What Is Architects and Engineers (A&E) Liability Coverage?

As its name suggests, architects and engineers (A&E) liability coverage is a type of insurance policy designed to protect architects and engineers. Specifically, it provides coverage for potential damages relating to construction delays, structural damages, and other potentially costly risks.

Although A&E liability coverage is designed with the needs of architects and engineers in mind, similar policies are available for other professions, such as doctors and lawyers. Businesses can also obtain general commercial liability insurance to cover a range of potential claims.

Key Takeaways

  • Architects and Engineers (A&E) liability coverage is a type of insurance product purchased by building design and construction companies.
  • They help businesses avoid bankruptcy in the event of rare but costly damages for which the business is at fault.
  • Although it protects the individual professionals, A&E liability coverage is purchased by architecture and engineering firms rather than by the professionals themselves.

How A&E Liability Coverage Works

Designing a building is a complex undertaking. Mistakes in calculations could result in construction delays, or, in the worst case, could even cause a building to collapse. Depending on the nature of the error, the architects and engineers who designed the building could be held partially or fully responsible for these damages, resulting in a costly financial penalty. To protect against this, many architects and engineers purchase A&E insurance.

Although its name refers only to architects and engineers, A&E liability coverage can actually be purchased by a wide range of building professionals, such as electrical or structural engineers, construction managers, and surveyors. Typically, the policies are renewed each year and are purchased by the firm rather than by specific professionals. In some cases, these policies will also provide coverage for subcontractors.

Although A&E liability coverage can go a long way toward controlling the risks of the building profession, there can be notable gaps in the coverage they provide. Common examples include damages relating to overseas projects, breach of contract, or emerging risks such as cyber liability. Another potential issue is that, while most A&E policies provide global coverage, this coverage usually only applies to the definition of liability that is common to U.S. courts. Finding policies that provide coverage for contractual liability in the event that another country’s laws do not follow the same guidelines as the U.S. can help close this gap.

Real World Example of A&E Liability Coverage

Given its complexity, there are no shortage of ways for building companies or professionals to potentially incur costly damages. For example, an architect might design the roof of a building in such a way that the rain fails to drain properly, causing water damage. Similarly, an engineer might forget to specify what type of adhesive or weather-proofing material must be used on a particular part of the building. If the construction company does not apply the correct material, this could cause the building to leak or be fragile. The nightmare scenario, of course, is for a building to collapse because of flaws in its design, potentially causing injury or death.

The type and extent of A&E liability coverage purchased often depends on the specific needs of the insured. After all, different kinds of building professionals will be exposed to different kinds of risks. HVAC engineers, for example, may want specific clauses relating to pollution, whereas a plumbing company working on construction projects might want protection relating to water damage.