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Architects help project owners move from ideas to actual buildings. While others actually construct the building, the architect provides the picture, model and details of how it is to be built. However, once they hand off the plans, architects usually play only a small role in the actual construction. The contractor works for the project owner, not the architect. If the project owner agrees to alterations based on the contractor’s advice, the building could be changed in ways the architect did not anticipate.
Unfortunately, even when changes over which architects have no control occur, they may still be sued and the costs of defending such suits can be very expensive. |
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Here is a possible scenario:
Church Planners, LLC, designed plans for Kelleysboro Community Church. The church’s fundraising campaign was very successful. With pledges in hand, it arranged for a local general contractor to do the work. When it was approximately 60% complete, a factory in town closed down. Many of the members still wanted to meet their pledges but could not. Kelleysboro decided to halt construction until the flow of money pledged resumed. It took three years to accumulate the funds to complete the project. The congregation's joy in moving in and having Christmas Eve services was replaced by worry and concern when the air conditioning needed in the spring caused odors and people reported headaches after being in the building for as little as an hour. An expert brought in to evaluate the situation found mold throughout the structure. Kelleysboro asked Church Planners, LLC, and the contractors that worked on the project to fix the problem, but each contended that the mold was due to the delay in construction. Because the situation could not be resolved amicably, the parties found themselves in court.
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The insurance marketplace is very open to architects and engineers (A&E) professional liability coverage. According to Christian T. Hamlin, RPLU, broker – professional & management lines at Burns & Wilcox, “Volatility in the market seems to be inviting new programs and fresh faces to the field every quarter. This is not necessarily a good thing, as a specialist broker’s job is to place risks with stable, long-term programs whenever possible.”
Michelle A. Duffett, executive vice president of Insight Insurance Services, Inc., adds, “There are about 40 companies, including Lloyd’s syndicates, that offer this line of coverage. Major writers include CNA, through Victor O. Schinnerer; XL; Argo Group, through Insight Insurance Services; HCC, through RA&MCO Insurance Services, and Lexington.”
Tony Armor, commercial underwriter at Roush Insurance Services, Inc., includes Chubb, Evanston Insurance Company, James River Insurance Company, US Liability, and Western World Insurance Company on his list of carriers that write this coverage. He comments that, while coverage is written with both admitted and nonadmitted markets, most of the accounts he writes are on nonadmitted paper. He adds, “Some admitted carriers' pricing may be lower but they have little flexibility with regard to policy forms, endorsements and coverage enhancements."
There are reasons a company chooses to write on nonadmitted paper. John Clarke, senior vice president of James River Insurance Company, explains that his company writes only on a nonadmitted basis. “Factors that typically influence whether business is written on an admitted versus nonadmitted basis are the nature of projects, professional disciplines, the state or venue, and the account’s loss history. For example, a firm engaged in structural engineering for high-end homes in Florida will likely find very few carriers willing to entertain writing it on an admitted basis.” Mr. Hamlin explains that the fact that more A&E professional liability is written on a nonadmitted basis in California speaks to both the litigious nature of the environment and to pricing volatility exacerbated by the recession.
According to Kate Frownfelter, senior vice president and program manager, construction industry group at Victor O. Schinnerer & Co., Inc., the most challenging operations to underwrite are the structural classes of engineering because “By the time a structural issue is discovered, it’s usually necessary to do a tear-out and rebuild, and there is a fundamental problem with the foundation or the overall structure.” However, she adds, “For both condominium projects and single-family homes, claims are being generated as a result of the quality of craftsmanship as well as design."
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