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Professional Liability Insurance for Licensed Architects

So I have never needed to worry about the professional liability insurance as I had always worked inside an architectural firm where someone else would be responsible in stamping and signing the drawings, even though I am licensed to do so.  Now, I am currently landed a job working for a fast food chain as a designer from a client, directing outside architectural firms for our stores.  However, we are a point to not to use them anymore and plan on taking over their unfinished drawings, and I am asked to stamp and sign for submission once we complete the drawings in house.  So, do we (I) need to purchase professional liability insurance?  But my boss is trying to tell me that we would not need to as we are not providing other people any architectural service but ourselves.  I want to tell him that's he is wrong, but I am just looking around to find the correct answer.  Unfortunately, all I can is referring to architects practicing architecture for other people that would require such insurance to protect their firms.  Any help and feedback for this situation from the other end?

 
Jun 18, 21 12:18 pm
SneakyPete

So if the contractor sues you? If the franchisee sues you? If a customer sues you?

Jun 18, 21 12:48 pm  · 
1  · 
rcz1001

It's advisable given you are doing project for a client that likely has a team of lawyers and could afford to sue you for any screw up. In addition, the type of project is the kind that involves public accommodation and all sorts of parties can or likely would sue you for any number of reasons we are not going to explain. 

Even a building designer (as in....not licensed as an architect) would probably be wise to have PLI when working on a project like this. 

Can you potentially get away with not having PLI? Yes but you would need to go to extra effort to make sure and I mean make sure there isn't an iota of errors and omissions that you would be responsible for under any legal precedent under any and every prior case. Point being, you have to make plans that are the most perfect prepared plans ever done before exercising the most highest level of competency and thoroughness of preparation and review. However, you would be exposed to liability. 

Where I am, I can legally design projects like a fast food restaurant because they may very well be just inside the 4000 sq.ft. ground area for where I am. If I was doing something like this for a fast food chain or even a franchise, I would be having PLI in case of lawsuit. 

Jun 18, 21 1:33 pm  · 
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rcz1001

With PLI, it is possible that you may be more likely a target by the lawyers to sue because they have a knack of being able to whiff the smell of money and attack like sharks. Should you have project specific insurance coverage that will cover E&O and Negligence or coverage that would be more or less on-going.... that's a question you have to assess for yourself and what the options are for you and have some conversations with multiple insurance companies.

Jun 18, 21 1:38 pm  · 
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proto

OP, you are designing/stamping for public facilities

Holy fuck, yes, you want liability insurance

Jun 18, 21 1:47 pm  · 
2  · 
Non Sequitur

and... OP better know what their deductible is too.

Jun 18, 21 1:48 pm  · 
1  · 
rcz1001

Facilities involving public accommodation with significant traffic of public.... yeah.... it would be like proto said. Otherwise, you are taking a risk. In Oregon, I would be at risk of legal actions for any sort of negligence for the 10 year STATUTES OF REPOSE / LIMITATION.

N.S. makes a great point about the deductible. Check your options for insurance and look for a good deal/coverage not just if it is cheapest premium but what the package as a whole and your responsibility in this. It might even be worth it to know how well the insurance company has served your colleagues in the architectural profession. You wouldn't want some insurance company that bilks your for money but doesn't do anything in the realm of actually insuring because they basically do all kinds of fine print giving them ways to not actually cover your claim when it arises. Check on it.

Jun 18, 21 2:13 pm  · 
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proto

what's that pithy doctor/architect comparo...?

"doctors bury their mistakes; architects build them"

Jun 18, 21 1:49 pm  · 
1  · 
Non Sequitur

This sounds like such a bad arrangement.  Chain joints typically have the worst in-house production staff which is why most will hire-out consultants to review and take responsibility for their drawings.  My office reviews a fair amount of this stuff since we often act on behalf of the landlord and holy jesus on a salty cracker... I would not want to be the one standing behind the "stamp" on the docs I see. 

