won't run into those situations as often as a bigger A/E firm might. Instead, you may need to use an Additional Insured endorsement to protect yourself when you collaborate with other licensed design professionals.
For example, say you specialize in custom-build projects that require nontraditional business structures. One such business structure is a joint venture, which…
- Allows a licensed design professional to team up with other licensed design professionals for one-time, temporary projects.
- Allows the design professionals to work in an equal partnership while maintaining their separate business identities.
Unfortunately, joint venture partners tend to be excluded from standard insurance coverage. This can be addressed by temporarily amending your current policies. Each design professional should…
- Make the joint venture partner a Named Insured. A Named Insured is simply an entity or person listed on your policy's declarations page. Both members of the joint venture must endorse the Professional Liability policy that names it as an insured.
- List the other partner as an Additional Insured. Generally speaking, Additional Insureds are added to General Liability policies. In this case, the Additional Insured will be added to each individual's Professional Liability (Errors & Omissions) policy.
Joint ventures are often excluded from standard insurance policies.
Why is amending coverage important? There is often language in an Additional Insured endorsement that makes it impossible for an insured (you) to sue or be sued by another insured (your partner). This levels the playing field and eliminates the fear that either party will turn on the other.
Compared to the price of the primary policy, properly drafted Additional Insured endorsements are relatively inexpensive. But the stipulations of Additional Insured endorsements can vary from insurance provider to provider.
There is often gray area around coverage limitations. It's extremely important to contact your insurance agent if you are interested in protecting your joint venture with an Additional Insured endorsement.
Lastly, you may have a client request to be an Additional Insured on your Professional Liability policy. Read the "Should Your Client Be an Additional Insured?" section to learn what to do in this situation.
NEXT: Limited Insured Endorsements for Architects, Engineers, and Design Professionals