Architects and engineers face mounting E&O litigation in Canada. An example of this is Lansdowne Park in Ottawa. The park is in the midst of a multi-million-dollar lawsuit between its owners and project partners. This is just one of several high-profile projects that wound up in court recently. Suits have also emerged from stadium upgrades in Edmonton and Winnipeg, where Investors Group Field owners allege that poor design resulted in leakage, draining and cracking, according to court documents.
Exposures aren’t limited to design work. Delays or cost overruns can also find architects and engineers in court. “Even if the architect or engineer isn’t negligent, they can still be named in a claim along with everyone involved in the project,” says Helena Fan, senior underwriter at RSA Canada.
Helena shared her top five areas of concern when it comes to E&O:
- Contracts: Some contracts have no cap, so the claim amount can be larger than the fee for work rendered or than the agreed-upon insurance limit. Some firms may rely on verbal, rather than written, contracts, especially for a long-time client, such as an engineering firm that designs smaller projects for a large oil and gas producer on a yearly basis.
- Subcontracting: Most policies cover subcontractors’ work as long as it’s within the scope of the professional services. It’s important that their partners have their own E&O insurance; otherwise, it can dilute coverage or allow an avenue for insurers to subrogate if the subcontractors are the ones liable for the loss.
- Cyber and Tech: Though such professionals may not have a trove of credit card or other personal data, they still have proprietary designs that could be lost or stolen and valuable information on larger clients. If they have access to a client’s computer systems, they could also unintentionally pose a threat of cyber loss.
- The “grey areas”: Most engineers work with technology, and certain exposures may straddle the line between engineering and technology. For example, software or telecommunication engineers' needs would call for specialized coverage. Those engineers would require an architects and engineers (A&E) product with a technology endorsement attached or have a technology E&O policy that considers design engineering exposures as well.
- International rules/restrictions: A lot of policies are global, but it could be that a policyholder is doing work in a sanctioned country, or perhaps the current policy limit is insufficient for a project being bid on. For example, if an architecture firm that usually handles commercial projects shifts to condominium design, that’s a material change and could affect the rate of the premium. The client may not realize that a new opportunity for expansion in their portfolio may affect the coverage under the policy.
RSA Canada’s A&E E&O offering acknowledges what’s available in the market and what brokers seek for clients.
For more information on our E&O products, visit our Errors and Omissions insurance section.
This article was adapted from an article in Canadian Insurance Top Broker.