4 Best Tips On Architects Professional Indemnity Insurance
You run an architectural practice. You design beautiful buildings that are just as much works of art as they are places for people to live, eat, play, or work. Although your responsibilities lie primarily in designing elegant buildings for clients, there are also serious legal responsibilities that come along with being an architect.
Architects must shoulder onerous legal duties for delivering designs that are free from defects or faults. If architects produce designs with defects, and these structures are then built, clients and other parties may suffer economic losses. Defective designs may even result in unsafe structures, causing either injury to people or damage to surrounding property.
This is where architects professional indemnity insurance comes into play. An architects liability insurance policy essentially protects architects against negligence, errors & omissions, and other mistakes that result in them being sued.
#1. What does architects professional indemnity insurance cover?
Architects professional indemnity insurance covers:
- Negligence: You accidentally planned dimensions of certain parts of the building wrong, causing delays
- Errors and omissions: You forgot to include certain design or structural requirements into your blueprints. These errors were only discovered after construction. Fixing the problem will involve tearing down certain structural features and rebuilding them at a cost of $50,000. You can be held liable for
- Defamation: This is not specific to architects, but is a general feature of professional indemnity insurance. If you are sued for libel or slander, this policy will protect you.
- Sub-contractor errors: If you contract any work out (e.g. designs, blueprints), any errors that are made by your sub-contractors are also covered. This is incredibly useful because you are covered for other people’s mistakes.
What does architects professional indemnity insurance pay for?
Architects professional indemnity insurance pays for:
- Lawyer’s fees
- Damages or settlements awarded by the courts
#2. Why is professional indemnity insurance so important for architects?
There are two simple reasons:
- If there are defects in the building, it doesn’t matter who’s actually at fault. Most of the time, everyone involved in constructing the building gets sued together.
- You won’t survive the cost of a lawsuit without architects insurance
Architects can get sued either directly by the client, or much more commonly as part of a broader lawsuit targeting all related parties in a construction project: the developer, the construction company, the engineers, the surveyors, and the architects. These “dragnet” lawsuits are very common when there are defects in the final works.
As for the cost of surviving the lawsuit, most architects have a high risk of going bankrupt in the event of a lawsuit.
|Sample cost schedule if you get sued|
|Annual cost of lawyer’s fees||Approx. $100,000|
|Typical length of lawsuit||1-3 years|
|Sub-total legal fees||$300,000|
|Damages awarded||$100,000 to over $1 million|
|Total cost (legal fees + damages)||$400,000 to over $1.3 million|
There is no “typical” length or cost to a lawsuit – these two variables will move widely depending on factors like the severity of the architect’s negligence, the damages involved, etc.
What can be established, however, is a reasonable baseline estimate for what you might have to pay if you were sued as an architect. Even if the case is not complex, lawsuits can easily drag on for years as both sides battle back-and-forth. We can assume a conservative annual cost for lawyer’s fees to be $50,000. A lawsuit that takes 3 years to settle would cost you $300,000. And these are just lawyer’s fees alone – they haven’t even taken into account the damages you have to pay if you lose the suit.
This is why even a $1 million policy is not as generous as most people think. A million dollars may sound like a lot, but when you actually get thrown into a lawsuit, most insureds quickly find that cool million dollars isn’t really enough to cover their rapidly mounting costs.
The essential point is this: could you imagine bearing these costs out of your own pocket? How much savings do you have? Would you be willing to sell your car, mortgage your home, borrow from friends and family, to fund your own legal defense?
The most dangerous thing about architects’ liability is that you don’t even have to be guilty of whatever the person is suing you for. You could well be innocent, but you still have to hire a lawyer to prove that innocence. Freedom, unfortunately, is not going to come free. And while your lawyer is arguing your case in front of the court, you’ll still have to pay your legal team their fees so you don’t end up losing the case.
Most architects think that as long as the don’t make mistakes, they won’t get sued. What most architects forget is that if there are defects in the building, clients will often sue all the parties involved in the construction of the building: from the architects, to the surveyors, to the construction company. It is incredibly common for architects to get dragged into these lawsuits by nature of association. Your blueprints and designs may be perfect, but if there are even apparent faults in the building, your clients are not going to care if you’re not responsible. You are going to end up having to defend yourself in court, and this defence could very well bankrupt you if you don’t have liability insurance.
#3. What are some lawsuits that architects in Singapore have faced?
The above case which made headlines in The Straits Times is a great example of how architects will often get dragged into lawsuits. In 2016, residents of The Seaview condominium, located in the East region of Singapore, sued four parties for a host of supposedly defective works in their building.
Architects will face such lawsuits very commonly. So you see, it doesn’t actually matter whether you’ve done your job as an architect flawlessly. All it takes is for the developer or the construction company to make a few mistakes (and such mistakes are highly likely to occur), and all the parties who were involved in the construction of the building get slammed with a lawsuit together.
Even if you’re innocent, it’s going to cost a lot of money to prove that innocence in court!
#4. Use an online insurance broker to save money
Using an online insurance broker, like Provide, will help you to save up to 25% on architects liability insurance. Traditional agents/brokers have higher overheads, which are ultimately passed onto you in the form of higher premiums. Given the current economic climate, it’s highly recommended for businesses to try to cut down on expenses wherever possible.
Where can I get architects professional indemnity insurance?
Provide is the best place to get architects professional indemnity insurance. With Provide, you’ll save up to 25% on architects liability cover. Because we’re a digital platform, we have lower overheads, so we pass every dollar saved back to you.
Provide’s expert team has over 20+ years of experience protecting companies of all sizes – from large multinational companies to small businesses.