Chapter 24
Ideally, the material covered in this chapter, particularly that relating to
professional liability insurance in Section 24.6, can be approached by introducing
into the classroom someone with practical experience in professional liability
• Rate making;
• Effect of claims on rates;
• Operation of deductible policies;
• Attitude of insurer toward arbitration;
Regardless of whether such a person is available, each instructor must decide
how much of this difficult topic to address. We strongly believe that skipping this
chapter would be a mistake. Anyone involved in the business world should have
at least a basic understanding of insurance.
One claimant from the chapter’s scenario is the employee of Excavator, who
was injured when a soggy trench collapsed. His claim against AAI (the architect)
is discussed in Sections 24.6B and 24.6C. A good question to pose for class
discussion is: What would happen if the employee sued Excavator (his
employer)? Of course, the answer is that the employer would be immune from
liability under the workers’ compensation statutes (Section 2.12B).
Answers to Chapter Questions
1.) As a general rule, construction projects engender which types of insurable risks?
2.) Which three forms of insurance are most relevant to construction projects?
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a. The three forms of insurance that are most relevant are (1) property
insurance, (2)liability insurance, and (3) workers compensation and
employer’s liability insurance.
3.) What are the primary types of insurance obtained by the owner, design
professional and contractor or subcontractor?
4.) What are some factors that can determine the amount of required premiums for
any individual insured?
5.) What are some examples of how an insured must cooperate with the insurer in
handling a claim? What is the possible consequence to the insured of its failure to
cooperate?
6.) Which type of insurance is the property insurance policy most often secured to
insure against the risk of loss to construction projects?
7.) What is a primary purposes of commercial general liability insurance?
8.) What are two reasons why a design professional would carry professional liability
insurance, even if it was not required by his contract with an owner?
9.) What are some examples of activities that may be exclusions in a professional
liability insurance policy?
10.) What strategies should design professionals incorporate in regard to their
documentation in anticipation for facing claims?
