Professional Practices: Systematize Processes to Control Your RisksBelow are the most common questions that existing and prospective Professional Practice Insurance Brokers (PPIB) business insurance clients ask about A&E professional liability coverage.
Key Takeaways
- Professional liability insurance covers claims tied to a firm’s professional services, including economic losses — a gap standard general liability insurance doesn’t fill.
- Most architects and engineers E&O policies are “claims-made,” meaning coverage depends on the policy being active when a claim is filed, not just when the work was performed.
- A policy’s retroactive date determines how far back prior acts are covered — the earlier the date, the broader the protection.
- Coverage typically extends beyond the firm itself to include past and present officers, employees, and leased personnel named in a claim.
- Underwriters weigh factors like claims history, contract practices, and use of sub-consultants when setting premiums, so strong internal risk controls can help manage costs.
- Project owners bring the large majority of professional liability claims against both architects and engineers, far more often than general contractors or third parties.
1. What type of protection does professional liability insurance provide?
Professional liability insurance protects your business from claims alleged to have been caused from the firm’s professional service activities. The policy covers claims for bodily injury, property damage, or economic losses. This differs from commercial general liability policies, which limit coverage to bodily injury and property damage claims from non-professional service activities.
2. What professional service activities are typically covered?
Most policies typically cover professional services that your business is legally qualified to perform in its capacity as an architect, engineer, landscape architect, land surveyor, construction manager, interior designer, technical consultant, or as otherwise described by endorsement to the policy.
3. Apart from my firm, who else is covered by this policy?
Typically, the “named insured” is your firm and predecessor firm names, in addition to past or present directors, officers, employees, and leased personnel if named in a claim. Policies also generally cover liability arising from participation by your business in joint ventures. In our experience working with design firms, joint venture coverage is one of the most overlooked areas — firms often assume a JV partner’s policy will respond, only to find their own policy doesn’t extend as broadly as expected.
4. What are the benefits of Professional Liability insurance?
Professional Liability insurance safeguards your business from catastrophic loss in the event of a lawsuit, covering both legal expenses and sums paid as judgments, awards or settlements. Even baseless claims against your business can require a legal defense. Protecting your business reputation can require significant funds and can even bankrupt your business.
5. What if I am sued tomorrow over a past activity?
As long as there is a claims-made policy in force at the time the claim is made and that policy provides coverage for prior acts, there would typically be coverage.
6. What does claims made insurance coverage mean?
Most professional liability policies are designed to apply on a “claims made” basis. This means that a claim must be made and reported within the policy period, but not to exceed a reasonable period of time after the policy period expires. These policies list a specific date, often called a “retroactive date,” that becomes very important. Claims that arise out of acts committed prior to the retroactive date will not be covered. The farther back the retroactive date, the more coverage provided. This is also why firms that switch brokers or carriers need to pay close attention to their retroactive date — losing continuous coverage can inadvertently create a gap in protection for past projects.
7. What information does an underwriter consider when they determine your premium?
Insurance company Underwriters evaluate several factors in preparing quotations, such as:
- Policy limit and deductible requested
- Number of licensed professionals
- Number of years in business
- State(s) where business is conducted
- Professional service billings
- Mix of professional disciplines, project types and clientele
- Project delivery methods
- Use of sub-consultants
- Quality control, including use of written contracts
- Office policies, procedures and training activities
- Claim experience
8. Who brings professional liability claims against Architect & Engineer firms?
Architects: Frequency of claims by claimant (2013 Survey)
- 73% Project Owners
- 8% General Contractors
- 6% Third-Party Property Damage
- 5% Bodily Injury from Non-Workers
- 3% Bodily Injury from Workers
- 1% Specialty Contractor
- 4% All Other
Engineers: Frequency of claims by claimant (2013 Survey)
- 66% Project Owners
- 10% General Contractors
- 10% Third-Party Property Damage
- 3% Bodily Injury from Non-Workers
- 3% Bodily Injury from Workers
- 2% Specialty Consultants
- 6% All Other
These patterns are consistent with what we see in the field: see our related guide on design professionals risk management for the six exposures that most often lead to these claims.
How Much Does A&E Professional Liability Insurance Cost?
Premiums for architects and engineers professional liability insurance vary based on firm size, claims history, project types, and coverage limits — from a few thousand dollars annually for small firms to significantly more for larger practices with higher limits or higher-risk project types. Because pricing depends heavily on the firm-specific factors listed in Question 7, a broker quote is the only way to get an accurate number.
Professional liability claims rarely come from where you’d expect. As the claim data above shows, most professional liability claims against architects and engineers come from project owners — not the parties firms often worry about most. The right coverage, retroactive date, and named-insured structure make the difference between a manageable claim and a firm-threatening one. For more on building a stronger risk profile, see our 9 rules for robust risk management for architects and engineers.
Talk to Heffernan’s Professional Practice team
Notes: This post had no external citation prior to this refresh, and none was fabricated. If the team has a source for the “2013 Survey” claimant statistics, adding that citation (and, ideally, more recent data) would strengthen the piece — flagged for follow-up outside this optimization pass.
