Changing Your Design Firm’s Professional Liability Insurance

A new professional liability quote can look attractive while leaving an important question unanswered: what happens if a claim arrives tomorrow about a project your firm completed years ago?

For an architecture or engineering practice, the review needs to connect the proposed insurance to the firm’s history. Compare the work, the entities that performed it, the dates that matter and any disputes already developing. The premium and limit are part of that decision, but they cannot describe the whole transition.

Start the comparison while there is still time to resolve differences. Ask your insurance adviser to explain which documents establish continuity for past services and which questions remain open before you cancel or replace anything.

Check what the firm actually does

A carrier change is a useful time to describe the work again. Include design, inspections, construction observation, technical advice and services supplied through outside consultants. Compare that description with the proposed definition of professional services and any endorsements that narrow it. Tell the reviewer about new project types or responsibilities rather than assuming last year's application still describes the practice.

Keep general liability and professional liability in separate parts of the comparison. Travelers' explanation of the two coverages distinguishes premises, operations and product liability from allegations involving professional services. A general liability limit alone does not answer how an alleged design error will be handled. Have the adviser review the actual policies, including professional services exclusions. Neither a policy label nor the type of damage settles the coverage question.

Separate the project date from the claim date

Professional liability insurance often uses a claims made structure. The timing of a claim, the required notice to the insurer and any restrictions on earlier work can all matter. A project’s completion date does not, on its own, identify the policy that will respond. The District of Columbia insurance regulator’s small business guide explains the distinction between claims made and occurrence coverage and the role of prior acts protection.

Write down when the relevant services took place, when the firm first received a demand or allegation and when notice reached the insurer. Keep those dates separate. Do not label a complaint “not a claim” simply because no lawsuit has been filed. Have the adviser review it against the actual definition in the policy.

Read the reporting condition as well as the coverage heading. For example, Berkley's currently linked BDP0424001 specimen allows 120 days after a policy year to report claims first made during that year. Its optional extended reporting period separately addresses qualifying claims first made after termination and has a 30 day election and payment requirement. The form also requires prompt written reporting of a claim.

These are different deadlines serving different purposes. A window after expiration does not make every later claim eligible or give the firm permission to delay notice. Ask the reviewer to identify the deadline, recipient and required information in your actual policy. The Berkley example is a specimen, not a statement of your terms or an offer from RAM.

Keep earlier demands and reporting acknowledgments with that timeline. Under the Berkley specimen, claims arising from the same or related wrongful acts can be treated as one claim assigned to the earliest applicable policy year. A later letter does not, by itself, settle which year's insurance applies. Ask the reviewer to evaluate the connection under both policies rather than comparing only the newest demand.

Ask what the new policy does with earlier work

A retroactive date is an important starting point when the policy uses one. Moving that date forward may remove earlier work from the proposed protection. “Full prior acts” also needs to be understood in the context of the actual form and endorsements; it is not a promise that every historical problem is covered.

For a concrete illustration, the Beazley A&E Media Tech form, March 2016 edition connects its professional liability coverage to acts on or after a retroactive date. It separately addresses prior knowledge and matters previously notified under other insurance. Those are different tests. Preserving one date does not answer every continuity question.

Put the existing and proposed wording together and ask the reviewer to identify any change affecting earlier services. Request a written explanation tied to the relevant page or endorsement. If the quote is silent, leave the issue open rather than carrying the old date into your comparison spreadsheet as an assumption.

The practical question is specific: “How does this proposal treat our work before its start date, including work under our former business names?” That gives the reviewer something more useful to resolve than a general request for equivalent coverage.

Flag services performed while employed by another business separately from services under a predecessor entity. Ask how the proposed policy treats each history instead of assuming they are interchangeable.

Bring unresolved project problems into the review

Changing insurers is not a way to start over with a known dispute. Tell the adviser about allegations, demands, unresolved project concerns and previous notifications. Let the applicable policy and qualified reviewers determine what must be reported, to whom and by when.

Underwriting questions can reach beyond filed lawsuits. The Hanover’s published small firm application, January 2018 edition asks about potential claim circumstances, fee disputes and prior reports, as well as the applicant’s predecessors. It also asks for current policy and retroactive date information. The application is an example of the information an insurer may request, not a universal questionnaire or a statement of your coverage.

Assign someone who knows the projects to gather accurate answers. An administrator may know the renewal date without knowing about a demand received by a project manager. Resolve that information gap before a principal signs an application. Keep the final answers and supporting records together, and report material changes as required by the application through the policy’s inception date.

For an active problem, follow the current policy’s notice instructions promptly. Do not assume that telling your adviser completes that step. Travelers' September 2011 claim supplement warns that disclosing a known matter to the proposed insurer does not remove the need to report it to the current insurer within the applicable reporting period. Confirm the required recipient and keep the acknowledgment. Do not postpone the issue until the renewal meeting. Berkley Design Professional’s claim prevention guidance recommends early contact and cautions against admitting liability, paying or settling without the appropriate claims input. Avoid promising a client that insurance will pay. A report starts a review; it does not establish that the insurer has accepted coverage.

Understand what an extended reporting period changes

An extended reporting period, often called a tail, deals with reporting after a policy ends under its stated terms. It does not simply turn expired insurance into a fresh policy for new work. Ask which claims and acts qualify, when the extension starts and ends, what must be elected and paid, and which limits remain available.

