Architects must manage countless risks, day in and day out. Yet most of the exposures you deal with will tend to fall into only a few broad categories. You may be in the habit of dealing with each individual situation as it arises, but that can be tedious and frustrating.
Instead, it can be beneficial to recognize what type of risk you may be dealing with on a given day, since it can simplify what you do to protect yourself. This strategy can help you avoid burnout and also lower your risk of a claim, thanks to a more consistent approach to risk management.
Here’s a brief look at four key risks for architects and how to protect against them.
No matter how involved or uninvolved you are in the construction phase of a project, the risks remain high for architect. Problems run the gamut, since there are so many elements that go into this stage of a project.
Think about everything that could go wrong when your designs and instructions are turned over to contractors and subcontractors. It’s impossible to guarantee that every instruction will be understood or followed. Perhaps a crucial reinforcement step is overlooked, or an insufficient insulation product is installed.
Construction issues like this are likely to result in flaws in the finished structure. Owners can then sue for these mistakes citing negligence on the part of the architect, and if they win their case, you could be liable for costly damages.
The reality is that you can’t be everywhere at once, observing every detail of construction and checking that everything is right. To control for the risk of these construction problems, professional liability insurance is required. This is crucial coverage that covers you when:
- A client accuses you of professional negligence.
- You make a mistake that costs a client money.
- You miss important deadlines or fail to complete a project.
Your risk as an architect can extend beyond the project itself, to the people you work with to complete it. As most architects will take a leading role on projects, this adds to the risk of contractor liability.
If the work of the contractors you hire, manage or supervise leads to mistakes that affect the structure or cost the client money, you can be held liable under certain circumstances. The issue centers less on the mistake made and more on the relationship between you and the contractor who made it.
Your liability can hinge on why and how you hired a particular contractor, what contract terms you agreed to with them and whether you abided by the terms of that agreement. The wrong move here could leave you on the hook for a mistake someone else made.
Protecting against this risk requires careful attention:
- Do your due diligence, making sure the contractors you work with are licensed and fully insured.
- Scrutinize the specific terms of any contracts you enter into, seeking outside contract review, as needed.
- Be particularly wary of indemnification clauses that may expose you to more risk than you can handle.
- Adhere to the terms of the contract and always document your work.
Communication breakdowns are another area that is fraught with risk for architects. Projects where the information shared is insufficient or the client’s expectations are unrealistic often lead to a dispute and a lawsuit.
Clients can be very sensitive, even to situations that are unremarkable for an architect. Even minor everyday project hurdles can lead to surprise, confusion and disappointment. Unaddressed, these situations turn into hard feelings that can lead to a client filing a claim.
Issues with project scope, levels of responsibility, costs, unforeseen conditions, delays and general project processes are all frequent sources of miscommunication for architects. Unless an architect is actively managing their communications, the risk of a problem is high.
However, the risk of communication problems can be minimized by taking the right steps:
- Use detailed contracts that specify the key terms of the project, including the deliverables, deadlines, responsibilities and costs. If a key variable changes, revisit the contract and sign a revised agreement.
- Communicate with the client regularly throughout the project, set and manage realistic expectations about what to expect at each phase, and communicate promptly when a problem occurs.
- Document everything, including all discussions, recommendations and decisions taken by the client, such dealing with the potential of unforeseen conditions, as well as your own work, such as your construction observations.
Architecture is a business like any other, with bills to pay to keep the lights on, maintain facilities and so on. Most architects carry insurance to protect against risks to business property and assets, but the amount you carry may not be enough in certain circumstances.
If you face a lawsuit over a construction problem, contractor liability, client miscommunication or other matter, there are two factors you must consider:
- The amount of money required to hire an attorney and defend your interests.
- The cost of a potential settlement or judgement, if you should lose in court.
Professional liability coverage will pay for both types of costs, up to your insurance limit. However, as the costs of legal fees mounts, the amount of coverage available for a settlement or judgement erodes.
Underinsurance is a significant risk in the architecture field, due to the potential for large settlements and judgements. While insurance is another cost businesses must incur, the risk of purchasing too little coverage can be high. Things that can help include:
- Budgeting for adequate levels of professional liability protection.
- Setting professional fees that allow you to cover key business costs.
- Reviewing your current insurance coverage for protection and benefits.
At Lockton Affinity, we understand the needs of design professionals like you. Our insurance experts can help ensure you have the coverage and limits that fit your needs.
Talk to a dedicated representative today to see what our coverage will look like for you at (888) 435-7011.
See what our coverage will look like for you by visiting LocktonAffinityA-E.com or calling us at (888) 425-7011.