Setting appropriate requirements for professional liability insurance for planners and consultants
Mar 20, 2018
Article by Itzick Simon
Professional liability insurance for the engineering, architecture and planning industries is designed to provide insurance coverage to the professional against claims related to the breach of his professional duty, a mistake or a good faith omission.
The interest of the developer in a construction project of any type, or tenants in a TAMA 38 project, is that the coverage conditions be adequate and that there will be a 'deep pocket' that will ensure the possibility of being reimbursed by the professional who violated his professional duty or due to his mistake, act or omission.
Often times, the scope of insurance coverage in the planner's professional liability policy is disregarded, marginalized, not handled properly or not handled at all, and if, God forbid, something dramatic happens - then a 'dance of demons' begins.
Let's start with what's happening in reality.
Professional liability insurance in general, and in the engineering, architecture and planning industries in particular, is a burgeoning field in which if the client (the person commissioning the work) does not specify in the contract with the planner an insurance specification with a high level of requirements for the limits and conditions of insurance coverage, but rather leaves the determination of the wording and extensions of the policy to the insurance company's default - the result is often a policy of an inferior level and with very low insurance amounts in relation to the risk. In three words: a policy that is inadequate.
In general, and without generalizing, it can be determined that a significant percentage of professionals in the field have inadequate insurance coverage, to put it mildly.
A corollary of the above is that the client must set a high bar for his requirements, and to the extent possible, he must pressure the professionals to provide adequate insurance coverage (if only for the specific project). Otherwise, the level of insurance coverage will often be low.
Objectives of confirming the existence of the signed insurance
Following a request from our clients for a signed insurance confirmation document from the planner/consultant's insurance company, we are often sent the planner/consultant's insurance policies for review. In these cases - I reject the document - and request the signed insurance confirmation form, as the confirmation serves important purposes:
1. Verifying the existence of the insurance - clearly and unambiguously.
2. Cancellation of exceptions to coverage, determination of insurance requirements, and conditions for expanded insurance coverage.
3. Arranging the status of the client vis-à-vis the planner/consultant's insurance company.
4. The insurance certificate overrides the policy - its possession by the ordering party is important and advantageous.
_______________________________________________________________
Regulating the status of the client regarding the planner/consultant's insurance:
We emphasize again that the purpose of insurance approval is not only to verify the
The mere existence of insurance, but also to regulate the status of the person ordering the work
Article by Itzick Simon
Professional liability insurance for the engineering, architecture and planning industries is designed to provide insurance coverage to the professional against claims related to the breach of his professional duty, a mistake or a good faith omission.
The interest of the developer in a construction project of any type, or tenants in a TAMA 38 project, is that the coverage conditions be adequate and that there will be a 'deep pocket' that will ensure the possibility of being reimbursed by the professional who violated his professional duty or due to his mistake, act or omission.
Often times, the scope of insurance coverage in the planner's professional liability policy is disregarded, marginalized, not handled properly or not handled at all, and if, God forbid, something dramatic happens - then a 'dance of demons' begins.
Let's start with what's happening in reality.
Professional liability insurance in general, and in the engineering, architecture and planning industries in particular, is a burgeoning field in which if the client (the person commissioning the work) does not specify in the contract with the planner an insurance specification with a high level of requirements for the limits and conditions of insurance coverage, but rather leaves the determination of the wording and extensions of the policy to the insurance company's default - the result is often a policy of an inferior level and with very low insurance amounts in relation to the risk. In three words: a policy that is inadequate.
In general, and without generalizing, it can be determined that a significant percentage of professionals in the field have inadequate insurance coverage, to put it mildly.
A corollary of the above is that the client must set a high bar for his requirements, and to the extent possible, he must pressure the professionals to provide adequate insurance coverage (if only for the specific project). Otherwise, the level of insurance coverage will often be low.
Objectives of confirming the existence of the signed insurance
Following a request from our clients for a signed insurance confirmation document from the planner/consultant's insurance company, we are often sent the planner/consultant's insurance policies for review. In these cases - I reject the document - and request the signed insurance confirmation form, as the confirmation serves important purposes:
1. Verifying the existence of the insurance - clearly and unambiguously.
2. Cancellation of exceptions to coverage, determination of insurance requirements, and conditions for expanded insurance coverage.
