Firm-Level vs Project-Level Insurance

Compares blanket firm-wide insurance policies with project-specific coverage, including when each is appropriate, how claims-made policies interact with both structures, and the strategic considerations architects face when structuring insurance for different project types and delivery methods.

ARE · Practice Management

Overview

Every architecture firm carries insurance. But the question that catches candidates off guard on the ARE is not whether you need it. It's how you structure it.

Firm-level insurance is the blanket coverage your practice maintains year after year. Professional liability (also called errors and omissions), commercial general liability, workers' compensation, cyber liability, key person coverage. These policies protect the firm across all projects simultaneously. They renew annually, and the firm pays the premiums as a standard operating cost.

Project-level insurance flips the model. Instead of one policy covering everything the firm does, a specific policy gets written for a single project. This might be a project-specific professional liability policy covering the design and construction period plus several years beyond completion. Or it could be an Owner-Controlled Insurance Program (OCIP) where the owner purchases a single policy covering all project participants.

Why does this matter for practice management? Because the wrong insurance structure can leave gaps. A firm-level claims-made policy only covers claims reported while the policy is active. Project-specific policies can extend that window. And when owners demand insurance requirements that exceed what standard firm policies cover, someone has to pay for the difference.

Understanding how these two approaches interact, where they overlap, and where gaps emerge is a core PcM competency.

Essential

Firm-Level Coverage: The Foundation A firm's insurance portfolio typically includes several distinct policy types, each covering a different category of risk. Professional liability (PL) insurance, sometimes called errors and omissions (E&O), covers claims arising from negligent acts, errors, or omissions in the performance of professional services. Commercial general liability (CGL) covers bodily injury and property damage claims. Workers' compensation covers employee injuries. Beyond these core policies, firms also carry cyber liability, key person insurance, business interruption coverage, and property/casualty policies. These firm-level policies share one critical characteristic: they cover the firm across all its projects simultaneously. A single PL policy with a $2 million per-claim limit and a $3 million aggregate applies to every project the firm touches during the policy period. That aggregate is shared. If one project generates a $2 million claim, only $1 million of aggregate remains for everything else. ## Claims-Made vs.

Professional

Scenario: Mid-Size Firm Takes on a Large Public Project Consider a 40-person architecture firm that typically carries $1 million per-claim / $2 million aggregate professional liability coverage. The firm wins a $50 million county courthouse project. The owner's contract requires $5 million in PL coverage maintained for three years after substantial completion. The firm's existing policy cannot satisfy this requirement. The $2 million aggregate is shared across a dozen active projects. Purchasing higher firm-wide limits just for this one project would increase premiums across the board, penalizing every other project's economics. The better approach: negotiate a project-specific PL policy. The premium gets allocated to the courthouse project budget, the coverage limit is dedicated exclusively to that project, and the policy term extends through the required post-completion period. The owner may even reimburse the premium, since the owner benefits directly from the dedicated coverage.

TLDR

Firm-level insurance covers all projects under one policy; aggregate limits are shared across the entire practice
Project-specific policies dedicate coverage to a single project with independent limits, but are increasingly hard to obtain and expensive
Professional liability (E&O) is claims-made: only covers claims filed while the policy is active, not when the error occurred
Prior acts coverage protects work done before the current policy; tail coverage (ERP) protects after a policy ends
OCIPs (wrap-ups) let the owner buy one policy for all participants; typically cover CGL and workers' comp, less often PL
Prime consultants carry vicarious liability for subconsultant negligence, which often pushes them toward higher PL limits
AIA B101-2017 says if owner's insurance demands exceed the architect's normal coverage, the owner pays the difference
Architects should never act as insurance advisors; AIA A201 cautions that doing so may not be covered by PL
Elevated standard of care language ("expert services," performance guarantees) can void PL coverage entirely
At firm dissolution, purchasing tail coverage is critical; without it, principals face personal exposure on past projects

ELI5

Think of insurance like an umbrella. Your firm carries one big umbrella that covers everyone in the office no matter which project they're working on. That's firm-level insurance. It includes professional liability (protection if you make a design mistake), general liability (protection if someone trips and falls at your office), workers' comp (protection if an employee gets hurt on the job), and a few other types. Now imagine you're working on a really big, really important building. The owner says, "I want my own umbrella just for this project." That's project-level insurance. It only covers that one building, but it's dedicated. Nobody else's rainstorm can use up your coverage. Here's the tricky part about the firm's umbrella. Professional liability insurance works on a "claims-made" system. That means the umbrella only works if you're holding it when someone files a complaint.

AREPractice Management

Firm-Level vs Project-Level Insurance

2 min read213 words

Firm-Level vs Project-Level Insurance: Choosing the Right Coverage Structure

Every architecture firm carries insurance. But the question that catches candidates off guard on the ARE is not whether you need it. It's how you structure it.

Understanding how these two approaches interact, where they overlap, and where gaps emerge is a core PcM competency.

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