Building Design and Construction Handbook - Merritt - Ventech!

THE BUILDING TEAM—MANAGING THE BUILDING PROCESS 2.9
claims against professionals in the building industry are made by clients. Fewer
claims are made by contractors and workers.
2.6.2 Risk Management
So that the architect’s or engineer’s business goals can be accomplished, professional
liability insurance is offered through various underwriters and managed by
professionals. Such professionals should not dictate or limit architectural practice,
but rather should support it; neither should they tell architects to turn away from
risk, but instead they should help manage it.
Insurance allows the architect or engineer to transfer the risk of financial uncertainty
to an insurance company for a known premium. The professional should
calculate how much risk to assume. The risk the individual retains is the deductible.
The risk the insurance company accrues is the limit of liability over and above the
deductible. By choosing a higher deductible, the professional retains more risk but
pays a lower premium.
Professional liability protection for the architectural and engineering profession
has been designed with the help of the American Institute of Architects (AIA) and
the National Society of Professional Engineers (NSPE)/Professional Engineers in
Private Practice (PEPP). In addition to errors and omissions coverage, the protection
incorporates liability coverage for on-time performance, cost estimating, interior
design, asbestos, and pollution.
Liability programs vary widely from company to company. In general, the insurance
industry recommends that architects and engineers:
• Select a program with flexible limits of liability and deductible options
• Carefully review the insurance coverage
• Compare competitive costs
• Consider the insurance company’s experience
• Examine the insurance company’s criteria for accepting risk
• Compare loss prevention services
• Assure that the company shares its loss information
The AIA and NSPE/PEPP can also provide architects and engineers with valuable
information on what to look for in a professional liability insurance program.
2.6.3 Project Insurance
Project insurance permits the architect to be responsive to the client who has particular
insurance demands. Suppose, for example, that the client wants 3 times the
coverage the architect carries. Project insurance can respond to this requirement.
Project insurance costs are often reimbursable costs and considered a common
element of the construction cost, similar to the cost of the contractor’s insurance
coverage and performance bonds. Project insurance can sometimes reduce the architect’s
policy costs because project billings are not included in the architect’s
billings when the architect’s practice policy premium is calculated. Project insurance
may provide long-term coverage guarantees to the day of substantial or final
completion and up to 5 years thereafter with no annual renewals. Project insurance