THINKING OF JOINING NZACS?
Below are a host of frequently asked questions. If you don’t find the answer please don’t hesitate to contact us.
What makes NZACS different and why should I arrange Professional Indemnity Insurance through them?
NZACS has been the major player and market leader in Professional Indemnity Insurance for NZ architects since 1972. It was founded as a co-operative by architects for architects to provide professional indemnity cover tailored to the profession, achieve cost-effectiveness through group buying power and to provide education and risk management support.
We are unique in providing a Claims Committee of experienced architects to guide and liaise with members, insurers and legal teams on technical and professional matters. Our newsletter Communique updates members on current issues in risk management and we have consistently been ahead of the pack in evolving policy terms to meet them.
We maintain an ongoing relationship with the NZIA and support tertiary education in professional studies.
We value the ethos of the co-operative to share experience across all members and to maintain a governing board of experienced architects, representing the geographic and demographic spread of membership, assisted by insurance brokers and accountants with specific expertise in professional risk management.
What is Professional Indemnity (“PI”) Insurance?
Professional Indemnity Insurance is a commercial mechanism that provides support to the policyholder (including the directors, partners, employees and company name) in the event of a demand for compensation arising out of an alleged negligent act or omission which caused a third party to suffer a loss. [A third party is someone other than yourself and your insurer]. It effectively increases your asset worth for the purposes of defending and meeting legal liabilities.
Why is Professional Indemnity Insurance necessary?
Bankruptcy is perhaps the greatest commercial risk that an architect can face. Typically, it may preclude an architect from managing a business in the short term and they may carry the stigma of being an undischarged bankrupt. Equally, your potential client may not want to proceed with you on their projects if there was no prospect of recovering their financial losses from you if you made a mistake. Separation of your business risks from your personal and family responsibilities can sometimes be difficult.
What does NZACS do?
NZACS is a co-operative society that provides risk management advice to its member firms and can arrange appropriate Professional Indemnity Insurance for it’s members. It was established in 1972 by architects, for architects, and currently has in excess of 750 member firms.
What is Risk Management?
Risk management is the process of identifying, assessing, responding to and controlling risks. In architecture, prudent risk management includes taking out Professional Indemnity Insurance.
Who can join NZACS?
Full membership is available to firms (including sole practitioners) or companies practicing architecture in NZ who have at least one principal or director a member of NZIA. Associate membership is available to graduates from recognised schools of architecture in NZ who have been accepted as graduate members of NZIA, and also Members of ADNZ who meet the requirements of a “Professional Member” (or would do so upon being accepted for professional indemnity cover arranged through NZACS).
An application form is required and membership application is subject to approval by the Board of NZACS.
What does NZACS membership cost?
There is currently a membership cost of $10, plus a joining fee of $40.
What does NZACS membership provide?
Members are entitled to use NZACS resources and guidance notes; apply for Professional Indemnity cover; apply for other insurance cover; and access the Claims Committee’s assistance in the event of an actual or potential claim. You may apply for cover at the same time as applying for membership.
What are the liability exposures for an architect?
Architects in providing architectural services or advice, owe a contractual duty of care to their clients and a common law tortious duty of care to others who might be entitled to rely upon that service, advice or opinion. This duty of care is also imposed by statute (Consumer Guarantees Act) and the Registered Architects Rules of ethical conduct. It is also a contractual condition in the NZIA Agreement for Architects Services.
How do I get a quotation for Professional Indemnity Insurance or other insurance cover?
We need to know more about the nature of your practice and this information is collected in a proposal form. Forms are generated electronically and completed online through our insurance consultants Aon New Zealand Ltd.
Contact firstname.lastname@example.org to request a quotation.
How much cover do I need?
This is a commercial judgement decision which will be influenced by the size of your practice, number of staff, type and size of project, client profile and any contract requirements. Indemnity limits begin at $250,000 and go up from there. Some firms have $20m indemnity. Policy limits can be discussed as part of the quotation process.
Is it a legal requirement for an architect to have Professional Indemnity Insurance?
No, not in New Zealand, but in some countries or states it is a legal requirement to carry PI Insurance so you will need to check if you are intending to work on a project outside of New Zealand. NZIA Practices are contractually bound (NZIA AAS) to have PI Insurance cover for a minimum indemnity of $250,000.
