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Architect’s Professional Insurance: How to Protect Your Business

5 min read

Architect’s Professional Insurance: How to Protect Your Business

Business made easy January 31, 2023

Architects can be sued for various reasons, including negligence and inaccurate designs. The litigation process and damages, if found guilty, can be costly. This makes it essential for every architect to have architect’s professional insurance.

At Dialdirect, we make it our daily mission to provide businesses like yours with guidance on the most suitable insurance. With that in mind, we’ve created this article to help you decide what insurance you should have as an architect.

In this blog, we’ll answer your questions on why you need insurance, the types of insurance to have and the typical claims architects face.

Why do architects need insurance?

If you’re an architect, you provide professional service to clients on your behalf or as an employee of an architectural firm. That makes you a business. Like all businesses, you face risks that are general in nature, as well as others that are specific to the construction industry.

You, therefore, need to be protected financially against those risks to ensure the survival of your business. Taking out architect’s professional insurance can help you to achieve this stability.

Whether you’re an architect, architectural firm or draughtsman, it’s imperative to have the right types of business insurance. Here are some of the reasons you need insurance.

You face a myriad of liability risks. Architects work closely with clients who may visit their offices or construction sites. Who can guarantee that the client will come out unscathed if some accident happens? For example, a worker at a construction site may drop a brick by mistake and it falls onto the client’s head. The client may decide to sue you for the injury and damages, such as missing work for a couple of days or weeks, depending on the severity of the injury.

If you don’t have the right type of insurance, it would be costly to cover legal costs, medical costs, and to settle the lawsuit if found guilty.

You may need insurance when you collaborate with other architects or architectural firms. Building projects can be too large for a single architect or architectural firm to complete. Or, your architectural business might be too small to undertake and complete a large building project by itself. This is where partnering with other architects or architectural firms becomes necessary. When you have a joint venture with another firm or other individual architects, you introduce risk to them. That’s why they may want you to have the right type of insurance to safeguard themselves if they partner with you.
Insurance can help you land clients. Having professional architect's insurance gives potential clients the assurance that outfall from any mistakes you make will be financially protected. This makes it easier for them to choose you ahead of others who don’t have insurance. Insurance, therefore, makes business sense.
Renting office space may require you to have insurance. Commercial landlords want certainty that giving you office space won’t elevate their own business risk. To mitigate this risk, they may require you to have insurance before leasing the office to you.

The most common claims against architects

Architects can be sued for various infractions, including faulty designs, defective workmanship and failure to prepare sufficient documentation. In general, negligence constitutes the majority of claims against architects. Some of the common claims include the following.

Faulty or inadequate design: Each client has objectives when undertaking a certain project. Often, the client has a budget dedicated to finishing the project. If your design doesn’t align with your client’s objectives in certain areas or results in over-the-budget costs, your client may sue you for negligence.

For example, you may create a design that misses the mark about the soil conditions on which the project is to be erected.

Client dissatisfaction: Some architects, in trying to generate higher income, take on too many clients. Due to the increased workload, they may under-deliver, which violates the standard of care required by the profession. Your client can bring a lawsuit against you for this and you might be found guilty.
Poor construction site supervision: Some of the contracts you enter with clients may require you to supervise the building project. If you’ve entered into such a contract and the building contractor makes a mistake that costs the owner money to fix, you could be held legally liable.In a worst-case scenario, this lack of supervision could lead to the project failing. Other problems such as budget overruns and project delays could occur. You can be sure that the client won’t be pleased if any of these occur and may claim loss of income if their project is of a commercial nature.
Failing to secure all the required permits: All large construction projects have to adhere to the government’s building requirements. For example, before constructing a mall, you need to conduct an environmental impact assessment. If such a task isn’t done properly, problems such as civil lawsuits may arise later. The client will have to run around trying to address the problem. This will not only delay the project but will cost money. Failure to comply with such requirements could get the architect responsible into trouble.

There are many more mistakes that could get architects into trouble with the law. Even shoddy workmanship could cause you a difficult situation. Similarly, contractual disputes could lead to legal problems.

Since there are many possibilities for being sued and exposing your business to risk, it’s worth getting the right insurance for your unique business to protect it from mishaps.

Types of architect’s professional insurance

Most businesses require several insurance policies centred around one or two core ones. The same applies to architects. For architects, as professional service providers, professional indemnity insurance or errors and omissions insurance ranks at the top.

Professional indemnity insurance protects you financially if your client alleges you’ve given them the wrong advice or service. We live in a world where professionals, such as architects, face immense pressure to deliver quality advice and service to their clients.

This pressure can result in making errors and omissions. This is where professional indemnity insurance can come to the rescue. It may not help you get rid of the errors you make, but it’ll protect you financially, provide peace of mind and minimise reputational damage.

If a client sues you for omissions or errors, professional indemnity insurance will cover the following:

Legal costs to defend yourself in court
Compensation to the clients if they win the case

On the positive side, when you have professional indemnity insurance, it may be easier to acquire new clients because some require it before hiring you or your firm.

Like all types of insurance, professional indemnity insurance requires you to pay a premium to enjoy the coverage. How much you pay varies based on factors such as your needs, statutory requirements, the type of projects you design and income level.

The nature of an architect’s profession doesn’t only require professional indemnity insurance but other types of insurance too. The most common to consider include:

Directors & officers insurance: An insurance that financially protects directors and executive officers of a company in case they face a lawsuit. Claims against company officers may be due to fraud or failure to adhere to workplace laws.
Public liability insurance: A type of insurance that covers you in case a member of the public gets injured or dies due to some aspect of your work. It also protects you financially if you cause damage to the property of a third party.
Business office insurance: This covers you financially in case you suffer damage or loss due to unfortunate events such as fire, theft or natural disasters.
Commercial property insurance: It protects your commercial property financially if there is loss or damage to assets due to natural disasters, theft and fire. Commercial property includes items such as the building and the installed machinery.
Business interruption insurance: It covers you for loss of income due to unforeseen events such as we saw in 2020 with the COVID pandemic. When COVID struck, more than 62% of architectural practices were owed R846,000 in unpaid invoices.

Get a professional indemnity insurance quote from Dialdirect

Do you want to protect yourself or your architectural firm from financial loss? The answer is almost certainly a resounding “Yes!” Dialdirect has expert advisors who can help you with the right type of insurance you need — architect’s professional indemnity insurance.

To get this type of insurance, begin by requesting a free and no-obligation online errors and omissions insurance quote.

Disclaimer: The information in this article is provided for informational purposes only and should not be construed as financial, legal, or medical advice.