Like any profession providing goods or services, architects need insurance to protect themselves against claims made by clients, members of the public or employees.
Mistakes are possible regardless of an architect’s experience and ability. If things go wrong on a project, it can cost a client thousands, if not even millions, in some cases. Therefore, claims of wrongdoing can also prove costly. Claims can be made against an architect for financial loss due to delays on a project from getting planning permission or adhering to building regulations, breach of duty, negligent advice, or even injury.
According to business insurance experts NimbleFins, even if there was no mistake or wrongdoing, architects professional indemnity insurance can be used to mount a defence against such an allegation.
The Architects Registration Board’s Architect’s Code lists the standards of conduct and practice for the profession. And by the terms of that code, all architects, either employed or sole traders, must have professional indemnity insurance. It is vital for architects working in the industry. The board even recommends the minimum cover of that insurance, of £250,000 for every claim.
There are then other types of insurance that should also be considered to provide the appropriate protection from any claims that could be made against the architect or the company.
Public liability insurance is needed by any professional dealing with members of the public, including clients and vendors. Allegations of damage to property as well as a personal injury can be made against architects, and public liability insurance will provide cover from that in the form of legal expenses and compensation payments.
Architects running their own companies are open to the same claims as other businesses face. Employers are therefore also required to have employer’s liability insurance to provide cover in the event of an employee suing.
Architects might also decide to consider insurance to cover business equipment and company cars as well as personal injury insurance.
What insurance does an architect need?
Firstly, the most critical type of insurance all architects need is professional indemnity insurance (PI). This insurance cover is compulsory for architects whether they are self-employed or working in practice. It is vital in protecting the architect from clients raising a claim if the work they did cost the client money. It will also cover legal costs in defending any claim as well as paying out compensation if found liable.
The Architect’s Registration Board recommends a minimum level of PI cover of £250,000 for each and every claim. Though in some cases, a higher amount will be needed.
Public liability insurance is also a vital type of insurance for architects to provide cover from allegations of property damage or injury. In addition, public liability insurance pays for legal costs as well as compensation if required.
There are other types of insurance that architects should also consider.
- Employer’s liability insurance – if an architect has employees such as office staff or other architects, then employer’s insurance is compulsory, just like for any business.
- Personal accident insurance.
- Business equipment insurance.
- Commercial vehicle insurance.
Do architects need professional indemnity insurance?
According to the ARB’s profession’s code of standards, architects are required to have sufficient professional indemnity insurance. And according to the board, the minimum for this insurance should be £250,000 per claim, though some may need a higher limit. The amount of cover needed varies depending on the size of the contracts as well as if you work alone or run a company.
Standard 8 of the Architect’s Code: standard of conduct, says: “Architects are expected to have adequate and appropriate insurance, and that it is sufficient to meet a claim. Insurance cover must include any work that is done away from the architect’s main practise or job. It is the architect’s responsibility, where employed, to ensure there is appropriate insurance in place. If asked, an architect must be able to provide evidence of a professional indemnity insurance policy.”
For a professional indemnity policy to provide the correct cover, it must be active both when an alleged mistake is made as well as when the claim is made against the policyholder. This is called claims-made cover and is the way professional indemnity insurance is sold. The insurance is arranged this way because mistakes may not be noticed until years after the work is done. Under claims-made cover, there is no protection from a claim made after the policy has been cancelled or expired.
If an architect decides to take a break from practising or retire, they still need to have some level of cover. This is called run-off cover and must last for six years. This is because claims can still be made up to six years after the work was carried out or up to three years after any wrongdoing was noticed.
Professional indemnity insurance can provide cover for claims made regarding:
- Mistakes in drawings or plans.
- Delays created by a failure to obtain the required planning permissions.
- Decisions made without consulting the client.
- Not using the agreed materials.
- Poor advice.
- Failing to foresee a potential issue.
- Personal injury.
Do architects need public liability insurance?
According to NimbleFins, architects that interact with the public, including clients and vendors, are at risk of claims of injury or property damage and therefore should have public liability insurance.
Public liability insurance offers protection for businesses against claims by clients or other members of the public. The cover will provide access to legal professionals to help defend against any claims, cover legal costs, and, if found liable, will cover compensation payments.
Public liability insurance will also cover medical bills and repairs.
It can be critical for businesses that could otherwise be left facing insurmountable costs from a claim.