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Design Professionals Face Rising E&O Costs

of insurers surveyed raised Professional Liability rates for architects and engineers in 2013

With just 14 insurance providers making up 75 percent of the Professional Liability market for architects and engineers, these rate hikes likely affected quite a few design firms. And while the frequency of negligence claims appears to be trending downward, claim severity is on the rise. According to the survey reported in Insurance Journal, 64 percent of insurers paid at least one claim of $1 million or more, and 21 percent paid out $10 million or more on a single claim. How should you respond to these facts? Compare Professional Liability rates and policy highlights from as many providers as you can to ensure your clients get the deal that’s right for them.

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Important Insurance Policies for Engineers, Architects, and Design Professionals

As you already know, each industry has its own set of risks. Engineers, architects, and designers have several unique concerns of their own. Their intricate, precise work means they have to be especially cautious about professional liability lawsuits. Read on to review which policies can best protect these professionals from their common exposures.

Engineers, architects, and designers require a great deal of professional training to provide top-notch services. That expertise is a double-edged sword: it helps your clients grow their business, but it also exposes them to negligence claims if they fail to uphold certain industry standards. With these considerations in mind, your engineering and design clients may wish to carry:

Professional Liability / Errors & Omissions (E&O) Insurance

A miscalculation or design flaw could land your engineering, architecture, or designer client in the middle of a lawsuit over the financial losses their alleged mistake caused. Professional Liability, also called Errors and Omissions (E&O), pays your client's legal fees if a third-party claims their professional services or advice were incongruent with industry standards and resulted in economic losses. E and O can cover attorney fees, court costs, and judgments.

General Liability Insurance

General Liability is the cornerstone of most risk management plans. It protects your clients when a third party, such as a subcontractor or a customer, claims your client is responsible for their physical harm or property damage. For example, if your interior design client accidentally ruins artwork in their customer's home, GL Insurance covers litigation fees if the customer decides to sue.

Property Insurance / Business Owner's Policy (BOP)

Architects, engineers, and design professionals rely on their equipment to deliver their services. For instance, they may have office space, computers, and other business property that requires protection. Property Insurance pays to repair or replace these assets when they are damaged by a covered event, such as a fire or windstorm. You may want to see if your client qualifies for a Business Owner's Policy (BOP ), which bundles Property and General Liability Insurance together at a reduced rate.

Workers' Compensation Insurance

Because most states require employers to carry Workers' Compensation Insurance, your design clients may be obligated to purchase this coverage if they have even one employee. Workers' Comp covers their employees' medical expenses and replacement wages when an occupational injury keeps them from work. It can also include coverage for your client's legal fees if their injured employees sue for negligence.

Tips for Insuring Engineers, Architects, and Design Professionals

Small-business owners need to keep an eye on the bottom line. You can help your clients in architecture and engineering by telling them about:

Umbrella Insurance

If your client needs a certain amount of GL Insurance to meet a contractual requirement, suggest they look into Umbrella Insurance. This policy steps in when a claim exceeds another policy's limits. For example, if a customer sues your client for $1,500,000, but your client's General Liability limit is $1,000,000, they can make a claim on their Umbrella policy for the $500,000 difference. Keep in mind that an umbrella policy can't be applied to every policy (such as your client's Professional Liability coverage).

Business Owner's Policy (BOP)

You may want to see if your client qualifies for a Business Owner's Policy. Insurance carriers bundle Property and General Liability Insurance together in a BOP so they can offer basic coverage at a reduced rate.

Saving your clients money is a great way to become a trusted ally. But remember, a policy isn't a good deal if their assets aren't protected.

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