From John McClane crawling through the ventilation system in Die Hard to Ellen Ripley escaping an alien attack in Aliens, Hollywood loves to dramatize HVAC systems. Design professionals know real HVAC system risks—like engineers negligence—do not make it to the big screen and movie scripts.
Design professionals, commonly referred to as architects and engineers (A&E), are required to complete graduate degrees and industry tests in order to obtain their license for their respective specialized areas of practice as the industry holds them to a higher standard compared to others in construction. This higher standard is reflected in the risks mitigated by A&E Professional Liability coverage.
Coverage Outlook: Long-Term
An A&E Professional Liability policy for design professionals is triggered by a financial loss, property damage or bodily injury directly caused by an error or omission in a design. Nicole Greene, Brokerage Manager, Professional Liability at Burns & Wilcox, cited a recent claim that crossed her desk related to an engineer who had been hired to design an HVAC system in a new office building.
It is typical for design errors to surface several years after a job’s completion and retail brokers and agents must work with their clients to cover the longer tail of risk.
“The engineer made a miscalculation in the design, including the wrong angles for proper ventilation. This mistake eventually caused condensation to pool in the ductwork, leading to mold and respiratory problems for those working in the building,” said Greene.
During the claim investigation, it was determined that the installers who followed the blueprints and specs were not liable. It was not faulty workmanship that caused the mold, but an error in the design caused by the engineer. It also took more than a year after the building was completed for the problem to be uncovered.
Greene recommends maintaining coverage for 7-10 years after a project is finished, depending on the statute of repose in that state. It is not enough to have coverage that stops when the project is complete.
“It’s imperative that design professionals have continuous coverage. Any lapse leaves prior work uncovered,” said Greene. In other words, it does not matter if the client was covered while completing the job if you are not covered when problems arise. “It is typical for design errors to surface several years after a job’s completion and retail brokers and agents must work with their clients to cover the longer tail of risk.”
Retail brokers and agents should also make sure the application for coverage includes an up-to-date declaration page, also known as a “dec” page, which outlines the client’s previous limits and the retroactive dates of policies.
Beyond the longer statute of repose, retail brokers and agents should recommend contingent pollution coverage for all A&E clients.
For example, if a civil engineer or land surveyor makes an error that causes residential plots to be constructed 15 feet off plan and a gas line is struck during foundation digging, it will result in environmental damage. It is considered a pollution event caused directly by an error in the land surveyor’s professional services. Pollution coverage would be needed to remediate the situation.
Contingent Pollution, when added to an A&E Professional Liability policy for design professionals, can also assist on a broad range of design professional projects. This can be especially important to rehab-design-build contractors when renovating structures that may contain asbestos or lead paint.
Once a profession of pen and paper, engineers now rely on software and computer technology. Coverage should be extended to include technology service, technology products, multimedia and privacy riders. If the computer that runs a building system follows a poorly designed plan, it may lead to design failure and bodily injury.
The final note Greene offers to retail brokers and agents is to counsel design clients about the realities of project policies versus annual policies. “It’s tempting to get a shorter, cheaper policy, but the longer tail of coverage can turn this into a costly mistake,” said Greene.