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P.I. Limit for an Architect

What is the correct Professional Indemnity limit for an architect?

We are often asked by our clients and prospective clients “what is the right limit for my business?”

In an ideal world, advice might guide you to obtain the highest limit possible, which is economically viable for the practice / firm, however in real terms this doesn’t provide much guidance.

When we look outside of the Architectural sector, we see that there are a number of professions which are required by their governing bodies to hold and maintain a minimum standard / limit of indemnity;

  • Estate Agents / Auctioneers
  • Insurance Intermediaries
  • Accountants
  • Solicitors

architects

 

For architects, there is no such minimum requirement so we must consider other factors which might assist us in deciding what the is the right limit;

  1. Contractual Obligations;
    1. The contract will often state what limits of indemnity a professional must hold
    2. The contract will also state the period for which the professional must maintain the covers for (even for periods long after the contract has been completed)

 

  1. Tender Applications;
    1. Many of the new projects these days are awarded through a tender process, especially government related contracts.
    2. We have all seen a similar type wording;
      1. The successful applicant must hold the following covers;
        1. Public Liability at €6.5M
        2. Employers Liability at €13m
        3. Professional Indemnity at €XM

 

  1. Contract / Project Values;
    1. The contract value is linked to the potential loss / claim
    2. It goes without saying, that the bigger the project the bigger the exposure
    3. Even though you may only be responsible for a small % of the contract, there is still potential to be held liable for the whole contract value (joint & severally liable)
    4. It may not be viable to hold a PI limit which matches the contract value, as some Commercial Development contracts can be upwards of hundreds of millions, however a review of the project values you are involved in is a good risk management process.

 

After a review of the above points you may find that you have a starting point for a chosen limit.

Outside of contractual obligations, it’s difficult to definitively say what the right limit is and unfortunately it is only really when a claim occurs that we know whether the current limit is sufficient (all too late).

One of the things we can do to protect ourselves is make sure that the Professional Indemnity policy provides cover for defence costs (ideally that they are provided in addition to the limit of indemnity). We want to avoid legal costs eroding the policy limit of indemnity.

The graph shown is a simple overview of our clients in the Architects & Engineer sectors. As you can see from the chart, there is a wide spectrum of limits across various clients.

Crotty P.I. Limit


 

CROTTY SUGGESTION:

  1. Carry out a review of current & past contracts;
    1. Unbeknownst to yourself, have you signed up to contract which demands a certain limit and must this apply for a pre-determined period of time?
    2. What is the average contract size?
    3. Were there any one off contracts which carry an increased exposure?
  2. At each renewal, request a number of options on the limit of indemnity for price comparison purposes. You might find that for a reasonable additional premium, an increased limit can be purchased and with it some additional piece of mind
  3. Check to make sure your current policy provides cover for defence costs in addition to the limit of indemnity

Should you have any queries on any of the points raised above, please contact one of the Crotty Architect Team below. They will be happy to discuss further whether you are an existing Crotty client or insured elsewhere.

Meet The Team

Brian O’Connor

You can contact Brian via phone below or click on photo to email directly

01 290 8800

Meet The Team

Brian Shalloe

You can contact Brian via phone below or click on photo to email directly

01 290 8800