How long do I need to maintain Professional Indemnity Insurance cover?
For as long as you are in architectural practice, professional indemnity insurance should be maintained.
Once you cease practice you will need to need to consider continuing with a “run-off “PI Insurance policy. This can extend your previous cover, but with an ever-reducing annual premium which recognises your lessened risk exposure.
I am employed as an architect in an architectural firm. Do I need my own Professional Indemnity Insurance?
If the firm is insured via NZACS, then no. The NZACS policy automatically includes employees and employed architects. In some circumstances, contract staff can also be covered by the NZACS-arranged PI Insurance policy: that situation must first be discussed with the employer and Aon.
I am an architect working for a non-architectural firm. Does my firm need Professional Indemnity Insurance that specifically covers architects/architecture?
Yes; Professional Indemnity Insurance would still be required. If you are an NZIA member you are eligible to apply for the NZACS insurance cover in your name. It won’t include your employer, but it will provide cover to you and any legal liability that you may have in your role as the architect.
I am employed as an architect in an architectural firm. I am doing some small projects of my own in my own time. Should I have my own Professional Indemnity Insurance?
Yes. Architects are potentially liable for the consequences of their services, advice and opinions if they are given negligently. You will need your own separate insurance cover for this type of work as it is not included under your employer policy.
If I only do ‘small’ jobs. Do I still need insurance?
Risk exposure is not diminished by small projects. There is no direct relationship between the size of the project and the risk exposure. Small projects are often residential in nature and therefore covered by the Consumer Guarantees Act and the Fair Trading Act which prohibits any attempt to impose a contractual limit of liability. Projects which involve a limited architectural service or a truncated construction observation role, are known to present a higher risk profile.
There is also the accumulation factor to consider because each project is a potential risk for several years: see at “claims made” below.
I am going overseas for a year. What should I do with my insurance?
You will need to keep your insurance current to continue to be indemnified. However, if you go overseas and during that time cease to practice, you will be eligible to maintain insurance under the ‘abeyance’ option at a reduced premium until you return to practice.
I am semi-retired, doing occasional work. Do I still need insurance?
Any work you do creates potential risk. Consideration also needs to be given to the risks associated with work you have done in the past, as claims can arise many years after the project is completed. There may also be contract obligations that require insurance to be maintained for an extended period of time.
What does “claims made” mean?
Professional Indemnity Insurance is on a ‘claims made’ basis. This means that the policy will only respond to events which become apparent, or ought to have become apparent, during the period of insurance cover and that you have notified the insurer within that insurance period.
For example: if today you become aware of an actual or potential claim on a project you did 5 years ago, it is the policy in place today that will respond to your notification lodged today. If you delay the notification until a later insurance period, the PI cover may be in doubt.
Statutory Liability, Employers Liability, Directors & Officers, Cyber Liability and Employment Disputes insurance are all ‘claims made’ policies.
Am I covered for past work?
Yes Professional Indemnity Insurance covers your past work, although restrictions can apply to past work before you first took out a Professional Indemnity policy – refer retroactive date.
Provided you maintain current professional indemnity insurance, claims notified under the current insurance can be in relation to services you provided years before.
What is a retroactive date?
This is a condition under ‘claims made’ policies and is applied by insurers to restrict cover for past work. The insurance cover provides indemnity for services provided from the ‘retroactive date’ onwards. If there are no restrictions on past services, the retroactive date will be shown as being ‘unlimited’.
How does run-off insurance work?
Run-off insurance is a term that describes a claims made policy, such as Professional Indemnity Insurance, that only covers past business activities. Typically, this occurs when you have ceased practice and/or retire from practice.
Policies are endorsed as run-off policies when you no longer require cover for any future business activities. Because there is no cover for future work, pricing reductions apply and gradually reduce over time.
Does NZACS offer complimentary run-off?
Yes. Qualifying NZACS members who retire from practice are eligible for free run-off insurance of $300,000 in the aggregate, for the duration of their years and until 2 years after death. Although there is no attached premium, you are still required to apply for this insurance annually and it is only available to members who have continuously held NZACS-arranged insurance for the past 10 or more years. Your executors should be made aware of the availability of this insurance cover.