You may recall in the last article, the discussion centering upon the insurance needs for workers compensation and general liability. The remaining coverage necessary to meet all your needs as a design professional is professional liability, also known as errors and omissions.

Professional liability excludes general liability exposures and vice-versa. It is for that exact reason that it is necessary to carry both kinds of protection. Although this issue appears to be confusing, it is often easier to understand if you merely utilize “professional” opinion as the acid test for determining if professional liability is at issue. Some examples might be helpful.

It is critical to understand that anyone can sue you any day for anything. Whether they collect or not is the important issue. In most cases professional liability is written on a “duty to defend” basis. This means that your professional liability carrier must defend claims against you even if groundless. It is becoming considerably more common for professional liability writers to demand that a design firm carry comprehensive general liability prior to even receiving professional liability so that the professional liability writer does not end up having to defend general liability type claims which are more frequent than professional liability claims.

If you were to design or even specify playground equipment to be utilized in a childrens’ park, it is assumed that professionally you are placing items that are safe in such a setting. To do so requires a professional opinion on your part. If a child is injured by utilizing the play equipment you either designed or specified, whether utilizing it improperly or not, rest assured you are going to hear from someone concerning your choice or design of that equipment. These are professional decisions you may have made as a landscape architect. In this day and age, one would be crazy to design playground equipment because of the large potential for claims in the future with such equipment. The alternative, of course, is to specify equipment that has already been utilized and has been found to be safe and durable. If, on the other hand, you were to go to a client’s project with a transit to shoot elevations and someone were to trip and fall over your equipment, this would be covered under your general liability policy, because it involved the jobsite and did not involve your professional opinions or drawings.

Contrary to common belief, professional liability for landscape architects is readily available. There are approximately three or four viable sources for this coverage in the United States. Rating mechanisms may differ from one to another varying from utilizing your fee income to head count of professional staff as the means for determining the amount you will pay for coverage. Typical amounts of coverage vary from $100,000 up to $1,000,000. With the recent “crunch” in the insurance industry, coverage above $1 million has become considerably more difficult to obtain. You should also consider the adage: “If you give me a million dollar policy, I’ll show you a million dollar lawsuit.” Unfortunately, this is reality today. Many people are falsely under the impression that the attorney opposing you may be unable to determine how much insurance you carry. Such is just not true. That information is readily available during the discovery portion of the proceeding. I would encourage people to carry enough to make them comfortable or enough to cover any requirements found in the contracts they are involved in. Nowadays I encourage people to carry only sufficient minimums to give a level of comfort if their contracts do not require a specified amount of protection.

Unlike most other policies, professional liability typically has a higher deductible. Most often with $5,000 as a minimum. A smaller firm should not consider going much beyond a $5,000 or $10,000 deductible since virtually all claims incurred by landscape architects are more likely to involve defense only situations rather than a serious error which will involve a large award. With that basic understanding, you then begin to appreciate that the deductible comes into play on each and every claim and in defense-only situations you may end up paying virtually all of the costs on each claim that comes in when you have a higher deductible. Larger deductibles offer savings and the amount of savings varies considerably in the insurance marketplace.

You would also be prudent to examine the exact coverages afforded under any professional liability contract that you consider. These coverages can vary tremendously. Some companies that purport to be interested in writing this class of business exclude all bodily injury and property damage liability from their forms. (What they are covering beats the heck out of me!) Do not be shy in asking for examples prior to purchasing professional liability. This is even more important because the vast majority of insurance agents are not conversant or knowledgeable about professional liability or the “claims made” form on which nearly all of this business is written.

Next time’s issue will cover a number of specific claims that have occurred to landscape architects. This should serve as a learning vehicle to protect yourself in the future. We will discuss why residential work often involves more claims than commercial, why maintenance specifications may be the most litigious areas in the future, along with suggestions as to how to avoid being drawn into such claims and lawsuits.

Jim Leatzow, Leatzow & Associates Insurance Consultants Glen Ellyn, IL