Professional Liability Limits of Liability for Architects/Engineers
Our agency is often asked what is a good limit of liability for our Professional Liability policy. This can be a challenging to answer because it is hard to predict what types and the amount of claims your firm might receive. There are few guidelines to determine the limits that are good for your firm.
The size of your firm’s projects is a good guideline. If your firm is doing ground up office building you may require higher limits of liability. On the other hand, if your firm is doing interiors for a home your firm may not need as high of limits of liability.
Another good guideline is the amount of projects your firm does in a year. If your firm only has a few projects per year, the higher limits of liability may not be necessary. However, if you have a full teams working on multiple projects a year you will need higher limits of liability.
The billings your firm is generating each year. If your firm has a large amount of billings then typically that means more projects and larger projects, therefore a larger limit of liability may be necessary.
Another factor in determining limits are the amounts that the insurance companies are able to offer based on their underwriting guidelines. They may not be able to offer high limits of liability for a smaller firm.
Contract requirements are also a driver of limits of liability on your firm’s Professional Liability policy. However, be careful with this requirement. Some contacts will require high limits of liability even though your firm’s involvement in the project are limited. For example, your client may require $5,000,000 and your firm’s billings for the project are $10,000. The contract requirement doesn’t correlate to the billings and your firms services on the project.
If you have questions on limits of liability on your design firms Professional Liability policy call or email your Professional Underwriters agent for assistance.