3. Arranging the status of the client vis-à-vis the planner/consultant's insurance company.
4. The insurance certificate overrides the policy - its possession by the ordering party is important and advantageous.
_______________________________________________________________
Regulating the status of the client regarding the planner/consultant's insurance:
We emphasize again that the purpose of insurance approval is not only to verify the
The mere existence of insurance, but also to regulate the status of the person ordering the work
The legal responsibility of a professional according to law
With regard to various insurance requirements, it should be remembered that the existence or non-existence of insurance in general, and at one level or another of coverage in particular, is intended to ensure the ability to receive indemnity or compensation for claims and damages, but its absence or existence does not in any way change the professional's obligations by virtue of his legal liability.
Therefore, even if we compromise on the demands, this does not in the least diminish its responsibility and its financial implications.
The client's desire to work with a preferred professional
Often (naturally) a preference is created for a particular professional, and then, when the person does not provide the required insurance or at the requested level, I am asked to ease the requirements.
In these cases, it is worth distinguishing between the different professionals. For example: Defects and errors in the work of the constructor may result in claims of a more serious nature and scope than those of the landscape architect. Therefore, we can sometimes be lenient, but we will always require a signature confirming the existence of insurance, as I will detail below.
Insurance company signature confirming insurance coverage
When the insurance company has to sign a confirmation of insurance coverage, it should not be expected to expand the limits of its liability beyond what is stated in the policy (unless the insured agrees to pay an additional premium).
However, the approval includes (in addition to the limits of liability) various clauses and extensions, at least some of which the insurance company will approve, even though they are not automatically included in the policy, not to mention regulating the status of the ordering party with regard to the aforementioned insurance.
Therefore - from our perspective, even if it is a preferred professional who asks us to settle for the existing insurance - we will always require the insurance company's signature confirming the existence of the insurance and will try to motivate the planner/consultant to improve his policy, with the understanding that deficient insurance coverage will not prevent a personal claim by virtue of his legal liability.
There is no shame in setting high standards when it comes to insurance.
Naturally, as in every field in the business world, every professional wants to do business under the best conditions for them.
Since the issue of insurance, and in particular - the professional liability insurance of the planner/consultant - is important, and often even critical and fateful in cases of an insurance event, I suggest broadcasting the following message to planners and consultants at all times, and pumping it until it penetrates the consciousness of the professionals who are interested in collaborating with you:
We demand the best in all areas of our work - and also in everything related to the scope and quality of your professional liability insurance as a professional who seeks to provide us with services.
With regard to various insurance requirements, it should be remembered that the existence or non-existence of insurance in general, and at one level or another of coverage in particular, is intended to ensure the ability to receive indemnity or compensation for claims and damages, but its absence or existence does not in any way change the professional's obligations by virtue of his legal liability.
Therefore, even if we compromise on the demands, this does not in the least diminish its responsibility and its financial implications.
The client's desire to work with a preferred professional
Often (naturally) a preference is created for a particular professional, and then, when the person does not provide the required insurance or at the requested level, I am asked to ease the requirements.
In these cases, it is worth distinguishing between the different professionals. For example: Defects and errors in the work of the constructor may result in claims of a more serious nature and scope than those of the landscape architect. Therefore, we can sometimes be lenient, but we will always require a signature confirming the existence of insurance, as I will detail below.
Insurance company signature confirming insurance coverage
When the insurance company has to sign a confirmation of insurance coverage, it should not be expected to expand the limits of its liability beyond what is stated in the policy (unless the insured agrees to pay an additional premium).
However, the approval includes (in addition to the limits of liability) various clauses and extensions, at least some of which the insurance company will approve, even though they are not automatically included in the policy, not to mention regulating the status of the ordering party with regard to the aforementioned insurance.
Therefore - from our perspective, even if it is a preferred professional who asks us to settle for the existing insurance - we will always require the insurance company's signature confirming the existence of the insurance and will try to motivate the planner/consultant to improve his policy, with the understanding that deficient insurance coverage will not prevent a personal claim by virtue of his legal liability.
There is no shame in setting high standards when it comes to insurance.
Naturally, as in every field in the business world, every professional wants to do business under the best conditions for them.
Since the issue of insurance, and in particular - the professional liability insurance of the planner/consultant - is important, and often even critical and fateful in cases of an insurance event, I suggest broadcasting the following message to planners and consultants at all times, and pumping it until it penetrates the consciousness of the professionals who are interested in collaborating with you:
We demand the best in all areas of our work - and also in everything related to the scope and quality of your professional liability insurance as a professional who seeks to provide us with services.
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