In any business, accidents can happen, and there is risk for lawsuits over injury or property damage. In the building design industry, you may host clients, partners, or other third parties at your offices, or you may visit clients at their homes, exposing you to liability risk. Commercial general liability insurance can help protect your business from these risks.

What is General Liability Insurance?

General Liability Insurance, also known as Commercial General Liability Insurance, protects your building design business financially from lawsuits and damages that arise while doing business. Since architects, engineers, and other building design professionals are interacting frequently with clients either at their own premises or their customers’ premises, General Liability Insurance is an important coverage to have. It pays for bodily injury and property damage that is unintentionally caused by your business in the course of your business operations.

General Liability Insurance is one of the most common types of insurance that businesses purchase. It can help protect your business financially if someone else is harmed by your business and sues your company. General Liability Insurance is third-party insurance, which means it covers you against claims by third-parties, which don’t include your business or your employees. Third parties may include customers, vendors, or landlords.

What does General Liability Insurance cover?

General Liability insurance typically covers property damage, bodily injury, products and completed operations, and personal and advertising injury. It also covers the costs of any legal defense or attorney’s fees incurred while defending against covered lawsuits.

Property Damage

General Liability Insurance will pay for the damages if your business or one of your employees causes property damage to another person or company’s property.

Examples:

• One of your engineers is providing a consultation at a client’s estate when he accidentally knocks over a valuable heirloom on display in the main hall.
• Your interior decorating firm is rearranging furniture at your client’s office and end up making deep scratches to the flooring of the office.
• Your architect makes a design error that causes the roof of a building project to collapse. Since it resulted in property damage, general liability will usually cover it.

General Liability Insurance does not provide coverage for damage to your own business property, only for damage to the property of others. For coverage of your business property, you would need commercial property insurance.

Another important exclusion to property damage coverage is property belonging to others that is under your care, custody, or control.

Example:

• Your design-build firm is hired to redesign and renovate a residential home. During the renovation process, your team unintentionally ruins the original carpeting in the house. Because the carpeting in the house would be considered in your care, custody, or control during the renovation, your liability insurance would not cover the damage.

To protect against such incidences, you’ll need an additional endorsement to your property damage insurance, often known as voluntary property damage. Voluntary property damage provides coverage for unintentional damage to others’ property while that property is under your care, custody, or control.

Bodily Injury

This aspect of General Liability Insurance covers your business if a third party who is not an employee suffers a bodily injury while on your business premises or in the course of your business operations.

Examples:

• A client who is visiting your engineering firm for a meeting trips over a misplaced storage box and suffers a concussion.
• Your design-build firm has been hired to build an office building. A small child wanders into the unsecured construction site and gets injured when a wooden beam falls on him. His parents sue for $1 million.
• One of your architects makes a mistake on a blueprint that causes a steel beam to collapse at a building site, injuring your client.

If your company is found liable for injury, bodily injury coverage will pay for damages to the other party. These damages might include the injured party’s medical expenses as well as lost income from not being able to work, pain and suffering, and funeral expenses.

Products & Completed Operations

Products liability covers your business if the products you sell are defective or have a faulty design and cause either bodily injury or property damage. It is important to note that products liability does not cover defects in products if they do not cause injury or damage. This coverage also excludes the costs of a recall.

Example:

• Your business designs and builds tiny houses for people who do not want to purchase larger homes. Some of your customers complain of experiencing eye and throat irritation and breaking out in rashes after moving into the tiny homes. It is discovered that these symptoms are due to elevated levels of formaldehyde in the homes, which your company is liable for.

Completed operations covers your business if there is property damage or bodily injury caused by work your company has completed for a client. This generally applies to design-build firms in which the company’s architects or engineers design the structure and the firm also manages the project construction.

Example:

• Your design-build firm designs a green building for the city and oversees the construction of it. Two months after its completion, the skylight collapses due to poor construction and injures two office workers.

Personal & Advertising Injury

Personal and advertising injury provides coverage for several non-physical reputational injuries that are specifically defined. While bodily injury and property damage cover unintentional acts, personal and advertising injury covers intentional acts that may have unintended consequences.

The areas covered by personal and advertising injury include:

False Arrest and Malicious Prosecution

• Example: The managing director of your engineering firm notices an employee of a competing firm in your offices. The director suspects this person is at your office to steal valuable customer information. Your director calls the police to arrest this person, accusing him of corporate espionage. The police investigate but discover no evidence of such theft. The competing firm sues your company for malicious prosecution.

Publications That Violate Privacy

This includes the use of a person’s name or likeness without permission or intrusion into someone’s private affairs. It also covers advertisements that show others in a false light or public disclosure of embarrassing private facts.