So, cloud yelling aside, I assume you must get a heavy cut of the corporate profit pie for your efforts.  No, you don't?  Oh shit... so you're a regular employee with no stake in the drawings you produce?  Maybe you should reconsider this are set yourself up as an independent consultant and carry a healthy insurance portfolio because you'll need it.

side note, we've been sued a bunch of times...  once we were served and given 3 new projects... all by the same client, in the same day.  It's business.  We've also been to court on a large 6-figure claim because one of the trades fucked-up blocking for furniture anchors in a big chain.  Guess who gets sued first?  The one with the stamp on the page.

   

Jun 18, 21 1:55 pm  · 
1  · 
rcz1001

NS.... it appears he's the arrangement is changing in such a way that he may become the AOR. In which case, with such fast food chain, I would recommend insurance coverage... even as an unlicensed "Building Designer" because such projects are the kind that may fall into the exemptions in Oregon and some other states when the size doesn't exceed the ground area rules or other size related rules here and other states. I wouldn't do this in California but insurance is advisable in my opinion.


Jun 18, 21 2:00 pm  · 
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Non Sequitur

insurance is mandatory for anyone who practices in my area... and that includes the building designer folks. Oddly enough, the interior designers don't need to, but again, their scope of work is not life/safety.

Jun 18, 21 2:19 pm  · 
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rcz1001

I agree. However, I am trying to keep it someone more relevant i language for the OP who is in California... if his current location is in the Los Angeles area as his profile indicates. In which case, it would be highly advisable

Jun 18, 21 2:29 pm  · 
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Volunteer

It doesn't matter if you are at fault or not, just defending yourself can bankrupt you even if you are totally not to blame. Go have a talk with your insurance provider. Face to face. 

Jun 18, 21 2:06 pm  · 
4  · 
rcz1001

If you don't have one, talk to multiple insurance providers..... FACE TO FACE (wearing masks and whatever as appropriate at this time).

Jun 18, 21 2:15 pm  · 
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midlander

op, you and your boss seem to be confused.

when an architect stamps a drawing, the architect is PERSONALLY liable. The lawsuits can come from anybody too, not only the business 'receiving' your work. Contractors, owners, customers, neighbors. And of course the chain business itself could sue YOU despite being your employer, which they would of course do if there's a costly problem in the construction. Their own insurance company / lenders would insist on it even if he gives his personal assurance not to.

Jun 18, 21 11:18 pm  · 
1  · 
rcz1001

I agree with midlander. Now, if you are licensed but working on a project where you are not licensed, then in that state, you are for all intents and purpose an unlicensed person. However, if you stamp the drawings then you are liable. If you are unlicensed and is not an owner of the business, then the employer would be responsible. In my case, licensed or unlicensed, it doesn't matter. I am legally responsible for the drawings I prepare. Why? I'm the owner and even if I had business partners that are licensed, I would be responsible. They would be jointly responsible or liable for contractual matters of a business to extent of limited liability.

In any case, I highly advise some sort of liability insurance coverage for your services you render.


Jun 19, 21 3:43 am  · 
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midlander

the drawings will be stamped by a licensed architect and that person will be personally liable. there is no other theoretical possibility within the law. ownership is irrelevant to professional liability.

Jun 19, 21 3:51 am  · 
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rcz1001

There is no disagreement with liability of a licensed architect. However, you are only licensed in the state/province/territory or nation where you have license (depending on their laws, respectively regarding architectural licensing). 

In the U.S. as you know, we don't license on a national level. We license on the state level (and some U.S. territories). In the states you are not licensed then you are not a licensed architect therefore would be basically unlicensed staff.... in that situation... the owners of the business will be liable to the work of their employees which they technically are anyway. The difference is, when you are licensed, you are liable for the work you do in the jurisdiction(s) where you are licensed regardless of your ownership status. 

When you are an owner of the firm, you are liable for the work you do and you will have default liability to what your employees do. So if you were my employee, while you may be liable to the work you do in the jurisdiction you are licensed, I would still bear liability to the work you do regardless of the state, territory, country, province and it doesn't matter if I was licensed or not. This is because, as business owner and essentially the principle of employer liability to actions of employees...... any lawyer suing you would be also enjoining me and any business partners of my business. When you are an employee and licensed, you are not going to be the sole party of the firm brought into the case. Lawyers by RULE are going to drag every party that they can reasonably bring into the lawsuit like the business owners of the firm providing architectural services not just the licensed architect that is an employee. 