The CNA 2020 specimen linked by Victor illustrates why the details deserve attention. It distinguishes automatic, optional and nonpracticing extensions, with different conditions. Its automatic and optional extensions use the remaining limit from the final policy year rather than adding a new limit. That is one form, not a rule for every insurer or extension.

Tail coverage and prior acts coverage solve different timing problems. Do not assume you need both in every change of carrier, or that one is always an adequate substitute for the other. Ask how the old policy, proposed policy and any extension would fit together. Get the proposed terms before making the cancellation decision, including any election deadline that could expire while you are still comparing options.

Include the consultants whose work you rely on

Identify who hired each outside design consultant and what that consultant agreed to do. Include the agreements and available insurance evidence in the transition review. Ask how the proposed policy addresses your firm's liability for another professional's work and whether that professional independently qualifies as an insured. Those are separate questions.

Berkley's guidance on subconsultant relationships recommends coordinating the prime agreement with consultant agreements and matching insurance requirements to the services. It is practice guidance, not a determination of liability for your project. Have counsel review obligations that do not align, including responsibility for design coordination, claims and continuing insurance. Do not assume hiring an insured consultant removes your firm's own exposure.

Retirement and a change of entity deserve separate attention

Closing the office does not prevent a later allegation about earlier services. AXA XL’s guidance for retiring design professionals recommends planning with both an insurance broker and legal counsel, including the obligations that remain after practice ends. The appropriate duration depends on the facts, contracts and applicable law. There is no single number of years that this article can prescribe for every firm.

Explain what “retiring” will actually mean. Will anyone finish open projects, answer technical questions, sign drawings, provide unpaid advice or accept occasional paid work? Bring those plans into the discussion rather than assuming a retirement extension permits them.

An insurer may also offer a separate runoff product with its own eligibility rules. Berkley’s May 2022 overview describes a product distinct from an extended reporting period. Its conditions and limits should not be generalized to other carriers. Ask what is available for the particular practice, and whether ongoing services change the answer.

If the firm is merging, selling assets, changing ownership or using a new legal entity, prepare a history of the entities and work involved. Identify which organization signed each project agreement. Request an explicit review of predecessor work and the people or organizations that qualify as insureds. Do not treat a new logo or business name as evidence that the insurance follows every old obligation. Ask whether the insurer must consent to transferring the policy; a business acquisition and an insurance assignment are separate matters.

Read the contracts before choosing the length of protection

Project agreements can impose obligations that outlast the work. A requirement to maintain insurance is not itself insurance coverage, and a policy does not automatically satisfy a contract merely because the limit matches.

For example, Florida International University’s March 2022 requirements for architects and engineers address continued claims made insurance after completion, retroactive dates and an extended reporting alternative in specified circumstances. That is one owner’s requirement for its projects, not a statewide rule for all design firms.

Look beyond the insurance clause. A promise to guarantee a result or pay every change order can create a different obligation from responsibility for negligent professional services. The CNA specimen's contractual liability exclusion expressly addresses warranties, guarantees and assumed liability, with an exception for liability that would exist without the contract. Have counsel and the insurance adviser review the exact promise and applicable exclusions before treating it as insured.

A certificate cannot resolve that mismatch. Florida's Department of Financial Services explains that evidence of coverage must not differ from the underlying insurance contract. Confirm what evidence needs updating after the terms are settled.

Gather the actual agreements still relevant to the practice. Have counsel identify continuing contractual obligations and have the insurance adviser compare them with available terms. Record any mismatch for the person authorized to decide how it will be addressed. Do not turn an unanswered contract question into an insurance assurance to a client.

Leave the next person a usable record

Keep a transition file containing the expiring policy, proposed wording, endorsements, completed application, relevant correspondence and the final decision. Identify the person responsible for resolving each open question. Record the effective time and date of any confirmed change, rather than relying on an informal expectation that a quote will become coverage.

Retain the project records needed to explain earlier work. AIA’s risk management guidance, republished in 2024 from earlier professional practice material, recommends organized documents, a chronology and an identified contact when responding to a claim. Plan access to those records even if the project manager leaves or the firm closes. Ask counsel to establish an appropriate retention policy.

Compare the treatment of defense costs and the deductible as well. The CNA base specimen includes claim expenses within the liability limit, while its current program page describes outside limit options for eligible firms. Ask which wording is actually proposed and what limits remain available. Victor’s explanation of its outside limit option includes a separate claim expense allowance. Ask for the amount of that allowance and what happens after it is exhausted; do not assume outside limit means unlimited defense. Matching the headline limit does not establish that two proposals handle defense costs alike.

Also distinguish how defense affects the limit from how it affects your deductible. AXA XL’s US claims guide describes a Dollar One Defense option under which defense is paid up to the applicable limit, while the deductible applies only to a settlement or judgment. That does not mean defense sits outside the limit. Ask which arrangement your proposed policy actually contains.

A useful final review should make it clear what happens to past services, how existing concerns have been handled, what protection is proposed for future work and what remains unresolved. Keep those answers alongside the premium comparison.

Bring RAM your current policy, proposed renewal or replacement terms, firm history and the questions you cannot resolve. Contact RAM Risk Group to discuss the review and an appropriate way to share those records.

Policy wording governs. This article provides general educational information, not a coverage determination or legal opinion. Actual coverage depends on the policy, endorsements, exclusions, limits, facts and applicable law. Published carrier forms are examples and do not establish RAM’s appointment with a carrier or the availability of a particular product. Consult qualified insurance and legal advisers about your circumstances.