Flashcards in Practice Management - Insurance Deck (25)
What 5 types of insurance does AIA Document B101 required architects to maintain?
Standard Form of Agreement Between Owner and Architect requires:
- Professional liability insurance
- Commercial general liability insurance (with excess/umbrella if needed)
- Automobile liability insurance (with excess/umbrella if needed)
- Workers' compensation
- Employers' Liability insurance
Professional liability insurance
Also known as "Errors and Omissions" liability
AHPP: Insurance coverage for the insured professional’s legal liability for claims arising out of damages sustained by others allegedly as a result of negligent acts, errors, or omissions in the performance of professional services. Claims-made coverage typically purchased annually to cover all claims on all projects during the coverage period (the “practice policy”).
Ballast: Insurance required by AIA Document B101, Standard Form of Agreement Between Owner and Architect, that protects architects in case one of their action in performance of their professional duties causes bodily injury, property damage, or other damage
What does professional liability insurance include? What does it exclude? What specific terms vary based on a firms needs?
- incorrect specifications
- mistakes on drawings
- intentional wrongful acts
- claims for cost estimates being exceeded
- claims arising from express warranties (ie. avoid using language providing guarantees, especially for max price for construction)
Terms that may vary based on a firm's needs:
- coverage limits
- specific endorsements (ie. for joint-venture projects or design-build arrangements)
What are 4 reasons that professional liability insurance is essential for an architecture firm?
1. Required by contract, such as with AIA Document B101
2. Critical for the survival of the firm to pay for legal representation as well as any damage awarded against the firm
3. Allows for continued operation of the firm while defending against a claim or lawsuit
4. Provides against losses for people who may be harmed, such as the architect, architect's employees, clients, and the public
Project professional liability insurance
Insurance commonly carried by architects that is intended to cover only one specific project:
- usually required by and/or paid for by the client
- protects the design team and named professional consultants
- often used fo large or complex projects
- coverage lasts for duration of the project + predetermined discovery period after completion of the project
Commercial general liability insurance
A range of insurance commonly carried by architects that protects against claims of property damage and personal injury for incidents that occur on or off the policyholder's premises caused by the architects or their employees, consultants or other people hired by the architect.
- provides contractual liability coverage subject to policy exclusions
What are two common triggers in a policy that would require the insurance holder to report a claim?
1. Receipt of a demand for money or services with an allegation of a wrongful act
- straightforward = produces a clear reference point indicating when the insured and the insurance company should intervene
- broad enough to cover lawsuits and angry calls from clients
2. Threat of an action or troubling circumstances that requires alerting the insurance company of a potential problem, even though it may not become a formal claim
- more subjective
- it is important to carefully review these kind of policy terms since failure to report a claim in a timely manner may jeopardize coverage
How can you protect yourself from liability with insurance when forming a joint venture?
Each member of joint venture should obtain evidence from the others that their policies have been properly endorsed to cover their participation joint venture by obtaining both:
- a certificate of insurance and
- a copy of the joint-venture endorsement
Contracts that an architect signs may contain provisions that transfer another's legal liability to the architect:
- contracts for service (owner-architect agreement)
- office leases
- business contracts
- purchase orders
- insurance policies
This type of coverage may be included in general liability, but that applies only to bodily injury or property damage
Automobile liability insurance
An essential type of insurance for an architecture firm that covers the business use of automobiles by the policyholder, employees, or others.
- Personal automobiles should also be insured with adequate limited of liability to provide protection for possible business use.
- Similar liability coverage for watercraft or aircraft if used by the firm
Umbrella insurance or excess liability insurance
Insurance that provides higher limits for general liability, automobile, and employer's liability policies
Employer liability insurance
AHPP: Insurance protection purchased by an employer to cover the employer against claims arising out of bodily injury to an employee who is not covered by a workers’ compensation statute. This is usually provided on the same policy form as the employer’s workers’ compensation insurance.
Ballast: Insurance that protects an architect and their firm against claims brought by employees regarding work-related injury or illness, outside what is covered under workers' compensation insurance.
Employment practice liability insurance
Insurance that protects an architect against claims brought by employees, such as sexual harassment, discrimination, and wrongful termination.
Does not cover a person working in a home office, and a separate policy must be taken out for any business-related home office coverage
Insurance that covers the architect's office building or rental office space against disasters such as fire, theft, and flood.
- reimburses architect for expenses and loss of profits.
Office content insurance
Insurance that covers the architect's office contents against fire, theft, and flood.
- covers drawings that are damaged, but only to extent of cost of labor and materials to product them.
Valuable paper and records insurance
Insurance coverage for valuable papers and media that is critical for protection of an architect's property.
- covers the total value of documents lost or destroy by any of the means described in the policy
- often an all-risk coverage
Intellectual property insurance
Insurance that protects an architectural firm from claims of copyright, trademark, or patent infringement arising from the architect's actions.
- protects the architect from a suit by competitors from infringement, however inadvertent, on their ideas.
Technology liability insurance
Insurance that covers claims arising from alleged negligence in managing the security of a computer system (ie if network security is compromised)
Insurance that is mandatory in all states and protects employees in the event of injuries by work related activities:
- medical benefits and wage replacement
- benefits for dependents of workers who are killed because of work-related accidents
- employees cannot sue their employers for injuries covered by workers' compensations
Why does an architect need to be careful when signing an indemnity clause?
Because the wording can make it so that the architect is be liable for any loss to the owner not resulting form the architects' negligence
B103-2017 and its insurable indemnity provision
Owner-Architect Agreement for Large or Complex Projects:
1. Disclaims any duty to defend
2. Limits the architect's financial obligation to:
i. Damages, losses, and judgements arising from claims by third parties, including reasonable attorneys' fees and expenses
ii. recoverable under applicable law
iii. only to the extent they are caused by the negligent acts or omissions of the architect, its employees, and its consultants providing professional services
3. Limits the indemnity obligation to the amount of insurance proceeds of the insurance coverage required by the owner-architect agreement
Personal injury protection
Insurance that protects architects against charges of slander, libel, defamation of character, misrepresentation, and other torts (aka civil wrong, not a criminal act)
Types of health insurance
- Indemnity plans
- PPOs (preferred provider organizations)
- HMO (health maintenance organizations)
- POS (Point-of-service plans)
- HRA or HSA (Consumer-directed plans)
- Limited medical plans
3 markets in health insurance
1. Individual coverage
2. Small group coverage (2-49 employees)
3. Large group coverage (50 or more employees)