Architects can cover professional risks through insurance -min
Since stakes involved are high, in the absence of any indemnity insurance an architect would be crushed by the costs involved in a legal action. It may take only one legal action to destroy all that an architect might have struggled to build throughout his professional career. A professional indemnity insurance can safeguard the interest of an architect in the event of an error or omission
The architectural profession is changing and the pace of change is becoming faster in recent years, thanks to changing technology and also government policies. Our building codes are changing and even the urban regulations are getting modified which in turn have impact on architects professional responsibilities and liabilities. In fact, changes in last few years is more prolific than in last few decades.
For example, the new building plan approval process implemented by various states requires self-certification by the architects. By self-certifying the architect is taking over part of the responsibility of conforming to rules and laws from the applicant and at the same time sharing some of the work hitherto done by the government on himself. Remember, self-certification was a process invented in USA to circumvent the problem of insufficient staff or resources to handle incoming requests. Not just volume of work but also potential liability for architect will go up without commensurate increase in his fees. Further , there is a proposal to extend the process of Self Certification in the completion/occupation certificate procedure also so that the process of the start of building construction to its completion can be independently handled. An architect is thus entering an environment of high professional risk where the sword of uncertainty arising out of possible legal action will always be hanging over his head. He has to protect himself, his firms and his families from the risk of legal action and consequent damage claims. Since stakes involved are high, in the absence of any indemnity insurance an architect would be crushed by the costs involved in a legal action. It may take only one legal action to destroy all that an architect might have struggled to build throughout his professional career. A professional indemnity insurance can safeguard the interest of an architect in the event of an error or omission.
Or alternatively, allow engineers and engineering firms and contractors to assume a larger portion of the risk and save yourself from costly litigation. In this case, there will be gradual erosion of architectural roles in favor of the subcontractor and contractor, who will continue to take on an increasingly larger part of the technical design work. This trend will be dangerous for the profession and in due course the architecture profession itself will be at stake. If the trend is allowed to continue the architecture role will ultimately turn into a commodity rather than a service. Therefore, the conversation should be shifted from simply what should be done to how and when it should be done.
Professional indemnity insurance for architect covers him for compensation he has to pay to his clients or any other third parties caused by problems with his work, including compensatory damages and claimant’s legal costs awarded against him in relation to a covered claim. Usually terms and conditions offered by all the insurers are almost the same as insurance products have to be vetted by the IRDAI before being offered to the public. Such policies cover claims made against the insured, that is, architect, for loss arising due to actual or alleged legal liability provided that the claim arises out of an actual or alleged negligent act, error or omission in the rendering of or failure to render professional services by the insured or any person or entity for whom the insured is legally liable, within the geographical territory specified in the policy. The claim should be made during the Period of Insurance and reported to the Company in writing during the period of insurance or any applicable extended reporting period and the negligent act, error or omission in the rendering of or failure to render professional services first takes place on or after the retroactive date but before the expiration of the policy.
Recently Maharashtra government announced that all people who are involved with the construction of the building (including architects) will be held liable for any structural defects found in the building within ten years of its construction. In such cases, an occurrence policy may come to the rescue of the architect. An occurrence policy safeguards the policyholder from any event which occurs during the policy tenure, irrespective of the fact when the claim is filed.
Here a distinction is made between Claims made policies and Occurrence coverage. Claims made policies provide coverage for claims that are made during the period of time while a policy is in force. Claims made policies will provide coverage for as long as the insured maintains continuous coverage – the initial policy and subsequent renewals. Once a policy is cancelled or not renewed,coverage will not exist for claims that are not known or delivered to the insurer.On the other hand, Occurrence coverage is provided for claims stemming from an event when an insurance policy was in force even if the claim is not made for several years and the policy is no longer active. This is important for professionals like architects who give professional advice and services to physical structures that may have a problem years down the line. If it is found the problem with the structure was the result of the architect’s faulty work, the architect can be held liable for damages. With an occurrence based policy in place this would be covered under most circumstances. Though the cost of occurrence based policy is slightly more than the Claims made policy, it is always advisable to go for the former one considering the risk coverage it provides.
Cost of indemnity insurance policy depends on many factors such as the individuals or corporations total turnover, the number of staff employed, and the coverage options selected by the insured (e.g. Policy Limit, coverage options chosen, etc.). Usually, minimum total premium for professional indemnity providing a cover of Rs 10,00,000 will not be more than 0.1% of the sum covered. No doubt, cost of operation of the architects will go up due to premium payable on policies. Architects should be able to recover the same from the clients as they are recipients of the services.
Remember, advancement in technology and changes in law also show the profession a path for the future. They provide the potential to expand architects’ sphere of influence in the world by expanding upon their strengths. More pragmatic risk management and ability to concentrate on long term effects than short term consequences can help the profession to regain and maintain the unique position in built environment.