Design errors, technology failures and pandemic-related project delays are just some of the potential liability exposures faced by architects, engineers and contractors. To learn more about Architects & Engineers Insurance, we spoke with Michael Muglia, National Underwriting Director, Professional Liability, Burns & Wilcox, Detroit/Farmington Hills, Michigan.
What are some of the greatest risks currently faced by architects and engineers?
M.M.: With the shift to working from home, some architects and engineers are experiencing work-life balance problems, decreased creativity, communication breakdowns and decreased collaboration on projects due to social distancing. All of these things can increase the risk of errors and missed deadlines. Contractual weakness is a significant risk, especially given the materials shortages, higher costs and delays we are seeing right now. The increased reliance on design software programs leads to greater risk for unintended negligence in design, either due to incorrect use of technology or failure of the technology itself. There are a large number of new ventures starting up; this can be risky if those in charge lack experience in operations management or establishing risk management practices.
What should design professionals be aware of relative to these risks?
M.M.: If there is a loss, the total cost could be in the hundreds of thousands when you combine immediate loss of income and legal defense costs with intangibles such as reputational damage. When architects and engineers change how they conduct business, they need to make certain their insurance policy includes the appropriate coverage before they implement any new practices. Failure to do so could result in substantial uninsured costs. When it comes to technology, cyber and privacy exposures are greater right now due to increased use of home networks and mobile devices, as well as other aspects of working from a home versus in an office setting: all of these should be accounted for in insurance policies.
What insurance policies can help architects and engineers respond to these threats?
M.M.: At minimum an Architects & Engineers Professional Liability Insurance policy should be in place. This helps cover mistakes made in the course of providing professional services. A policy that also includes a technology insuring agreement would be beneficial, in addition to a Cyber and Privacy Liability Insurance policy. When there are multiple insuring agreements on a policy, there is usually only one aggregate limit available for all of those insuring agreements. By obtaining a separate Cyber and Privacy Liability Insurance policy, a design professional would not need to use their Professional Liability limit to pay for costs related to that type of loss. They should also consider Contractors Pollution Liability Insurance. A traditional Architects & Engineers Insurance policy may include contract review services, which is very important right now because so many contracts are being modified to accommodate work order changes.
There are additional layers of protection that can be added, such as Contractors Protective Indemnity, which will designate a limit for a general contractor or prime architect’s Professional Liability Insurance policy to respond to subcontractor or subconsultant errors. Because Commercial General Liability Insurance and Architects & Engineers Professional Liability Insurance typically exclude faulty workmanship, design professionals should inquire whether their insurance carrier offers a faulty workmanship carve-back on the Professional Liability policy.
How has COVID-19 affected the Architects & Engineers Insurance market?
M.M.: There is a lot of disruption in the market right now. New purchases are up because of startups and because there are more contract requirements for Architects & Engineers Professional Liability Insurance. Crisis usually leads to innovation and new income streams, but there are risks associated with that. For example, if an architect designs an outdoor dining structure for a restaurant and does not incorporate the appropriate practices for mitigating the spread of COVID-19, that architect could face potential liability for failing to follow guidelines.
Is there anything else architects and engineers should know about mitigating their exposures?
M.M.: Have an expert in risk management in your industry help identify potential exposures and ensure you have adequate insurance coverage. Now is not the time to rely on online platforms—have a real insurance coverage expert take a look at risks and exposures.
What are the greatest opportunities for brokers in Architects & Engineers Insurance and what advice would you give them?
M.M.: Brokers in this marketplace should make it a point to focus on learning the industry; to be successful it has to be an area that they want to become an expert in. They should become a knowledge resource for all the coverages in the industry to best articulate what is available to the insured. Every Professional Liability Insurance policy is different.
What features of Architects & Engineers Insurance are specific to Burns & Wilcox?
M.M.: ProConstruct is an exclusive product that was written specifically to address the needs of architects, engineers and contractors. As a wholesaler, Burns & Wilcox has always had strength in the contractors market on the Commercial General Liability Insurance side, and now we are supplementing that same strength with Professional Liability Insurance.
Architects & Engineers Insurance
WHY YOUR CLIENTS MIGHT NEED IT: Provides financial protection against alleged professional negligence and also includes coverage for directly related bodily injury and property damage. Construction projects that have structural or other issues often can lead to lawsuits of at least $1 million.
PROTECTS AGAINST: A range of legal-, property- and injury-related exposures, including those resulting from the design professional’s negligence or error. Includes financial restitution for costs related to legal defense, material defects, bodily injury and property damage.
EXPERT OPINION: “If there is a loss, the total cost could be in the hundreds of thousands when you combine immediate loss of income and legal defense costs with intangibles such as reputational damage,” said Michael Muglia, National Underwriting Director, Professional Liability, Burns & Wilcox, Detroit/Farmington Hills, Michigan.