Just because you are licensed does not mean the employer (firm owners) are going to no longer have liability. Their level of involvement with the daily operations of the firm may vary their scope of liability. Now, when the owners bears FULL liability to any negligent work of unlicensed persons working as employees. So, firm owners can be held with professional negligence if the employee screws up and does negligent work in preparing the design of a house, for example. 

If you were working for me as an employee and not licensed in Oregon, I would be professionally liable for your work because in Oregon you would be unlicensed but you would be an employee but I would be the firm owner subject to the lawsuit and would be the party targetted and held while you get out of it because the general rule of employers are responsible for their employees and that you're not licensed in this jurisdiction. 

If you undergo reciprocity, then you would be in the lawsuit and so would I and any business partners I may have. Most likely, we'll get stuck with contractual related issues and some portion of the financial restitution but YOU would be the primary target of the negligence and tort actions but we collectively would be enjoined to the court order. This is why, as owners, it doesn't matter if you are licensed or not. YOU are right that if you are licensed, it doesn't matter if you have ownership in the firm but only right and true in the jurisdictions you are licensed. 

The owners of the firm will always bear liability to their employees including those that are licensed. In which case, a lawsuit involving an employee of a licensed architect will be a lawsuit not only to that licensed employee but the firm business and their owners and possible even managers/executives (who may not necessarily be holding any ownership stake but because of their role in leadership of day to day operations and that would be in the nuance of the laws).

Jun 19, 21 1:53 pm  · 
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midlander, you are absolutely correct (and I advise OP to ignore rcz). However, architects are not “personally liable” in *every* state, only in most of them. OP, if you are working in various stages you absolutely want to get E&O insurance that your employer pays for.

Jun 21, 21 9:39 pm  · 
1  · 
midlander

thanks Donna I never realized that! the OP probably should know his state's laws on professional liability as part of getting his license... but obviously that passes by most people

Jun 22, 21 1:07 am  · 
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rcz1001

liability insurance and the nuances of that is complicated and not entirely uniform as inferred by Donna. HOWEVER, absolutely anyone can be held personally liable for their actions..... in absolutely every single state. There are provisions in the WHOLE statutory laws and the court system and case law (laws of precedence) that allows for and pierces the corporate veil of any LLC, LLP, Corporation of any business. There is no absolute protection.... not even for employees but its a upward battle for employees without an occupational license to be held for negligence. There is no testing in architectural licensing that covers legal matters to such nuances. They just don't go that far.... otherwise you would have to undergo 12 hours worth of testing every day of a week for a decade. When you are licensed, you are PROFESSIONALLY liable for your actions and EVERY lawyer in every state will name the architects who worked on the project and through subpeonas and search warrants and other investigatory actions, every person who worked on the project can be identified and potentially named in a lawsuit in civil and potentially in criminal court in more extreme cases. If you own a firm, YOU will be named in the lawsuits not just the company. Every lawyers is taught in law school to pierce the corporate veil and to name everyone possible and then they may thin down the list over time of the legal proceeding. If you stamp the drawings or were identified as someone who worked on the plans and that you are licensed in the state and even possibly if you are licensed or otherwise have some credential where they can support and argument of negligence. In reality, limited liability is a veil not an armor. In civil court, there is no presumption of innocence doctrine. It is all a matter of who's side has the most convincing and supported argument wins.

