4 Insurance Coverages Design Firms Should Consider
As a risk manager, it’s my job to educate our design professional clients about the risks and exposures at stake and to ensure they have holistic and appropriate insurance programs in place. While I wouldn’t recommend our clients purchase every coverage available, I would suggest at a minimum they know the insurance coverages and risks available to them and those that are gaining traction.
Knowing this and insurance claims data trends, here are 4 policies you should be mindful of in today’s environment if you’re an architecture and engineering design firm.
Directors and Officers (D&O)
Claims trends indicate that more and more insurance claims are being brought against the corporate officers and directors of design firms by employees who are affected by the business decisions they make.
D&O protects individuals and organizations from claims for decisions and actions made on behalf of the organization and duties owed to the company. It also provides personal asset protection for leaders of the organization and the entity itself.
Examples of claims you may see in this area include:
- Breach of duty
- Tortious interference
- Antitrust violations
- Unfair competition
- Breach of contract
- Mismanagement of assets/resources
Employment Practices Liability
Design firms have Professional Liability for the professional services they provide. Think of Employment Practices as professional liability for Human Resources. Employment Practices Liability provides defense and damage costs coverage for claims and wrongful act allegations deriving from employer/employee relationships.
Third-party Employment Practices Liability provides coverage for harassment and discrimination claims and allegations brought by non-employees.
Examples of claims you could see in this area are:
- Wrongful termination
- Sexual harassment/retaliation
- Hostile work environment
- Illegal employment practices
- Disability discrimination
- Intentional misrepresentation
- Wage and hour violations
- Failure to promote
Cyber insurance continues to be a hot button coverage in our growing digital world and provides protection for your organization and its leaders for liabilities arising from exposures relating to network security and data privacy.
Cyber liability is a policy designed to help protect those assets and provide resources in case of a breach of your data.
The average ransom payment shot up 82 percent from 2020 to 2021. By the middle of last year, the number of ransomware attacks was up more than 150 percent over the entirety of 2020. We are seeing an increase in both the frequency and the severity of cyberattacks. These attacks aren’t just hitting major companies, a cyberattack on a design firm providing professional services could mean days, and even weeks, of lost billable hours, missed deliverables, and lost work and reputation.
Examples of claims you may see in this area are:
- Breach of a system leading to loss of personally identifiable information (PII) or personal health information (PHI)
- Lost or stolen laptops
- PII, PHI, or credit card information inadvertently released to outside parties
- Ransomware/malware attacks
Key Man Insurance
Many of the design firms we work with are top heavy organizations, and in the terrible event something was to happen to a Principal, Owner, Key Salesperson, or technical expert in the firm, they would have an insurance policy in place to keep them whole.
Key man life insurance is purchased by a business to insure the life of one of the company’s employees. It’s intended to help the company recover from the loss of an employee who contributes significantly to the business if that person’s death or disability would reduce productivity or the company’s value.
I know I’ve covered a lot, and as I mentioned, previously, there are a lot of difference coverages you can purchase. So, if you have questions about the above coverages, don’t know if you have any of the coverages in place, or are curious about what a coverage might cost, please feel free to reach out to us with any questions!
Published on: 05.19.22