Architects need to consider a variety of types of insurance they may need to protect their business against claims. The type of insurance needed will depend on whether they are a sole trader or run a practice.
All architects are required to have professional indemnity insurance (PI) under standard 8 of the Architects Code. The Architects Registration Board lays down the standards of conduct in the code, including the requirement of PI insurance. There is also a recommended minimum of £250,000 cover for each claim.
Standard 8 says: “You are required to have adequate insurance, which you should ensure is sufficient to meet a claim. As part of that insurance, you are expected to keep a minimum level of cover, including run-off cover.
“You must ensure your insurance extends to work carried out away from your normal employment or practice.
“If you are working for a practice, you are required to ensure, as far as possible, that your employer provides insurance cover.
“If asked, you are required to provide evidence of your professional indemnity insurance.”
It is important to note that according to NimbleFins, architect PI insurance is sold on a claims-made basis. This means to have cover against a claim, and the policy must have been active at the time the mistake/wrongdoing was made as well as when the claim is made. This is because claims can be brought up to six years after an event.
Due to this type of insurance cover, there is a need for something called run-off cover. This provides cover if an architect retires or stops working.
Beyond the PI insurance, architects must consider what other claims can be made against them in the same way as other businesses.
Another critical insurance for architects is public liability insurance. This sort of cover is a must-have for any profession dealing with members of the public. Public liability insurance protects from claims of property damage or personal injury. In addition, it provides access to experts in case of a claim as well as covering legal costs and compensation payments if an architect is found at fault, not forgetting the legal costs of defending even if the architect has done nothing wrong.
For employers, another cover to consider looking at employers’ insurance.
But there is also personal accident insurance, business contents insurance, commercial vehicle insurance, and depending on the business, other business insurances could be needed.
Do I need insurance as a self-employed architect?
Self-employed architects, or sole traders, face the same professional risks as those running a practice or who are employed so need insurance just the same.
All architects, regardless of how they work, must have professional indemnity insurance. As set out in the Architects Code, this insurance must be in place and be adequate to meet a claim. The Architects Registration Board also recommends that the cover should be at least £250,000 for every claim.
In the same way, self-employed architects should also consider vital public liability insurance, which will protect against claims of injury or damage to property. Even if a claim is unfounded, the insurance cover will provide access to experts as well as funding legal costs to defend the allegation.
Even the very best architects can make mistakes, which can ultimately prove very costly to clients. Claims can therefore also be very high, and having insurance is the only way to provide a level of cover against such occurrences, or even just fighting against allegations of wrongdoing.
Just like any professional who is paid for their advice or a service, there is a risk. However, professional indemnity insurance for architects can provide cover for:
- Errors in drawings and plans.
- Failing to obtain planning permissions, which in turn causes delays.
- Making a decision without first consulting the client.
- Using different materials than what was agreed.
- Poor advice.
- Failing to anticipate possible issues.
- Personal injury.
The cost of professional indemnity insurance and public liability insurance for architects can range. The size of the business, such as if it is a self-employed architect or a company, and the types of work undertaken are factors in the costs.
Does an architect LLP need run-off insurance?
All architects, including those working in limited liability partnerships, require run-off insurance when they retire or otherwise stop working as an architect.
Due to the nature of the professional indemnity policies, which are sold on a claims-made basis, the cover must last for a minimum length of time after a project has been completed. Therefore, even if the architect has retired or stopped practising, a claim can still be made, and if the policy is no longer active, there is no cover against it.
In a claims-made insurance policy, the insurance must be in place when the alleged mistake or fault happened as well as when the claim is made.
Run-off provides that extra protection after a policy has expired or been cancelled. For example, any architect who stops practising should have run-off professional indemnity insurance for six years (five years in Scotland). That is because a claim can still be made up to six years after the work was done and up to three years after a problem has been noticed.