By Audrey Camp
Reprinted by permission of the National Society of Professional Engineers, 2016. Original article appeared in the March 2015 issue of PE Magazine.
Carefully selected and advantageously used, your broker can be as important to the management of your practice as your accountant or your attorney. Poorly selected and ill-equipped to advise you on the risks of professional practice, your broker may add little more of value to what you do than the cost of a few postage stamps at renewal time. The choice is yours.
— Dave Lakamp, founding member of a/e ProNet
For design professionals, finding the right insurance broker can present a challenge. You need someone with ample experience handling the professional liability needs of architects and engineers, and who offers a wealth of value-added services. Only if your broker has a comprehensive understanding of what you and your firm are all about can he or she be of real use to you. Lacking this knowledge can leave your firm vulnerable in a shifting insurance marketplace. A good specialist broker is committed to investing the necessary time and resources to your account. They find you the best coverage for the best price, and they save you the considerable time it would take for you to do so on your own.
What is professional liability insurance and why is it important?
A professional liability (errors and omissions) insurance policy provides coverage to defend and indemnify a professional firm against claims alleging negligent acts, errors, or omissions in the performance of professional services.
Any project can give rise to a claim. Even if your firm employs an excellent risk management strategy, it is vulnerable to being named in a lawsuit. The cost of that defense can mount fast, even if your firm wasn’t in the wrong. A professional liability policy covers the cost of defense.
In the event that your firm is found negligent, and that the firm’s negligence gave rise to the claim in question, your professional liability policy will cover your firm for the damages you’re legally obligated to pay, up to the policy limit. (Note: In most cases, defense costs erode the policy limit. Having adequate limits to cover both defense and indemnity is important.)
Why do I need a specialist insurance broker? Shouldn’t I be able to purchase my professional liability policy directly from an insurance company?
For architects and engineers, maintaining an active and adequate professional liability insurance policy is very often a legal requirement. And while a basic professional liability policy is straightforward enough for anyone to acquire, the insurance needs of design professionals are more complex than that.
The insurance industry is full of companies who want your business, but no two professional liability insurance carriers are exactly alike. Among the major differences are:
- the size of policy limits offered;
- whether multiyear policies are available;
- underwriting appetites for types of engineering services;
- and claims service.
Some companies require a 10-year loss history from design professionals, while others only require a five-year loss run. A specialist broker knows what the markets are doing, who the underwriters are, and how to present your firm in the best possible light. The cost of your insurance depends on this knowledge and attention to detail used on your behalf.
Here it should be noted that insurance companies often reward longevity. If your firm has been insured by a single company for a number of years and doesn’t have an especially adverse claims history, it’s likely that your premiums have been fair and endorsements (e.g., per project limit increases) have been easy to come by when needed. This does not mean that your current insurance company should be the only one to see your renewal application, however. A specialist broker understands the importance of approaching multiple markets periodically, either to reassure you that your policy is in the right hands or to grant you the opportunity to trade up.
Whether the market in a given year is hard or soft, a skilled professional liability insurance broker’s experience will benefit your firm. You need competent advice from a broker with the right perspective, both on your industry and the needs of your firm, as well as on the insurance marketplace as a whole.
What else sets specialist brokers apart from the pack? How do I know a good specialist broker when I see one?
We’ve already touched on the importance of receiving proactive guidance from your broker at renewal time, but a good specialist broker should be available to you and valuable to your firm all year long.
Beyond billings, professional liability premiums often suffer the largest impact from claims.
Avoiding claims means employing a risk management strategy, and a good specialist broker should be equipped to assist your firm in that endeavor. He or she will provide you with contract review services, either personally or via the insurance company who holds your current policy. Your broker should also be able to refer you to specialist attorneys and other risk management professionals.
In the event a potential claim looms before you, a specialist broker will be able to reduce the stress of the moment by putting you in touch with any preclaims assistance options through your insurance company. He or she will also be available to answer your questions about the process of reporting a claim. Finally, if you end up filing a claim, your broker’s long-standing relationships with claims adjusters at your insurance company may, again, come in handy.
How do I find a specialist broker? Where can I get a recommendation for a good one?
Naturally, we suggest starting your search with a/e ProNet. We are a national network of specialist brokers, meeting the insurance and risk management needs of design professionals since 1988. Because our members are independent—not obligated to any one insurance company—they are in the best position to compare policies. Our members do everything mentioned above, and they are supported in this endeavor by our website, which is full of relevant information and resources.
With a specialist broker, you can rest assured that you have an experienced advocate, both in relation to your bottom line and your overall exposure as a professional in a demanding and risky environment.
This article was written by Audrey Camp, Web & Social Media Consultant for a/e ProNet. It originally appeared in the March 2015 issue of PE Magazine. It is reprinted by permission of the National Society of Professional Engineers and is provided as a service of a/e ProNet. a/e ProNet is an national association of independent insurance brokers dedicated to serving the design profession since 1988.