For my first blog post, I thought it a good idea to start with the basics. This month I presented to 100 architecture and engineering firms a review of all the insurance products every design firm should know and use in transferring their risk—a lengthy presentation, to be sure. For our purposes here, however, I thought I would share what I consider to be the three most important.
1. Professional Liability
Most claims against architects and engineers are professional liability, so PL is by far the greatest exposure and insurance expense of a design firm.
2. Business Owners Policy
Architects and Engineers are typically covered by a business owners policy (BOP) where property coverage is combined with general liability coverage including the option to cover hired and non-owned automobiles. Workers Compensation is included as it is compulsory coverage in most states.
3. Executive Risk Coverage
There are certain exposures which can directly affect the directors and officers of a design firm based on the management decisions made. This insurance covers certain directors and officers activities outside of providing professional services.
Market Trends and Underwriting Criteria
We have found that pricing remains soft for design firms with the exception of structural and geotechnical engineers or firms with pre-existing claims. We are also seeing a general increase in fees for design firms and expect this to continue.
The full presentation discussed each of these in detail and provided practical risk management tips on reducing and mitigating claims and client disputes as well as some thoughts on contract negotiations, such as:
- P&C insurance products A&E firms should use to transfer risk
- Underwriting criteria and market trends unique to each product
- Utilizing policy wording/coverage features in contract negotiations
- Negotiation strategies when addressing policy wording/insurance requirements