ARE Daily | PcM #21 — Insurance: Architect's Coverage

Quick Recall (from #20 — Copyright)

An owner terminates the architect for convenience midway through construction and hires a new architect to complete the project using the original drawings. Can they do this?

No — not without paying a licensing fee to the original architect. When the owner terminates for convenience, the license to use the instruments of service does not automatically transfer. The original architect retains copyright, and the owner must compensate them for continued use of the drawings. This is one of the most important practical consequences of understanding architectural copyright.

Today's Content

Insurance is a risk management tool — a way of transferring financial exposure that can't be eliminated entirely. The exam tests which parties carry which types of insurance, what each covers, and what the key exclusions are. Today focuses on the architect's coverage; tomorrow covers the owner's and contractor's.

AIA Document B101 requires architects to maintain four types of insurance: professional liability, general liability, automobile liability, and workers' compensation. If an owner requires coverage at limits higher than the architect normally carries, the owner is responsible for paying the additional premium cost.

Professional liability insurance (also called errors and omissions insurance or malpractice insurance) is the most important coverage for architects. It protects against claims arising from the architect's professional actions — incorrect specifications, drawing errors, negligence in design or construction administration. Key exclusions: intentional wrongful acts are not covered, claims for cost estimates being exceeded are not covered, and claims arising from express warranties are not covered. Professional liability insurance covers negligence, not promises.

General liability insurance covers claims of property damage, bodily injury, and personal injury caused by the architect, their employees, consultants, or others they hire. An architect may also carry coverage to protect against situations where a contractor or subcontractor doesn't have valid insurance — so that a gap in the contractor's coverage doesn't become the architect's problem.

Property insurance protects the architect's office building and its contents against disasters — fire, theft, flood. Even in a leased space, property insurance covers the contents of the office.

Personal injury protection covers the architect against tort claims — slander, libel, defamation of character, misrepresentation. A tort is a civil wrong (as opposed to a criminal act) that causes injury to another party.

Automobile insurance covers vehicles owned and used by the business, including liability for employees using their personal vehicles on company business.

Workers' compensation is mandatory in all states. It protects employees against work-related injuries, regardless of fault.

Other optional coverage architects may carry: health and life insurance for employees, valuable papers insurance (for drawings and documents), special flood insurance, and business life insurance.

Today's Questions

1. What are the four types of insurance AIA Document B101 requires architects to maintain?
2. Professional liability insurance covers negligence. Name two things it explicitly does NOT cover.
3. An architect's employee is involved in a car accident while driving to a site visit in their personal vehicle. What type of insurance might cover the firm's exposure?
4. What is the difference between professional liability insurance and general liability insurance?

Next up: Insurance — Owner's & Contractor's Coverage

Answers from #20 — Copyright

1. Two categories of copyright protection and when the second began? → (1) Drawings, specifications, and graphic representations — traditional, long-standing protection. (2) The building itself — established by the Architectural Works Copyright Protection Act, applying to buildings erected after December 1, 1990.
2. Who owns the copyright by default? Exceptions? → The architect owns it by default. Exceptions: (1) the architect is an employee of the building owner (work for hire), or (2) the architect explicitly assigns copyright to the owner in writing.
3. Owner terminates for convenience and uses original drawings — can they? → No, not without a licensing fee. Termination for owner's convenience ends the license. The owner must compensate the original architect to continue using the instruments of service.
4. Why register with the U.S. Copyright Office if copyright is automatic? → Registration enables the architect to sue for infringement, collect attorney's fees, and recover statutory damages. Without registration, these legal remedies are unavailable — making enforcement of copyright much harder in practice.

Additional Quick Recalls

From #02 — Corporations, LLCs & Joint Ventures What is the structural difference between a professional corporation (PC) and a standard C corporation?

Both provide liability protection and are structured similarly. The key difference: in a PC, malpractice liability is generally limited to the individual responsible for the act, rather than shielding all shareholders from professional errors. State laws vary significantly on how this works in practice.

From #14 — Financial Terminology What is direct personnel expense (DPE), and how is it used in fee calculations?

DPE is an employee's base salary plus all mandatory and discretionary benefit costs (payroll taxes, health insurance, etc.). When used in fee calculations, the DPE multiplier is applied to this loaded labor cost rather than the base salary alone — because benefits are already included, the DPE multiplier is slightly lower than the net multiplier.

From #19 — Risk Management What is the firm's primary obligation when a safety problem is observed during a site visit?

Notify the contractor (not the subcontractor directly) of the observed safety problem, and follow up in writing to both the contractor and the owner. If the problem is not corrected, suggest to the owner that construction be stopped until it is resolved.