Terry applied for Architects and Engineers Professional coverage with Lloyd's of London three months after he was notified that the University of Pennsylvania was initiating legal actions against his firm and others. The application asked if he was aware of any circumstances that could result in a claims being made against him. He answered "no."

The University of Pennsylvania sued Terry and others involved with building its conference center six months after Terry's coverage went into effect. Terry presented the suit to Lloyd's and expected it to represent him. Lloyd's instead researched the case, rescinded the policy for misrepresentation, and denied all coverage.

Terry objected. He argued that his answer to the important question was very deliberate and he answered it only after he consulted with both his attorney and the architectural firm he had worked for on the University of Pennsylvania project. He reasoned that he had not done anything wrong on the project and, therefore a claim should not have been brought against him.

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Architects and engineers are the foundation of all construction. They develop the plans that contractors use to construct buildings and structures. They are expected to understand how building materials will respond to environmental and operational challenges, and select building methods and materials accordingly.

Defense is one of the most important parts of professional liability coverage. Many lawsuits that involve building failure name the engineering firm in the suit, even when there is little or no connection to the case. An effective defense is vital to maintain the architect's or engineer's reputation.

The coverage also provides liability limits when the insured is at fault. Most coverage is on a claims-made basis.

Click here to view an analysis of an Architect and Engineer Professional Liability policy.

Terry completed an application. Lloyd's trusted the information that Terry provided and issued a policy. Your clients also complete applications and insurance companies issue policies based on them. Can you imagine how difficult it would be to function if the insurance company refused to issue a policy until it completely verified the accuracy of every answer on an application?

Policies are issued relatively easily. This fact may encourage clients to not be honest with their answers. It is important that they understand how coverage could be denied at the time of loss if answers to questions on the application mislead the insurance company. Consider the following emarketing article that could be used on your website or as a newsletter article.

Are you interested in writing Architects and Engineers Professional Liability coverage? This coverage is vital for architects and engineers firms but they are not the only businesses who should purchase this coverage.

Consider your contracting customers. Do they engage in design and build activities in an attempt to save their clients from the extra expense of hiring an architect or engineer? It is possible that they even added a staff person to provide such assistance and use software products to help. These cost-saving measures may expose them to professional lawsuits that their CGL coverage excludes.

If you would like to learn more about the marketplace for this important coverage, click here to view the IMP Cybercast on this subject.