Schinnerer's RM Blog - insurance tag

Communicating with Your Client

Tue, 12 Jul 2011 15:11:00 GMT

Does your client want to be named as an additional insured on your professional liability insurance policy? Does their agreement contain a broad indemnity provision that is not limited to damages caused by your firm’s negligence? Are the insurance requirements unreasonable?

If you’re not sure how to communicate to your client the issues involved with these contractual requirements, you may want to send them The Client’s Resource: Intro to Professional Liability Insurance. This Schinnerer publication responds to these issues and more. It also includes graphs that illustrate what policy limits other design firms similar to yours carry. This information may aid you in negotiating more reasonable insurance requirements.

The Client’s Resource: Intro to Professional Liability Insurance can be downloaded from the risk management section of the Schinnerer website. Here is the link: www.schinnerer.com/risk-mgmt/Documents/UnprotectedFiles/Intro-professional-liability.pdf

New IPD Coverage

Mon, 13 Sep 2010 12:49:00 GMT

Schinnerer has seen few attempts at true integrated project delivery (IPD). Despite all the talk about significant changes in how projects are designed and constructed, most of the “integrated” projects we have seen are basically design-build projects using standard contract forms.

Despite this, we have been preparing for the rush of IPD projects by developing new forms of project-specific insurance that will not only cover the design team but also the increasing design liability of the construction team. The shared-risk, shared-profit collaborative aspects of IPD result in many aspects of the relationship being defined contractually. However, it is unclear how courts will construe the provisions of multi-party agreements with extensive waivers of rights, unusual limitations on risk, and blurring of responsibilities. Without clear law, such as the law of negligence that applies normally to design and other professional services, it is difficult to craft a responsive and affordable insurance policy specifically for IPD projects.

While the goal of IPD is to have the parties share risk as a way to protect project-based interests, there is a misalignment of currently available insurance to cover this risk-sharing and team decision-making. The unique challenges of the IPD system can best be solved by having a project-based policy that cultivates the commonality of interests in completing a project.

Schinnerer and CNA have responded to this gap by developing professional liability exposure coverage for all members providing design or design and construction services through a multiparty agreement on a project basis. While this project-based coverage will not be available on extremely large or high-risk projects, it will respond to the need for a dedicated policy to cover the design exposure on projects such as office buildings, public and private educational and healthcare facilities, and certain residential, commercial, and mixed-use projects, for example.

We also developed a special variation of the project-specific coverage for the highly unusual (and probably highly unlikely) Special Purpose Entity called for in the AIA IPD contract. Because of the project client’s involvement as a joint owner of a limited liability company with the architect and construction manager, no current professional liability policy can cover the design risks.

Look for more information as the coverage is rolled out nationally at www.Schinnerer.com.

Educating Clients About Insurance

Wed, 21 Jul 2010 14:11:00 GMT

Insurance is the transfer of pure risk from one party to another, for a price, through a legal contract that spells out the terms of the contract as well as the perils both covered and not covered. For design professionals, a key set of professional and business risks arises from the possibility of causing harm because of their negligence in performing professional services. These negligent acts, errors, or omissions may cause damage to clients, contractors, or other third parties, and the firm may find itself liable for these damages.

In buying a professional liability insurance policy (sometimes inappropriately called errors and omissions or E&O insurance), the firm is asking a broader financial entity—the insurance company—to absorb a portion of the costs of claims in exchange for a premium paid to the insurance company.

The professional liability policy has many unique features that are often misunderstood by the clients of design firms. One of our most widely-used resources is The Client’s Resource: Intro to Professional Liability Insurance, available on our website at http://www.schinnerer.com/risk-mgmt/Documents/UnprotectedFiles/Intro-professional-liability.pdf. It is written to explain the nuances of the coverage of the professional liability policy to the client of the design firm. When negotiating contracts that spell out the client’s insurance requirements, design firms can use this publication to explain the nature of the professional liability policy.

Small Business Feeling the Squeeze of the Poor Economy

Wed, 11 Feb 2009 15:03:00 GMT

The current recession has many owners of small businesses reeling. Even prior to the recession, small business owners found it difficult to pay for the annual rise in health insurance premiums for their employees. The soaring premiums leave many businesses with difficult decisions.

The New York Times posted a recent article about small businesses facing the financial crisis and looking for ways to save money. One option that is explored by some is cutting, or at least cutting down, health benefits for employees. Options for saving money on health insurance for employees are unsavory: providing personal stipends much lower than what the employer formerly paid for health care; providing health benefits with much higher deductibles; having employees share in the cost of benefits at a much higher percentage than before; or cutting benefits altogether.

When considering options to save on providing health insurance to employees, businesses need to be careful of the risks these options pose. This is particularly true when considering replacing employees. A small business owner in Tennessee found himself “considering replacing older, more experienced workers who leave with younger ones who would be cheaper to insure.” While this particular business owner was merely considering replacing employees who choose to leave on their own accord, firms need to be careful if they decide to let any employees go without just cause. Firing an employee without just cause could potentially lead to that employee making an employment practices liability (EPL) claim against the company. The Age Discrimination in Employment Act (ADEA) prohibits discrimination against employees over 40 years of age. As people have become increasingly litigious, claims are increasingly brought against firms whose reduction in workforce seems directed at older employees.