The CNA professional liability policy provides very broad coverage for damages caused by your negligence, but it does contain some exclusions, and it’s important to know what they are. For example, we recently received an inquiry from an architect who was in the process of interviewing structural engineers to provide services for a private residence. The architect asked us to review several of the subconsulting agreements he had received from various engineering firms. He did not at first advise us that he also owned the residence that was the subject of these agreements. That important fact affects coverage.
Professional liability policies exclude claims for professional services you provide for property you own, manage, or control. Exclusion E of the CNA policy states:
We will not defend or pay under this Policy for any claim:
E. made against you by any entity:
1. which is operated, managed, or controlled by you;
2. in which you have an ownership interest in excess of 49%;
3. which wholly or partially owns, operates, or manages you.
Hence, as the owner of the residence, the architect would not be able to make a claim under the professional liability policy for damage caused by the architect’s negligence. You cannot make a claim against yourself. However, and depending upon the law of the local jurisdiction, a subsequent owner may be able to make a claim against the architect’s professional liability policy for damages caused by the architect’s negligence.
If you find yourself in the position of performing professional services on property in which you have an ownership interest, it’s essential to consult with your broker and local legal counsel to fully understand your coverage as well as your risks and responsibilities both as a design professional and as the client/owner.