When insurance agents and brokers work with architects and engineers (A&Es) to secure the best possible A&E professional liability coverage, understanding the nuances of their projects and practices is crucial.

Here are four essential areas agents and brokers should focus on and the key questions to ask to gain a comprehensive view of their clients’ risk profiles.
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No. 1: Project scope and delivery method

What is the nature of the work? Architects and engineers operate in various sectors such as infrastructure, commercial, residential and education. In addition, within both architecture and engineering, there are numerous specific disciplines, from structural engineering to electrical engineering, environmental design, landscape architecture, and more. Understanding the client’s specific discipline and project types will help the agent determine which insurance markets to approach, as all carriers have unique risk appetites and pricing guidelines.

What is the scope of work (SOW) and preferred project delivery method? Knowing the client’s typical SOW will identify the range of professional services performed in any given project. Understanding the risks inherent in performing those services is crucial for piecing together a detailed coverage submission.

The client’s preferred project delivery method is something that most insurance carriers will want to know. Are they participating primarily in the traditional design-bid-build method or do their projects use the design-build approach? The latter can blur the lines between design and construction responsibilities, which can affect risk assessment in underwriting and claims handling. If the client participates in design-build projects it is critical to understand their role, in particular, whether they are in the lead position, hiring the contractor for construction, or are being hired by the contractor or construction manager.
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No. 2: Risk management, quality assurance and control

What risk management practices are in place? Agents and brokers should investigate architects’ and engineers’ risk management practices, including their quality assurance and quality control procedures. Ask whether they have a written quality control manual and how that information is communicated throughout the firm. Do they offer risk management training and continuing education courses to keep their employees up to speed?

Understanding how the clients manage projects and client selection is also important. That is sometimes called the Go/No-Go decision, and it boils down to whether they have the right expertise, experience, and client relationships to mitigate risks. How they handle design changes, errors, delays, and disputes is also relevant when assessing potential risks.

How are contracts managed? A rigorous contract review process can mitigate risks and improve an A&E firm’s overall risk profile. Find out whether the clients use written contracts on all of their projects and whether they utilize an attorney to review contracts and assist in negotiating terms. Underwriters will look favorably on firms with strong contractual risk management practices. Firms that use limitation of liability clauses are also viewed favorably in the underwriting process.

How are emerging risks associated with technology and innovation managed? It is important for agents and brokers to stay up to speed with evolving trends in technology and the ways architects and engineers may be experimenting with new tools, such as artificial intelligence or advanced modeling systems, in their daily practices. New or untested products — including innovative building materials — may present unknown risks that underwriters will want to assess, as they could affect the insurance coverage and premiums offered.
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No. 3: Claims history and risk exposure

Have there been any claims in the last 10 years? Agents and brokers should review a client’s claims history as far back as 10 years, to understand any patterns or significant claims, how they came about, how they were resolved, and what measures have been taken to prevent future issues. Presenting insurance carriers with currently valued loss runs along with a “lessons learned” statement for any significant claims is critical for the underwriters’ risk assessment.

Are there any international or multi-state exposures? Different U.S. states and countries carry different exposures, from legal challenges to climate-related factors. Knowing exactly where a firm has a footprint — including any prior entities, subsidiaries, or joint ventures — will help agents to build a complete risk profile.
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No. 4: Human capital and workforce management

What is the succession plan? The aging workforce is a challenge for many A&E firms. With many industry veterans nearing retirement, understanding a firm’s succession plan is critical to ensuring the long-term success and stability of a business.

Having a plan is key. An insurance carrier is not going to dictate what that plan should be, but they will feel a lot more comfortable knowing that effective change management is taking place, and firms are doing their best to educate and pass on industry knowledge and expertise to the next generation of design professionals.

This trend is also driving mergers and acquisitions (M&A) between A&E firms. Agents should be well-versed in how the M&A process works when it comes to the sale of a firm or a firm’s assets. Understanding whether there is an extended reporting period post-M&A and how the professional liability is covered is key to protecting the coverage needs of the former principals.

Targeting these four key areas will help insurance agents play their pivotal role in getting A&E clients the right professional liability coverage tailored to their unique needs.

Wayne Brockington, RPLU, AU, is a vice president at Berkley Design Professional, a Berkley Company. He has 20 years of experience in the A&E professional liability insurance market with an emphasis in underwriting and claims. Wayne can be reached at [email protected].

Michael Hraber, CPCU, RPLU, is a vice president at Berkley Design Professional, a Berkley Company. Hraber has more than 20 years of experience in the professional liability insurance market with a focus on A&E clients. He can be reached at [email protected].

The remarks in this piece are the authors’ own and do not necessarily represent the views of Berkley Design Professional or W. R. Berkley Corporation.

See also:

• Claims trends affecting the construction professional liability segment
• Trends, challenges and opportunities in roof risk
• How commercial property owners try to beat high premiums