Communique May 2002
Reviewed June 2009, Feb 2017In dealing with claims, architects are involved in coping with the additional uninsured costs; personal, professional and financial, that can arise when a negligence claim is being defended.Professional Indemnity Insurance will indemnify or reimburse an architect for the cost of their legal liability to third parties that result from the architect’s negligent acts or omissions, subject to the extent of the cover and excess. Additionally, the legal costs incurred with the Insurer’s approval associated with the defence of an allegation are recoverable also.The hidden uninsurable costs of allegations of professional negligence must be anticipated, for they can be considerable.The policy terms require the insured architect to render all reasonable assistance to the insurer at all times. The reason for this is obvious. It is the insured architect who has all the knowledge and information necessary for the Insurer to assess the nature of the claim, its quantum and defence strategy. Providing this assistance is at the insured architect’s expense.Failure to provide proper assistance may constitute a breach of contract and invalidate this cover.The most costly toll is the personal one which the architect will experience: to themselves, their practice, their staff and their family relationships.A claim is firstly a challenge to the architect’s professional reputation. It places the architect in an adversarial role. Professional reputations are hard earned and jealously defended. They are also uninsurable.Defence of a claim will involve the architect in research of the job file and diary records, continuing enquiry of office staff involved with the project, perhaps even former staff employed elsewhere, and also consultants, and contractor/subcontractors.As the defence strategy evolves, there will be a requirement to brief a defence lawyer representing the Architect’s interests, and possibly an expert witness to advise the Insurer and the legal counsel.As the litigation process develops, and the listing and exchange of discoverable documents is completed, the architect’s risk exposure is more precisely identified and quantified.Following this, there may be an exchange of expert evidence and further challenges to the architect’s professional competence and judgement.These matters typically taint the architect’s relationship with staff, business partners and their families. These emotional pressures can be insidious and cancerous. The damage inflicted may be irreparable. Alternatively, healing may require immense courage and compassion from these innocent parties. Support of the Claims Committee is an important component of this professional reconstruction.In cases where the architect’s legal liability exceeds their insurance cover, the balance will be to the architect’s account.It may therefore be necessary for the architect to retain separate legal counsel in matters relating to the uninsured risk.This background should be kept in mind when assessing the initial terms for professional service, and the risk of accepting the commission. A low fee bid is no defence for inadequate professional service. Never compromise your professional standards, particularly for property-developer clients who will on-sell their building or apartments to others during or following construction.