Do architects need professional indemnity insurance?
All architects need professional indemnity insurance. It’s more than a regulatory requirement from the architect’s registration board (ARB), it’s an essential piece of protection for the architect, the practice and the client. Even the best architects make the occasional mistake. And even if you’ve done nothing wrong it’s entirely possible to end up on the wrong end of a claim. Professional indemnity insurance provides financial protection for architects go help them to either defend allegations of negligence or to put things right. Professional indemnity insurance protects your practice and your customer.
What kind of PI insurance should architects have?
The architect’s registration board (ARB) requires all architects to carry at least £250,000 of professional indemnity insurance, however, most architects opt to buy a higher limit of cover that is in line with the value of the projects that they design and project manage. There are lots of different types of professional indemnity policy, and each insurer has its own special architects policy that’s designed specifically to meet the requirements of the ARB. When choosing an insurer architects should be careful to ensure that the insurance company has a good financial rating and is at least rated as “A” by Standard and Poor.
Are architects required to have PI insurance?
It’s a regulatory requirement for every architect to have professional indemnity insurance. The architect’s registration board (ARB) requires every architect to have at least £250,000 worth of professional indemnity insurance. Professional indemnity insurance is important for architects because it protects their business and also their clients. Many clients will be trusting you not just with their money, but their hopes and dreams too. Chances are there be spending their life savings on the projects that you work on and it is only fair that you protect their investment against the possibility of a mistake or error or omission is made.
How much does PI insurance for architects cost?
The cost of professional indemnity insurance for architects depends on a number of different factors. First of all, because professional indemnity insurance covers all of the work that you have done in the past the premium will be based on the number of years that you have been trading. This isn’t just about how experienced you are but also how many projects you have done which might throw up a problem in the future. Insurers will also want to know what sort of projects you are doing whether these are commercial or residential and what sort of value they represent. Higher value projects will result in you paying a higher value premium. Insurers will want to know how many people you employ and how experienced they are? Does your practice invest in training? Do you work just in the UK or do you do projects abroad too? And have you had any claims? And of course, the level of cover that you require will also be a factor. All of these factors will influence the premium that you pay for your architects professional indemnity insurance.
How is the indemnity insurance premium calculated for architects?
When underwriters think about calculating and professional indemnity insurance premium for an architects insurance policy they will take a number of factors into account. They will want to know how long the architect has been trading, and how many people are employed by the practice. They’ll ask if you have had any claims, the value of the projects that you are undertaking and your turnover. They’ll be different premiums charged for architects that work on commercial projects compared to those who work purely in the residential market. Architects who undertake work overseas invariably pay more for their insurance than architects who work just on UK projects. Underwriters are always interested in things which make a risk better so if you do a lot of training or you have specialist knowledge in a certain area then that’s always going to be a plus for getting your premium down.
How much PI cover do architects need?
All architects need professional indemnity insurance cover. The architect’s registration board sets a minimum amount of cover that all architects must buy. This is currently £250,000. Buying the amount of cover that the regulator suggests as a minimum is never a good plan. Almost all architects practices will invariably need greater cover than the minimum amount. Architects need to consider the type of work that they do and the value of the projects that they are involved in. It is important to consider the worst that could happen if the project goes wrong. This might not just involve the project that you are working on for your client – you might need to consider the impact that that project could have on the surrounding buildings and environment too. For example, if the project is near to the London Underground a mistake could have a much wider impact on the surrounding area than it costs to put right. For this reason, you might need to buy professional indemnity insurance to a higher level than the total value of the project that you work on.
What’s usually covered by architects PI insurance?
An Architects professional indemnity insurance policy protects the practice against claims arising from errors and omissions that are made by the architect. This could be something quite straightforward like a decimal point being in the wrong place on the drawing resulting in the building being constructed incorrectly. But the professional indemnity policy doesn’t just cover the professional mistakes that you make in the course of designing and drawing incredible buildings and living spaces. It also covers things that you might do accidentally in the course of your practice, for example, an inadvertent libel, slander, or even allegations of breach of copyright. It can also cover liabilities arising from the loss of deeds and documents. Professional indemnity insurance covers the cost of defending a claim made against you which arises from professional negligence. It also covers compensation payments which are awarded against you if a client suffered a financial loss as a result of an error that you have made.
What is ‘claims made’ insurance?
There are two types of protection that you can buy from an insurance company – Claims made or claims occurring. A claims-made policy basis is the more unusual but it is typically used by insurers when you buy a professional indemnity policy. A claims-made policy essentially requires you to have cover in place at the time you do the work, The cover needs to continue and be renewed, and it needs to be in existence at the point that a claim is made against you where the discovery of a possible claim is made. The claim will always be dealt with by the policy that is current at the time that the error is discovered or the claim is made against the architect’s practice. It is not dealt with by the policy which was in place when the work which causes the complaint was done. For this reason, all professional indemnity policies which are on a claims-made basis also have a retroactive date. This provides the starting point from which the current insurer will consider claims from.
PI for Architects – Example Claims
Architects can be exposed to a wide range of claims, these can include (but are not limited to):-
- Errors in the production of drawings, schedules, specifications or quantities of materials
- An incorrect assessment of a clients requirements, particularly with regard to timescales or financial limits imposed by a contract
- Inadequate supervision of contractors or other professionals
- Incorrect assessment or understanding of a clients requirements, timescales or financial limitations.
- Errors in the production of drawings, schedules or negligent design
- Negligent site layout
- Negligent survey report
- Failure to adequately specify
- Failure to make or renew planning permission requests within the given timescales