Jun 22, 21 4:58 am  · 
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rcz1001

Sure, the chances you'll be successfully sued is all case by case. The point in the preceding reply is that there is no invincible 'armor' in law. If you are an owner of a firm, you are liable for the firm and the actions of your employees and that is regardless of licensure status. Now, laws may limit your liability but limited liability is only effective if you are merely a silent business partner as in that you have absolutely nothing to do with the daily operations of the firm. However, you're an architect involved in the work of the business.... in this cases the architectural services of the business and therefore, even an attorney who just passed the bar can pierce the corporate veil of ANY business entity type that has limited liability. EVERY state has laws where the corporate veil can be pierced. For example, managers (typically we call them principals in architectural firms that are LLCs) of an LLC (whether or not they are members of the LLC) can face unlimited liability for actions they do in the managing of the business and the operations of the firm and work of a firm. IF you stamp drawings (or prepared them whether it is directly by you or under your supervision and control), you face unlimited liability. As a licensed professional, even if you are licensed, you will likely be named in a lawsuit. California is one of those states that can name you in a lawsuit if you have any part to do with the work especially if you have an occupational license where you are supposedly held to a higher standard of care and professional duty of care. If you hold ownership stake, you have liability.... whether that will be limited or unlimited depends on whether or not you are basically just a shareholder or are involved in the actual operations of the business. Limited liability is for limiting liability to contractual matters NOT professional negligence which limited liability provision will not protect you from. This is why PLI / E&O insurance is recommended because there is a big f---ing gaping hole in the limited liability provisions of LLCs, LLPs, PLLCs, PLLPs, C Corporations, S Corporations, and pretty much any other business type other than sole-proprietorships and general partnerships. Employees are generally immune (to an extent) of being liable for their actions but even then, it's not a perfect immunity... in other words, there are exceptions to the rule. Architects that are employees can be sued regardless if they are the AOR or just a contributing architect on the project. Unlicensed persons who possesses occupation-based professional certifications may also be subject to lawsuits even if they are just an employee and not an owner of the firm.

Jun 22, 21 5:18 am  · 
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rcz1001

Typically, architectural firms are relatively small companies in that the owners tend to be actively involved with daily operations not just appearing or voting at the annual meeting for the election of officers/directors, etc. Limited liability protects shareholders of a corporation (such as those on the stock market) from being personally liable for the actions of say... the CEO. This is because the typical shareholder has nothing to do with the daily operations of those corporations. That is basically what the intent behind limited liability. Most architectural firms are privately held businesses where the owners of the business are actively involved with the day-to-day operations of a business. Small firms and sole-practitioners will almost certainly have unlimited liability or that it will be very easy for a lawyer to pierce the corporate veil when they can support the argument that you're more involved in the operations of the business than that of a 'shareholder'. Add to it, limited liability provisions do not provide protection against negligence and tort actions especially if you have had any involvement with the work that is claimed to be negligent and if work was found negligent, you may be found guilty of negligence. This is why you need professional liability insurance. If you had NO involvement with the architectural services that were found to be negligent because you were not on that project team at all, you might be able to get out of the law suit. If you are an owner, limited liability *MIGHT* limit your liability but you need to not be involved at all.

Jun 22, 21 5:33 am  · 
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rcz1001

It is true that you MIGHT not be sued if you have nothing to do with the work that was found or claimed to be negligent. Courts are to some limited extent effected by political will.

Jun 22, 21 5:35 am  · 
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rcz1001
rcz1001

While this article is talking about limited liability protections of LLCs, these provisions are basically identical to LLPs, corporations, etc. PROFESSIONAL LIABILITY refers to negligence, malpractice, etc. Even in corporations, you would still be personally liable for negligence, malpractice, etc. but also the company and persons involved. This is what 'piercing the corporate veil' does and lawyers learn about how to pierce the corporate veil because all corporations (even when deemed a separate legal entity) are still owned and ran by people. Limited liability is not to protect YOU from your own negligence. Limited Liability is to protect or limit the liability exposure of your business partners especially if they have no involvement with the goods or services rendered like a silent business partner like the majority of shareholders of corporations on the public stock exchange. The majority tends to just collect dividends and may be involved in elections of officers, directors, etc. but not the making of goods or rendering of services. If your partners are involved in the preparation of technical submissions and other associated documents relating to the architectural services rendered to the 'harmed' client, they may be subject to the lawsuit. If they aren't, they may face at most LIMITED personal liability (Limited liability).

