Understanding the Difference Between Additional Insured Coverage and Professional Liability Protection
Clients of architects, engineers, and other design professionals sometimes request to be named as an additional insured—or even a named insured—on their design firm’s professional liability insurance policy. The motivation is understandable: clients want to protect themselves against potential third-party claims and ensure that adequate insurance is available if a project-related dispute arises.
While this approach may be appropriate for certain types of insurance, it is generally not suitable for professional liability coverage. Under the CNA/Schinnerer Professional Liability Insurance Program, a design firm’s client cannot be added as an insured simply to obtain broader protection against third-party claims.
The reason comes down to the fundamental purpose of professional liability insurance: it is designed to cover liability arising from the professional services performed by the insured, not to provide general liability protection to a client.
Professional Liability Insurance Is Designed to Cover Professional Services
Professional liability insurance differs from other forms of insurance because its coverage is tied to the professional services the insured is qualified and insured to perform.
For example, an architect’s or engineer’s professional liability policy is intended to address claims alleging negligence, errors, or omissions in the rendering of covered professional services. The policy is designed around the professional responsibilities and risks assumed by the insured design firm.
A client, however, typically does not perform the professional services covered by the design firm’s policy. As a result, adding the client as an additional insured would not provide meaningful protection for claims arising from the client’s own activities or liabilities.
In other words, being named as an additional insured does not automatically extend professional liability coverage to risks that fall outside the policy’s intended scope.
The Potential Problem With the “Insured vs. Insured” Clause
Adding a client to a professional liability policy can create another concern: the policy’s “Insured vs. Insured” provision.
Professional liability policies may contain language restricting or excluding coverage for claims brought by one insured against another insured. The precise effect depends on the policy wording and applicable circumstances.
If a design firm’s client is added as an insured, a subsequent claim by that client against the design firm could trigger this provision. Rather than improving the client’s protection, the additional insured status could potentially compromise coverage for a claim that would otherwise be considered under the policy.
This is an important distinction. Insurance provisions that are intended to extend protection can sometimes have unintended consequences when applied to professional liability coverage.
Before agreeing to any request to add a client to a policy, design firms should carefully consider the relevant policy language and consult their insurance broker or carrier.
Why an Insured Cannot Simply Recover Against Itself
Another important consideration is how professional liability insurance responds to covered claims.
Unlike some insurance arrangements that provide benefits directly to an insured, professional liability insurance generally indemnifies the insured for covered liability or pays covered amounts on the insured’s behalf, subject to the policy’s terms, conditions, and limits.
If a client is also an insured under the design firm’s policy, the client may face a fundamental obstacle when seeking recovery for damages from the design firm: both parties are insured under the same policy.
The policy is intended to respond to covered liability arising from the insured design firm’s professional services. It is not intended to serve as a source of recovery for an insured seeking to collect damages from another insured when the policy’s terms prevent that recovery.
Consequently, naming a client as an insured does not necessarily give the client an additional avenue for compensation if it later alleges that the design firm’s professional negligence caused damage or loss.
An Additional Risk: The Client’s In-House Design Professionals
The potential complications can become even more significant when a client employs its own professional engineers, registered architects, or other licensed design professionals.
If the client were added as an insured under the design firm’s professional liability policy, the scope of coverage could potentially extend to professional activities performed by the client’s in-house design staff, depending on the policy’s wording and the circumstances.
This could create a substantial exposure for the design firm.
For example, a client might employ several engineers who work on a variety of projects, many of which have no connection to the design firm’s engagement. If a professional negligence claim were brought against one of those engineers, the design firm’s policy could potentially be called upon to provide a defense or indemnity if the policy extended coverage to those activities.
The resulting exposure could be significant because the design firm would be providing insurance protection for professional activities it neither performs nor controls.
This arrangement raises several concerns:
- Unintended exposure: The design firm’s policy could potentially be implicated by claims unrelated to the project for which the firm was retained.
- Limited control: The design firm may have no oversight of the client’s in-house professionals, their work, or their risk management practices.
- Potential claims against policy limits: Claims involving the client’s own professional staff could consume insurance resources intended to protect the design firm against claims arising from its own professional services.
Although this scenario may be less common, it illustrates why extending professional liability coverage to a client can create risks that go well beyond the original project.
Why Additional Insured Status May Be Appropriate for Other Policies
It is important to distinguish professional liability insurance from other types of coverage.
For example, it is common in many contractual arrangements for a client to request additional insured status under a design firm’s commercial general liability or automobile liability policy, where permitted by the applicable policy and endorsements.
These policies address different categories of risk. General liability insurance typically addresses certain bodily injury and property damage claims, while automobile liability insurance addresses covered liabilities arising from the use of vehicles. Additional insured provisions may be designed to extend protection to qualifying parties for specified liabilities.
Professional liability insurance, by contrast, focuses on liability arising from professional services. Its purpose and coverage structure are different, making the extension of insured status to a client potentially problematic.
A request that may be routine for general liability insurance should not automatically be treated as appropriate for professional liability insurance.
Each policy must be evaluated according to its intended purpose, coverage provisions, and exclusions.
What Should Design Firms and Their Clients Do Instead?
When a client seeks additional protection against claims arising from a design professional’s work, the better approach is to address the underlying risk directly rather than assume that adding the client to the professional liability policy will solve the problem.
Design firms and their clients should consider the following steps:
- Review the contractual insurance requirements. Confirm which policies and endorsements are required and whether those requirements are appropriate for the professional services being provided.
- Understand the scope of professional liability coverage. Review the policy wording with the firm’s insurance broker or carrier to determine who is insured and which professional activities are covered.
- Avoid unintended coverage extensions. Consider the implications of extending insured status to entities with their own professional staff or independent operations.
- Explore appropriate risk transfer mechanisms. Depending on the circumstances, contractual risk allocation, appropriate insurance requirements, and other project-specific protections may help address the client’s concerns without creating unintended professional liability exposures.
Any proposed alternative should be reviewed by qualified insurance and legal professionals to ensure that it is appropriate for the project and consistent with the relevant policy terms.
The Bottom Line
A client’s desire for protection against third-party claims is understandable, but being named as an insured under a design firm’s professional liability policy is not necessarily the right solution.
Professional liability insurance is designed to protect against covered claims arising from the insured firm’s professional services—not to provide general protection to its clients. Adding a client may offer little or no additional benefit, potentially complicate claims under an “Insured vs. Insured” provision, and, in some circumstances, expose the design firm’s policy to claims involving the client’s own professional staff.
For these reasons, while additional insured status may be appropriate and customary under certain general liability and automobile liability policies, it presents distinct challenges under professional liability insurance.
The key is to match the insurance protection to the risk being addressed. Design firms and their clients should work with their insurance professionals to ensure that contractual insurance requirements provide meaningful protection without inadvertently expanding professional liability exposures beyond their intended scope.
Note: This article is intended for general informational purposes only and is not legal advice or a determination of coverage under any particular insurance policy. Actual coverage depends on the applicable policy wording, endorsements, exclusions, and circumstances of the claim.
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