Professional Indemnity Insurance protects your firm against the unexpected.
Architects, like many others in the design and build industry, have to offer advice as an essential part of their service. Whether your firm specialises in commercial or residential designs, your client relies on your expertise to deliver their project from concept to completion, on time and on budget.
Despite how much combined experience there may be within your firm, there is always the possibility that something could go wrong. Professional indemnity insurance is the protection most practices need for when things do, as well as public liability insurance and business interruption insurance, to ensure your firm is covered against the unexpected.
Covering designs and plans
The costs of defending your practice against claims and allegations of incorrect advice or negligent services are covered by professional indemnity insurance. If for some reason your client was given a poorly drafted design or a building specification that was incorrect, there could be huge ramifications. Build projects may have to be re-budgeted, completion dates delayed and – if construction has started – the possibility of demolishing part-built sections of the site (and replacing the materials) to start again. Professional indemnity covers these eventualities, helping to minimise the financial impact it would normally have on your firm.
The ARB recommends having at least £250,000 cover in place, although many architects take out £1m upwards. Many clients will insert a clause in your contract stating how much professional indemnity insurance they require a firm to have. However, if you are starting a new practice it can be difficult to choose a suitable limit; the best way is to assess the potential losses your firm could suffer based on the value on the contracts you currently have (or are likely to have) and estimate any costs your firm would incur if anything went wrong.
It’s important to consider situations where an architect may have inadvertently provided advice; for example, if a client were to ask your practice to recommend a tradesman for the project, and the tradesman’s service was below par, you may be held accountable for the recommendation – even if it was made in good faith and on an informal basis. These awkward situations can be common in small practices whose clients are less certain about their requirements and are happy to take advice from their architect.
Public liability cover
Public and product liability covers your legal costs if someone is injured (or something is damaged) as a result of your negligence whilst at your premises or while working away from them. This is an important cover for all practices, especially if clients visit your workplace (including if you work at home). Slips, trips and falls are examples of accidents that are generally covered by public and product liability insurance.
Business equipment and business interruption cover
Visiting clients isn’t as risk free as it might first seem. Any tablets or computer equipment carried between client offices or work sites can easily be damaged. Replacing such a highly specified piece of kit can be expensive – especially when you factor in licensed CAD software that might be installed. Covering the vital equipment needed to operate your business – tablets and laptops, software, specialist cameras – against accidents can be easily done with business equipment cover. For firms that deal with clients outside the UK, it’s important to check your policy covers your equipment on a worldwide basis – this will avoid any problems that might arise should you need to make a claim.
Business interruption insurance is an important cover for firms which can’t afford to have an incident, such as a flood in their office, disrupt their business activities. The impact of such a situation isn’t immediately obvious – but when considered, your business could be left without vital equipment, time-sensitive project plans, or even something as fundamental as a phone system, for days or even weeks. Business interruption insurance can provide cover for the loss of income your business will suffer as a result of this interruption, helping to soften the financial blow that would normally be felt in such circumstances.