Our Design Professional firms are merging, how does this work with Professional Liability insurance? Merging firms can be tricky for many reasons involved but one major factor that is important for the merger is your Professional Liability policy.
If both merging firms are with the same carrier this makes the process much simpler. Typically the carrier will merge the policies with ease. However, that is not often the case. The insurance carriers for each design firm will ask for the application, current Professional Liability policy and loss runs of the other design firm. The other item the insurance companies may ask for is the merging agreement; this will tell them more about the liability and assets associated with the merge. From all of this information each insurance carrier will determine if they can offer prior acts coverage and what the change of premium may be to merge the policies. From there your firms can determine what makes the most sense on the Professional Liability merged policy.
Another scenario that may occur is if one of the firms (ABC Architecture) has claims and the insurance carrier that is going to insured the merged firms is not willing to provide a retroactive date for ABC Architecture then it is best to get the extended reporting period (ERP, or tail). This way then past projects from ABC Architecture will still be covered under the tail policy.
It is always best to check with both insurance carriers to find out what is going to make the most sense for the merging firms. Additionally, it is always helpful to provide as much information as possible to assist with the merging firms Professional Liability policy.
Your PUI agent is here to assist with the Professional Liability policies associated with the merge. Please call or email with any questions.