Understanding the Limits of Liability in Your Architecture/Engineering Firms Professional Liability Policy

It is important to know the ins and outs of the limits of liability in your policy to help to determine what limits make sense for your firm.

The limits of liability in the professional liability policy is the amount that is on the declarations page of your firm’s policy. The limit of liability is the maximum amount that the insurance company will pay out on a claim in a given policy period.

Your firm may have a limit of liability of $1,000,000 for each claim and an aggregate limit of liability of $2,000,000. The maximum the insurance company will pay out for each claim is $1,000,000 and the total for multiple claims per policy period is $2,000,000.

The limits of liability include claims expenses. For example, if your firm has an attorney that is working on your claim, that is considered an expense. If your firms limit of liability per claim is $1,000,000 and the claims expenses are $50,000 and the claim settlement is $250,000. The total amount for that claim is $300,000.

If your firm has a multiyear policy your limits will be reset for each year. The $1,000,000 isn’t for the two or three year policy term, it is for each policy year.

Typically, the deductible for your firm’s policy will be outside of the limits of liability. Be sure to read your firms policy to verify but most professional liability policies do not include the deductible in the total limits of liability.

As always, be sure to ready your firm’s policy to understand the limits of liability. If you have any questions with regards to limits of liability in your design firm policy please call or email your Professional Underwriters agent for assistance.