• Example: After your architectural firm designs a home for a celebrity, you use the celebrity’s image in your advertising materials without her permission.

Slander or Libel

• Example: Your interior design firm publishes a brochure that compares your design services to your local competitors. The brochure contains several false statements leading people to believe your competitors have no educational credentials in fine art. Your firm is sued for libel.

Copyright Infringement in Advertising

• Example: Your architecture firm creates a logo with the silhouette of a building that looks similar to the logo of a more established competitor. Your firm is sued for copyright infringement.

Legal Defense

If your building design company is sued for a cause covered by the insurance policy, General Liability Insurance will cover the costs of your legal defense, including attorney’s fees, expert witness fees, and court costs. These fees will be covered whether or not your company is found at fault.

These legal fees don’t count against your limits of coverage for most General Liability Policies. For example, if your policy has a limit of $1 million, and you are liable for a judgment of $1 million plus $250,000 in legal fees, the insurance company would pay for all $1.25 million in costs.

What are the key exclusions of General Liability Insurance?

There are several common exclusions to General Liability Insurance you should know about:

Your business property. Liability insurance only covers damage to the property of others. If one of the employees at your interior design firms slashes all the paintings displayed in your office on a bad day, you won’t be covered by General Liability. For coverage of your own property, you need commercial property insurance.

Damage caused intentionally. For example, during a heated argument at the client’s project site, an employee of yours throws a chair against the wall, damaging the client’s chair as well as the wall.

Liability resulting from crimes or fraud. An employee of your engineering firm has stolen tens of thousands of dollars from your company through check fraud. To cover this, you need commercial crime insurance.

Professional errors. For example, if one of the architects at your firm fails to turn in a blueprint on time and it delays the project, General Liability will not cover the financial losses. To cover this, you need professional liability insurance.

Employee injuries. For example, if one of your civil engineers gets injured at the project site, General Liability will not cover his injuries. For employee injuries, you should buy workers’ compensation insurance.

Employee discrimination lawsuits. For example, one of your employees sues for gender discrimination after not receiving a promotion. Employment practices liability insurance covers employment-related issues such as discrimination, harassment, and wrongful termination.

Automobile crashes. For example, one of your engineers rear ends another vehicle on the way to a client meeting. For auto coverage, you need commercial auto insurance.

Is General Liability Insurance required for building design professionals?

General Liability Insurance is not legally required in most cases, but many clients in the building design industry will require you to have General Liability Coverage before working with you. It is a foundational insurance policy that most businesses will carry.

What are the limits of General Liability Insurance?

The limit of insurance is the maximum that the insurance company will pay in claims. It is common in General Liability Policies for there to be separate limits “per occurrence” and “per year.” The “per occurrence” limit is the maximum that the insurer will pay for a single loss, while the “per year” limit is the maximum they will pay for the policy year.

Example:

• You purchase General Liability Insurance for your large engineering firm that has a $1 million per occurrence limit and $2 million per year limit. Your firm is sued for three bodily injury cases on your business property in one year. Each of the settlements ends up being $1 million, which is within the occurrence limit, but your insurance company will only pay out $2 million because of the per year limit. You must pay the additional $1 million settlement out of pocket.

Pricing and Quotes

AdvisorSmith found the average cost of General Liability Insurance for building design firms was $521 per year. This average cost was based on building design businesses with up to $500K in revenue for coverage of $1 million per occurrence and $2 million in aggregate.

Pricing for General Liability Insurance is based upon the unique risks your business faces. Insurers consider factors such as:

• Business size
• Industry
• Location
• Number of employees
• Claims history

Businesses with higher risks will have higher premiums than those deemed lower risk. For example, an design-build firm with a history of multiple claims will probably have higher liability premiums than one with relatively few past claims. Premiums also rise as you increase the limits of insurance. Different insurance companies have different models for rating risks, so it is worth comparing pricing across different insurers.

In order to get an accurate estimate on pricing, it’s best to get a quote from a reputable insurance company. Below we’ve highlighted a few of our trusted partners who offer General Liability Insurance:

Provider	General Liability	Business Owner's Policy	Product Liability
CoverageSmith	??	??	??
CoverWallet	??	??	??
Hiscox	??	??	??
Thimble	??	??	??
Embroker	??	??	??

Final Word

Throughout the normal course of your business operations, there will be damages that your business or your employees may cause. Whether it’s an accident that damages your client’s property, an injury in your office, a defective product that hurts someone, or a copyright infringement, General Liability Insurance offers financial protection for various liabilities arising from third-party property damage, bodily injury, and personal and advertising injury. It’s not mandated by law in most cases, but many clients in the building design industry will require it. General Liability Insurance is a foundational insurance coverage that most building design firms will carry.