There will be times that as an Architect or Engineer you will have contract requirements for limits of liability that are higher than the current limits carried on your Professional Liability policy. The scenario; your client is requiring $2,000,000 per claim and $2,000,000 aggregate on your Professional Liability policy. Your firms current Professional Liability limits are $1,000,000 per claim and $1,000,000 aggregate. There are a few directions your firm can go in this situation.
First, there are cases that your firm will be able to negotiate on the limits of liability on your Professional Liability policy with your client. Secondly, you can ask your insurance agent if the carrier will increase the ‘practice’ policy limits, so essentially increasing the overall limits of your Professional Liability policy. The insurance company may be able to increase the overall limits of your policy to the $2,000,000 per claim and $2,000,000 aggregate as required by the client. The last option is to ask your agent if the carrier will offer a ‘project endorsement’ (also known as Specific Additional Limit Endorsement, SALE). From the previous example, the project endorsement amount would be $1,000,000 per claim and $1,000,000 aggregate for the specific project. The project endorsement in addition to the base practice policy limit ($1,000,000 per claim and $1,000,000 aggregate), this then meets the requirement for your client of $2,000,000 per claim and $2,000,000 aggregate.
A few items to keep in mind with a ‘project endorsement’. Some carriers may not allow a project endorsement on certain higher risk types of projects (condos). Also, carriers will limit the amount of ‘project endorsements’ on a policy, be sure your firm is aware of how many endorsements are allowed. Because carriers may limit the amount of ‘project endorsements’ on your policy it may be better to increased your practice policy overall limits instead.
In addition to the limitation on the amount of ‘project endorsements’ a carrier may allow, it may make more economic sense to increase the overall practice policy limits rather than adding a project endorsement. Most importantly be sure to discuss the options with your agent to make sure you are doing what works best for your firm.
