Explaining ‘Limit of Liability’ on Professional Liability Policy for Architects and Engineers
There are some portions about the limits of liability in Professional Liability policies that your firm should be aware of.
Aggregate limit – What does an aggregate limit mean? This question comes up quite a bit about aggregate limits. For example, your firms limits of liability may be $1,000,000 per claim/$2,000,000 aggregate. The aggregate limit is the total limit paid for all claims in a policy period. If your firm had multiple claims in a policy year, the maximum aggregate limit the insurance company will pay is $2,000,000.
Increasing limits – What if my firm increases the limit of liability during the policy period? This happens from time to time and that your firm will need to increased limits for either a contract requirement or that your firm is doing larger projects. If your firm increases the limit during the policy period the projects that were worked on under the increased limit will be covered under the higher limit. If the project was prior to the increased limit the project would be covered under the lower limit.
Project endorsement – How does a project endorsement work? A project endorsement will provide increased limits for that specific project. For example, you may have your practice policy limit of $1,000,000 per claim/$2,000,000 aggregate. The project may require a $2,000,000 per claim limit. The insurance company will provide an endorsement for the additional $1,000,000 per claim limit. If there were to be a claim on the project the practice limits will respond first and then the project endorsement will respond.
Increasing limits for a project– Does it make more sense to increase limits for my practice or to have a project endorsement? This is something you should discuss with your agent. It will depend on the contract requiring the higher limits and potentially the cost associated with increasing the limits. Also, the insurance company may not be able to offer increased limits but may be able to offer a project endorsement or vice versa.
There are many questions that come up with it comes to limits of liability on a Professional Liability policy, please call or email your PUI Agent for assistance.