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As an architect, your clients trust you to design structures and buildings that are aesthetically pleasing as well as safe. Whether you are designing an office, restaurant, store, or home, your work can have a major impact on the psychological and financial well-being of your clients. Redesigning an office building or constructing a new home are large investments that people and companies undertake. If a mistake or miscalculation is made during the planning or design process, there can be serious consequences. A weak beam or poorly designed bridge can lead to physical injury. Often, these types of misfortunes can result in a lawsuit.
Because of the high risk factors associated with designing and constructing buildings, it is wise to consider business insurance for your architecture firm. Running a business in and of itself can open you and your employees up to a number of risks and liabilities. You might be interested in purchasing business insurance for your architecture firm if:
- You would like to insure your services and practice against claims of poor performance or errors in your work
- You are contractually obligated to obtain insurance
- You store sensitive customer or employee data
- You employ others
- You provide benefits to your employees like health insurance or retirement plans
- You work in an office that you lease or own
- You store valuable equipment or property in your office
- Customers or clients visit your office
What insurance coverage do I need as an architect?
Common insurance policies for an architecture firm often include plans that appeal to all businesses, like commercial property and general liability insurance. For companies operating in a field that requires certification like architecture, professional liability insurance is one of the most important coverages to obtain. Listed below are the major insurance coverages you should consider.
Professional Liability Insurance or Errors and Omissions (E&O) Insurance
Everybody makes mistakes, but in your work as an architect, those mistakes can have serious repercussions for your clients. Because of the complex and detailed nature of building design, even a small error or omission can be extremely costly. If your customers believe that the work you have performed was substandard or error-prone and ended up costing them financially, they can sue your firm for damages. Professional liability insurance can protect you from the financial repercussions of client lawsuits stemming from your firm’s professional mistakes. And, unlike most professional liability policies, professional liability insurance for architects typically covers third-party bodily injury and property damage.
- Errors/Negligence: Your firm designs a new 12-story office building that features an impressive curved facade filled with bright windows. Over the summer, several of the windows crack, and the entire office must be closed for three weeks for repairs. It turns out that due to the summer heat, the thermal expansion of the building caused the window to crack—something your firm didn’t consider in the design process.
- Misleading statements: You are hired by a major toy company to design their flagship store in downtown Manhattan. One of your architects estimates that it will cost the company $5 million in total to complete the 4-story building, but in reality the price winds up totaling nearly $8 million.
- Breach of duty: Your firm designs a new ballpark for the city. The design ends up not meeting some of the city’s codes, which delays the project and costs the city a substantial amount as they need to hire another firm to fix your errors.
- Performance: You are hired to design a new office building for a local software company. Due to various mishaps, your company will miss a critical deadline, and the software company must hire another firm to complete the unfinished work on time.
- Bodily injury and property damage: Your firm designs a new office building for a client, featuring a rooftop garden. During an especially heavy snowstorm, the rooftop garden collapses inward due to the weight of the snow, injuring occupants inside the building and damaging office furniture and equipment. It is determined that your design was at fault.
General Liability Insurance
General liability insurance can help protect you and your firm from the financial burden of a lawsuit that claims personal injury, client injury, or accidental property damage. It’s difficult to be certain how careful individuals will be when visiting job sites or when clients visit your office. General liability helps to safeguard your business against lawsuits from clients or third parties. The four types of coverage included in general liability insurance are: products & completed operations, property damage, bodily injury, and personal & advertising injury.
- Property damage: An architect from another firm that you are partnering with brings in a model of a building he has designed for another project. It is the only record of his work there. After meeting with him, you decide not to partner with him. On his way out, a colleague accidentally knocks the model to the ground. It crumbles in half, and is totally destroyed. The architect from the other firm wants to sue you for property damage.
- Bodily injury: Your team is working on a set of foam models, and you have a box of metal tools that you are using to cut into the foam. A woman who works in a nearby office stops in with her 8-year-old daughter to say hello to a friend. Her daughter trips on a power cord and falls on the box of metal tools, cutting herself severely and needing medical treatment. Her mother furiously decides to sue you for medical bills.
- Advertising injury: You launch an advertising campaign with your firm’s new slogan, “Architecture with people in mind.” Unfortunately, this slogan is actually the slogan of a larger, national architecture firm. You are sued for using their slogan without permission.
Commercial Property Insurance
Commercial property insurance protects your business property from damage caused by covered perils, typically including fire, windstorms, water damage from burst pipes, vandalism, and many other hazards. The included damage can happen to a building or item that you rent, lease, own, or have borrowed from someone else. Covered items include, but are not limited to: paintings, furniture, office equipment, and computers.
- Buildings: Your architecture firm values aesthetics, which is why 50% of the walls in your building are entirely made of glass. On Halloween, a group of teenage delinquents vandalizes the building, destroying six large glass panes.
- Contents: Your firm invests in a set of special ergonomic chairs. Each chair costs more than $1,000. A fire breaks out in the storage room where the chairs are stored, and the chairs are destroyed.
- Property of others: You want to start a new business, but your funds are limited. You borrow 20 drafting tables from another office to cut down on expenses. Unfortunately, a pipe bursts in your building, damaging the drafting tables.
Cyber Liability Insurance
As a modern architecture firm, much of your work will be done on computers, tablets, and smartphones, all connected to various networks. Your company likely stores sensitive and confidential data, including everything from personal employee information to proprietary client blueprints. That’s why it’s important to guard your business against the negative impact of any technological mishaps. Cyber liability insurance can protect you from the financial consequences of hacking, viruses, data breaches, and other cyber perils.
Cyber liability insurance also covers the costs of:
- Lawsuits against you for lost data
- Notifying customers and business partners about a data breach
- Marketing to restore your reputation
- Lost income
- Lost or damaged electronic data
- Your company has been working on a skyscraper project for the past two years. One of your colleagues accidentally downloads a virus that destroys his hard drive and also affects the other computers in your office system. Most of the files from the skyscraper project are compromised. You must hire a computer expert to recover what is left of them.
Workers’ Compensation Insurance
While general liability insurance can cover the cost of injury to a person who is not employed by your firm, workers’ compensation covers work-related injuries and illnesses for your own workers. Almost all states require some form of workers’ compensation if your company has employees, though requirements for coverage vary by state. Receiving workers’ compensation benefits means employees also agree not to file a personal lawsuit against your company in the event of an injury. Workers’ compensation is no-fault, which means that it pays benefits regardless of whether the employer or employee is at fault for the injury.
Workers’ compensation can cover the costs of:
- Funeral expenses
- Disability benefits
- Medical expenses
- Rehabilitation costs
- Death benefits
- A portion of lost wages
- One of your architects visits a worksite and is injured by a steel bar that falls from the ceiling. She must take three months off to recover in the hospital. Workers’ compensation benefits pays for her medical bills and compensates her for a portion of her lost wages.
Business Owner’s Policy
A business owner’s policy, also known as a “BOP,” combines property, general liability, and business income and extra expense insurance coverages for qualified small businesses. By combining these coverages together, your architecture firm can save on premiums, as there may be discounts available for bundled policies.
You have the privilege of creating beautiful spaces for your clients and their guests. However, you also face many risks through your professional work. If a client is unhappy with your work or suffers financial loss because of an error you make, you could be up against a financially devastating lawsuit. Simply running any business can also expose you to a host of liabilities. From a client getting injured on your property to a natural disaster damaging your offices, your business could encounter financial setbacks at any moment. That’s why it’s important to consider a comprehensive business insurance package. From professional liability insurance to general liability insurance, make sure you’ve obtained the right coverage for your architecture firm in order to protect your business and employees.