As an architect or engineer, you may be asked to sign a contract that has a requirement of adding the Owner (or Contractor, in a design-build project) to your own insurance as an “additional insured”. This is usually a fall out of the fact that the Owner is treating you like a contractor and using “stock” contract language. It is not appropriate, nor sometimes even possible, to add the Owner to your professional liability policy.
This is beacuse professional liability insurance only provides coverage for “professional services”. That is, if it is even possible to buy such coverage, it won’t work to avoid any risks the Owner is seeking to avoid, because the Owner is not providing licensed architectural or engineering services on the Project.
In fact, because of the way professional liability policies are generally written, naming the project Owner as an additional insured essentially voids any coverage for the owner for your Firm’s design errors & omissions.
What should you do with a stubborn Owner who insists he wants to be an additional insured under your E&O policy? Explain the facts to him, and point out he is risking voiding coverage all together. Tell him to call me, or point out this post to him. Also, several insurance brokers, agents, and companies have simple one or two page information sheets that you can provide to the Owner to help with his education.
Remember, having an “Additional Insured” in an Errors & Omissions policy is a true exercise in futility. It may not be what the Owner wants to hear, but such is life!
Question time: have you ever been asked to add an Owner to your E&O insurance? How did you handle it? Share in the comments section, below.
And if you haven’t already, be sure to download your free white paper on the 7 Critical Mistakes that Architects & Engineers make– it’s in the box on the top right hand side of the blog.
I enjoyed your post. As a general contractor who uses standard form contracts I often hear similar complaints from engineers and designers regarding our insurance requirements. I agree that E&O policies are fundamentally different than other types of liability policies. Often times we are asked by designers to completely delete any defend obligation or additional insured language. While that might be appropriate for E&O, we still want our designers to carry commercial general liability and those policies will defend and name upstream parties as additional insured. It is important for upstream parties to know what they are asking for. But I have spent countless hours with subcontractors and their insurance brokers trying to work though these issues.
David:
Thanks for your comments. Yes, CGL and other insurance is a completely different ball game, and having additional insured language on those policies is actually something that can be done and can be enforceable.
I have this conversation about once a month. Owners tend to back off their request when I explain the insured v. insured exclusion. Developers are simply not educated on professional liability policies, so I don’t mind taking a few minutes to provide them with a brief education!
Thanks Sarah for your comments. I agree– once owners know that they will actually lose coverage it can quickly change the conversation around! Is there a particular white paper or insurance form you share with them?