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.

Schinnerer's RM Blog - professionalliability tag

Educating Clients About Insurance