Below are questions that A&E firms need to carefully evaluate prior to cancelling (or non-renewing) their A&E Professional Liability coverage:
Risk Factor #1: What are two significant risks that happen if I cancel my “claims-made” A&E Professional Liability policy?
1. You are no longer protected because any claims filed after your policy has expired are not covered: even though you had purchased a professional liability policy at the time the work was performed.
Professional liability policies provide “claims-made” coverage, which means that your policy must be active both when the alleged incident occurs and when the claim is filed. This is why many Design Professionals invest in professional liability insurance and keep the same policy for the duration of their professional business career.
2. You will often lose the ability to secure “Prior Acts” coverage in the future.
Once your policy is cancelled, it is very difficult to re-purchase professional liability in the future and secure coverage for design professional services that were performed in the past.
Risk Factor #2: What should be thought about (to protect myself) once I have decided to cancel (or non-renew) my A&E Professional Liability policy?
You should consider purchasing an Extended Reporting Period coverage endorsement (aka “Tail Coverage”), which typically allows up to 3 years - 5 years on a less frequently basis - to file claims related to professional services activities that occurred while your policy was in force. Any claims filed after you nonrenew your policy would not otherwise be covered.
Risk Factor #3: Are there claims that I may not have thought about, but should be concerned about?
Yes, unfounded lawsuits.
Many Design Professionals are confident that they have properly performed their work and feel their exposure to future professional liability claims is minimal to non-existent.
But it’s been proven time and again: You don’t have to actually be negligent to get sued. PPIB has seen lawsuits against Design Professionals for many claims that were ultimately proven to be unfounded, yet their firms were sued and incurred significant legal fees to fight the allegations in court.
For more information, visit our Professional Practice page.