Jun 22, 21 5:59 am  · 
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rcz1001

TLDR: In shorter form, limited liability does not protect or limit the liability of a person's own acts of negligence. It may or may not protect your business partners from your own acts but that depends on their involvement and whether or not they were also part of the 'negligent' act. Professional liability is held personally against the person who did the act (especially if they have a duty of care like pretty much anyone who has an occupational license in their field). If you are licensed then you will be personally liable for negligence but the firm you work for as an employee or are a business partner/co-owner of, may also be targetted.

Jun 22, 21 1:50 pm  · 
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rcz1001

I have an LLC with regards to building design services. It makes no difference what business entity type I use, limited liability will not protect me from negligence on my part. This is a fact in ALL states. It is a big gaping hole in limited liability and it's meant to be that way. Limited liability provisions may protect any business partner I may have especially if they are not part of the day-to-day operations such as a silent partner in which case, they may be excused and removed from the lawsuit. The limited liability concept comes from the world of corporations and was designed with the intent of protecting and limiting the personal liability of shareholders from the negligent acts of the CEO or even the majority stake shareholder who is chairman of the board of directors and CEO. This is because, in large corporations that are in the stock market (NYSE, NASDAQ,etc.), the majority of shareholders are not employees or involved in the business operations. They are just making investment decisions in owning stock in the companies. Limited liability limits the personal liability exposure (hence the term LIMITED LIABILITY versus unlimited liability) from the actions of, for example, the CEO who may get caught in a negligence and tort lawsuit for making decisions and directions resulting in negligence. Now, the lingo, 'negligence' is usually used in professions like lawyers, doctors, engineering, architecture, and professions of similar nature. Licensure is irrelevant here because there are professions where there are no occupational licensing requirements and the courts review cases of negligence on. Negligence is a personal liability with unlimited personal liability exposure to the person who committed the act and anyone else who may be supervising and overseeing the actions of that person and can involve more than one individual. Traditionally, employees like an intern without a supervisory role will be immune from negligence because they are supervised or would have their work reviewed by their supervisor(s). This immunity erodes as the employee has more direction and control over the work and independence of supervision. Employees with a license would not have any such immunity and would be expected to perform their work competently regardless. Unlicensed persons like fresh interns in architecture school or recent graduates of architecture school will likely be immune while working as an employee because the process and procedure is the Architect(s) supervising will have direct control and supervision over the preparation of the plans and specifications and other documents relating to an architectural project. Architects who have responsibility for the preparation of those documents will be liable whether they are a firm owner or an employee of the firm. As a building designer and owner of my building design business, I am liable and personally liable for preparing any documents for services rendered for the client. Limited liability provisions in any state for any business type which provides limited liability do not provide protection from any actions of negligence on my part. This is why there is this thing called PROFESSIONAL LIABILITY INSURANCE because if limited liability of LLCs, LLPs, Corporations, etc. protected the architects, engineers, lawyers, doctors, and any other professional, including building designers, from personal liability of our own negligence, there wouldn't ever have been a need or system of professional liability insurance.

Jun 22, 21 2:17 pm  · 
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Thank you all for your feedbacks.  In short, no doubt in my mind that the Professional Liability Insurance would be needed if I were to stamp and sign for the company.  I was just hoping to find something (documents and such from CAB or AIA or NCARB) more solid and relevant to my situation, so I can convince my employer that this might be a situation that we are driving ourselves into without it.

Jun 21, 21 4:07 pm  · 
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proto

You just need to explain the exposure that both you personally & the office legally need to cover. The business should be covering this as a safeguard against legal suits that could shutter the company. You personally should not have to bear that burden because you are an employee of the company.

Jun 21, 21 7:37 pm  · 
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BlazeFoley

Even retired Architects in the USA, who built many buildings during career, carry the liability insurance. The way Architecture is regulated/practiced in the USA is horrible. The ultimate liability should be placed on engineers' and general contractor.  More like the the European model......Architecture is design period.

Jun 21, 21 7:18 pm  · 
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OMG architecture in the US is *totally not* just “design period”!!!! We are part of the construction industry and we need to play by their rules.

Jun 21, 21 9:41 pm  · 
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