Do architects and engineers need professional liability insurance?

Both architects and engineers are professionals who provide specialized services which involve significant expertise, technical knowledge, and creativity. Any errors in their work can have serious consequences, both financially and in terms of safety and functionality.

Enter professional liability insurance, also called errors and omissions (E&O). E&O offers protection against claims arising from professional services, such as those provided by engineers and architects.

E&O insurance goes by many names, and depending on the industry it’s for, it can also be referred to as professional indemnity insurance (usually for lawyers or law professionals) and medical malpractice (coverage for the healthcare industry). Its sole purpose is to protect “professionals” (any industry that offers advice or a service) from claims alleging errors, omissions, negligence, etc. It can also provide coverage for lawsuit costs, including legal fees, settlements, and more.

While E&O is an optional coverage, some regulatory bodies will require it for specific professions, such as for corporate lawyers. Architects and engineers may not be required to purchase it, but it’s highly recommended given the nature of their work. It also enhances a business’s professional appearance, and clients who are aware you have this coverage are more likely to trust and work with you. While it isn’t common for individuals or families to ask for this coverage, organizations, government, and corporations will look for it.

The work of architects and engineers is very sensitive by nature and any mishaps, errors, delays, or miscommunications could result in significant financial damage, reputational harm, or setbacks in a final project. Architects and engineers are held to a high standard due to the value of the work they provide, so an unexpected mistake or omission causing harm could be devastating for not just the client, but all involved.

Here are examples of claims that might be made by engineers and architects:

Your client alleges that you misrepresented your capabilities, experience, or qualifications as an engineer or architect, resulting in delays, mistakes, or problems during a project. As a result, they seek compensation for the costs and associated damages.

With E&O, your policy may provide coverage for compensating your client and assisting in restoring your reputation or offsetting any associated financial setbacks.

An example of a misrepresentation claim might be if your business made a false claim about its experience or reputation to secure a contract. If your client found this out to be untrue, they could sue you for a claim of misrepresentation.

A competitor or other third-party alleges that the design you created as an engineer or architect infringes upon their intellectual property rights, like a patent or copyright. As a result, they might seek an injunction or to protect their property and even sue for damages.

Like the example above, E&O could provide coverage for the costs associated with this. If the case escalated to a lawsuit, E&O could help with your legal and administrative costs.

*Note: In Ontario, infringement may need to be added separately to a policy for copyright or patent infringement claims to be covered.

An example of an infringement claim could be something like a competitor of your client’s alleging that the design you created was a direct copy of theirs. Your client could turn around and sue you for copyright infringement or defamation.

If a client claims that you were late in delivering the final design, which then caused further delays in the project and resulted in additional construction costs and potential lost revenue, they might seek compensation. E&O could help cover the cost of that compensation.

An example of a delay claim could be as simple as a professional architect alleging that they can complete a project within 10-12 months, but they take upwards of 18 months due to oversight of the complexity of certain phases. This oversight could result in additional, unexpected costs that the project owner originally wasn’t anticipating.

Designing, renovating, and proofing construction projects poses significant challenges and risks for an engineer or architect. It may be your specialty, but the consequences of a mistake are far greater than they would be in most other industries. Clients could sue over a variety of mishaps, from design flaws leading to injuries, property infringement, etc.

There are four main reasons why architects and engineers should consider E&O insurance:

Let’s dig into each of these a bit more:

One of the best benefits of E&O is that it can help your business to rebuild its reputation by providing finances for hiring crisis experts even if a client or ex-client files a claim against you. A case like this can seriously damage your brand and make it even harder to attract new clients. E&O helps you to both defend against claims and safeguard your reputation as your business grows.

E&O’s main purpose is to keep your business going despite a lawsuit. Given the value of architectural or engineering projects and what a mistake could cost a client, the dollar value of these lawsuits can be huge and have the potential to bankrupt your architect or engineer business. E&O insurance provides coverage for settlements, legal expenses, administrative fees, and more.

Perhaps one of the most underrated benefits of having the right insurance in place is the trust it builds with your clients even before you start working with them. This can lead to increased growth and a more successful business overall.

This should go without saying, but peace of mind is important when it comes to insurance protection. It allows you to focus on your work and assisting your clients without worrying about possible lawsuits, financial loss, and more.

Ready to get insured? Get in touch with Mitch’s commercial team and start discussing your options for E&O coverageas an architect or engineer today. Whatever your specialty or profession, we’re happy to find a plan that works for you. E&O is just the start – be sure to ask your broker about other coverages like commercial general liability, cyber liability, commercial property insurance, and more.