Insurance Types Compared: E&O, CGL, Workers' Comp, Builders' Risk

Compares the four major insurance types encountered in architectural practice, covering what each policy protects against, who carries it, how coverage triggers differ, and common exam traps around additional insured status and claims-made vs. occurrence-based policies.

ARE · Practice Management

Overview

Architecture firms don't carry just one insurance policy. They carry several, and each one covers a completely different kind of risk. Mix them up on the ARE, and you'll lose points on questions that test whether you understand which policy responds to which scenario.

Professional liability insurance (also called E&O, for errors and omissions) covers claims arising from your professional services. If a design error leads to a construction defect, E&O is the policy that responds. Commercial general liability (CGL) covers bodily injury and property damage claims that aren't tied to your professional work. Someone trips in your office lobby? That's CGL territory.

Workers' compensation is mandatory in nearly every state. It covers employees who get injured or sick on the job, regardless of fault. The employer pays premiums; the employee receives benefits without needing to prove negligence. Builders' risk (sometimes called course of construction insurance) protects the physical structure and materials during construction against perils like fire, wind, and theft.

Here's the critical distinction the exam tests: E&O is claims-made coverage, meaning the policy in force when the claim is filed is the one that responds. CGL is occurrence-based, meaning the policy in force when the incident happened is what counts. That single difference drives contract negotiations, tail coverage decisions, and a whole chain of practice management issues you'll see tested on the PcM exam.

Essential

Each insurance type in architectural practice exists because a different category of risk exists. You can't substitute one for another, and the ARE tests whether you can match the right policy to the right scenario. Let's break down all four. ## Professional Liability (E&O) Insurance Professional liability insurance, frequently called errors and omissions or E&O coverage, protects design professionals against claims arising from their professional services. The policy pays on behalf of the insured when negligence in rendering professional services causes damage or injury to a third party. A wrongful act under a professional liability policy means an act, error, or omission that causes liability in the performance of professional services. Those services include work performed as an architect, engineer, interior designer, site design professional, construction manager, or technical consultant. Claims-made vs. occurrence. This is the single most tested distinction. E&O policies are written on a claims-made basis.

Professional

Consider a mid-size architecture firm that just landed a $12 million mixed-use project. The owner's contract requires professional liability limits of $3 million per claim and $3 million aggregate, along with evidence that the architect carries CGL and workers' comp coverage. The firm's current PL policy has a $1 million per claim limit. What decisions need to happen? First, the firm's insurance broker needs to evaluate whether increasing the PL limit is feasible and what it will cost. Under AIA B101-2017, if the owner's requirements exceed the firm's normal coverage, the owner should pay for the additional coverage. That's a negotiation point many firms miss. They simply buy higher limits without passing the cost through. Second, the owner's attorney has included a provision requiring the firm to name the owner as an additional insured on the PL policy. The firm's broker flags this immediately.

TLDR

E&O (Professional Liability): Covers claims from negligent acts, errors, or omissions in your professional services. Claims-made basis; the policy in force when the claim is filed responds.
CGL (Commercial General Liability): Covers bodily injury and property damage from general operations, not professional services. Occurrence-based; the policy in force when the incident happened responds.
Workers' Comp: Mandatory state-run program. Covers employee injuries regardless of fault. No-fault system; employees can't sue their employer for covered injuries.
Builders' Risk: Property coverage protecting the structure and materials during construction. Owner typically carries it. Doesn't cover liability claims.
Additional insured status works on CGL but not on PL policies. Clients can't be added to your E&O.
Contractual liability is broad form under CGL, limited form under PL. Indemnification beyond negligence falls outside PL coverage.
Elevated standard of care (promising "expert" services or guaranteed outcomes) can make claims uninsurable under E&O.
Tail coverage (extended reporting period) is needed when you retire or wind down your practice because E&O is claims-made.

ELI5

Think of an architecture firm as a person walking through a rainstorm. But this isn't just one kind of rain. There are four completely different types of rain coming from four different directions. You need a separate umbrella for each one. Umbrella #1: E&O (Errors and Omissions). This is your "I made a mistake in my drawings" umbrella. If you design something wrong and it causes a problem, this policy helps pay for it. Here's the catch: it only works if the umbrella is open when someone complains, not when you made the mistake. So if you designed something five years ago but someone just now noticed the problem, you need to still be holding this umbrella today. Umbrella #2: CGL (Commercial General Liability). This is your "someone got hurt and it's not about my design work" umbrella.

AREPractice Management

Insurance Types Compared: E&O, CGL, Workers' Comp, Builders' Risk

2 min read226 words

Why You Need to Know Four Different Insurance Policies

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