Architects & Engineers Errors & Omissions Insurance: Mitigate Risk
Architects & Engineers Errors & Omissions Insurance, Updating Procedures to Mitigate Risk
The foreclosure and mortgage crises over the last several years impacted the construction and real estate industries significantly, forcing many firms to shut down or significantly scale back. Now these sectors are coming back to life, with new home sales advancing in March helping the real estate industry complete the strongest quarter since 2008. In fact, purchases of single-family properties climbed 1.5% in March to a 417,000 annual pace, according to Commerce Department figures. In addition, housing starts climbed to a 1.04 million annual rate, the fastest since June 2008, the Commerce Department said.
Moreover, the Wall Street Journal recently indicated that the low levels of previously owned homes are helping home-builders which have witnessed double-digit increases in new home sales. These low levels have also helped send housing construction to a four-year high. According to Bloomberg, shares of home-builders such as Toll Brothers Inc. have rallied as record-low mortgage rates and rising household formation bolstered demand.
The commercial real estate market also shows signs of improvements albeit more moderate than on the residential side. Industrial space, for example, is moving toward the right direction with more projects being delivered.
This is good news for those professionals involved in property development and construction, including architects and engineers. Yet what’s especially critical during this uptick in development is making sure that the right insurance protection is in place in the event of a claim. Like all professionals, architects and engineers face exposures that can land them in litigation over alleged errors or omissions during the course of their work. This can include issues involving design error, regulation and building code compliance, construction defects (leaking roofs, structural problems), breach of contract, etc. Sometimes a lawsuit is even filed as a way of a client having to pay an invoice.
Dealing with a claim has a number of ramifications, including substantial legal defense costs whether the suit is justifiable or not, indemnification, negative publicity and reputational damage, disclosure of the firm’s proprietary information, lost time and productivity among others. A Professional Liability policy for Architects & Engineers is designed to provide protection against exposures faced by these professionals. In addition, to avoid misunderstandings and disputes, not only do contracts have to be drawn up with the advice of attorneys who specialize in Errors & Omissions Liability, but also a proactive risk management approach must be implemented to take into account the project and potential issues as it progresses. This includes:
- Establishing effective change orders procedures and putting in place effective change order recovery
- Updating contracts and reviewing those changes with clients to minimize risk disputes
- Implementing documentation procedures to ensure maximum fee and minimized risk
- Addressing the issue of construction defects
- Establishing a procedure for requests for added services
- Inclusion of policy for trade secrets – ownership of drawings
At Caitlin-Morgan, we can put together a combination of coverages specifically tailored to engineers and architects including Professional Liability insurance. We can also work with you and your clients on implementing effective risk management protocols. Please give us a call at 877.226.1027 for more information.