Practice Management - Insurance Flashcards
What 5 types of insurance does AIA Document B101 required architects to maintain?
Standard Form of Agreement Between Owner and Architect requires:
- Professional liability insurance
- Commercial general liability insurance (with excess/umbrella if needed)
- Automobile liability insurance (with excess/umbrella if needed)
- Workers’ compensation
- Employers’ Liability insurance
Professional liability insurance
Also known as “Errors and Omissions” liability
AHPP: Insurance coverage for the insured professional’s legal liability for claims arising out of damages sustained by others allegedly as a result of negligent acts, errors, or omissions in the performance of professional services. Claims-made coverage typically purchased annually to cover all claims on all projects during the coverage period (the “practice policy”).
Ballast: Insurance required by AIA Document B101, Standard Form of Agreement Between Owner and Architect, that protects architects in case one of their action in performance of their professional duties causes bodily injury, property damage, or other damage
What does professional liability insurance include? What does it exclude? What specific terms vary based on a firms needs?
Includes:
- incorrect specifications
- mistakes on drawings
- negligence
Excludes:
- intentional wrongful acts
- claims for cost estimates being exceeded
- claims arising from express warranties (ie. avoid using language providing guarantees, especially for max price for construction)
Terms that may vary based on a firm’s needs:
- coverage limits
- exclusions
- deductibles
- specific endorsements (ie. for joint-venture projects or design-build arrangements)
What are 4 reasons that professional liability insurance is essential for an architecture firm?
- Required by contract, such as with AIA Document B101
- Critical for the survival of the firm to pay for legal representation as well as any damage awarded against the firm
- Allows for continued operation of the firm while defending against a claim or lawsuit
- Provides against losses for people who may be harmed, such as the architect, architect’s employees, clients, and the public
Project professional liability insurance
Insurance commonly carried by architects that is intended to cover only one specific project:
- usually required by and/or paid for by the client
- protects the design team and named professional consultants
- often used fo large or complex projects
- coverage lasts for duration of the project + predetermined discovery period after completion of the project
Commercial general liability insurance
A range of insurance commonly carried by architects that protects against claims of property damage and personal injury for incidents that occur on or off the policyholder’s premises caused by the architects or their employees, consultants or other people hired by the architect.
- provides contractual liability coverage subject to policy exclusions
What are two common triggers in a policy that would require the insurance holder to report a claim?
- Receipt of a demand for money or services with an allegation of a wrongful act
- straightforward = produces a clear reference point indicating when the insured and the insurance company should intervene
- broad enough to cover lawsuits and angry calls from clients - Threat of an action or troubling circumstances that requires alerting the insurance company of a potential problem, even though it may not become a formal claim
- more subjective
- it is important to carefully review these kind of policy terms since failure to report a claim in a timely manner may jeopardize coverage
How can you protect yourself from liability with insurance when forming a joint venture?
Each member of joint venture should obtain evidence from the others that their policies have been properly endorsed to cover their participation joint venture by obtaining both:
- a certificate of insurance and
- a copy of the joint-venture endorsement
Contractual liability
Contracts that an architect signs may contain provisions that transfer another’s legal liability to the architect:
- contracts for service (owner-architect agreement)
- office leases
- business contracts
- purchase orders
- insurance policies
This type of coverage may be included in general liability, but that applies only to bodily injury or property damage
Automobile liability insurance
An essential type of insurance for an architecture firm that covers the business use of automobiles by the policyholder, employees, or others.
- Personal automobiles should also be insured with adequate limited of liability to provide protection for possible business use.
- Similar liability coverage for watercraft or aircraft if used by the firm
Umbrella insurance or excess liability insurance
Insurance that provides higher limits for general liability, automobile, and employer’s liability policies
Employer liability insurance
AHPP: Insurance protection purchased by an employer to cover the employer against claims arising out of bodily injury to an employee who is not covered by a workers’ compensation statute. This is usually provided on the same policy form as the employer’s workers’ compensation insurance.
Ballast: Insurance that protects an architect and their firm against claims brought by employees regarding work-related injury or illness, outside what is covered under workers’ compensation insurance.
Employment practice liability insurance
Insurance that protects an architect against claims brought by employees, such as sexual harassment, discrimination, and wrongful termination.
Does not cover a person working in a home office, and a separate policy must be taken out for any business-related home office coverage
Property insurance
Insurance that covers the architect’s office building or rental office space against disasters such as fire, theft, and flood.
- reimburses architect for expenses and loss of profits.
Office content insurance
Insurance that covers the architect’s office contents against fire, theft, and flood.
- covers drawings that are damaged, but only to extent of cost of labor and materials to product them.
