If you are a glutton for punishment, like me, perhaps you have tried reading your home owner’s policy or your auto policy.  Sometimes it appears that these policies are drafted to purposefully cloud what is covered and what is excluded.  Despite these complexities, you must understand the basic types of insurance.

Professional malpractice insurance is generally called errors and omissions (or E&O) insurance.  These policies are the basic first line of defense against claims of negligence or malpractice.  E&O policies are generally “claims made” insurance policies.  What this means is that the policy that is in place when a claim is made is the policy that defends the claim.  Naturally, the question of when a claim is actually made can become a legal battle, especially if the extent of your coverage has changed or you changed carriers at some point.  Notably, if you switch insurance carriers, you need to be careful to make sure that you have insurance for “prior acts” or else you run the risk of your new carrier saying that old project is not their problem.

Comprehensive general liability insurance (or CGL) typically covers claims of personal injury or property damage.  CGL policies are typically “occurrence” policies.  In that situation, the policy in place at the time of the occurrence is the policy that defends a claim.

CGL policies generally have complex exclusions from coverage.  They generally do not cover damages that are covered in an E&O policy.  Another important point is that they generally exclude coverage the actual work of contractors.  Contractors often struggle to find insurance dollars to settle problems.  This is an important factor for architects to understand when dealing with claims or litigation.

With some very limited exceptions, employers are required by statute to maintain workers compensation insurance.  This insurance covers workplace related injuries.  Notably, when claims are made under these policies, the claimant does not need to prove negligence to recover.  The recovery of damages is somewhat limited under these claims.

One by-product is that the availability of coverage for workers compensation often bars claims against other parties for negligence.  In some instances, I have successfully argued to a court that an architect cannot be sued for negligence when contractor or subcontractor employees are injured on a worksite.

These are just a sampling of available insurance.  In addition, business owners should become familiar with builder’s risk policies, project insurance policies, and umbrella coverage, and excess insurance.  As a business owner, it is important to understand the various insurance polices so you know what risks you are insured against.  As an architect, it is important to understand the various insurance policies of the parties on a project to understand the underlying motivations and risks of the parties to the process.

Timothy R. Hughes, Esq., is the principal of the Northern Virginia law firm of Hughes & Associates, P.L.L.C. He specializes in construction litigation, corporate and business related representation, and complex civil litigation. He may be reached at tim@hughesnassociates.com.

Printed with permission from AIA NOVA News July/August 2004

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