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Providing Emergency Professional Services & Your Professional Liability
So...you plan to provide emergency professional services for the Texas Department of Public Safety and Texas Division of Emergency Management . Here’s some professional liability insurance information for you to consider.
The Texas Department of Public Safety and Texas Division of Emergency Management (TDPS) has produced a “Memorandum of Understanding” for use in contracting with Architects for procurement of emergency professional services. Under the proposed agreement, the Architect is considered a “State Operation Public Works Response Team Member” and will be on call during times of public emergencies.
Emergency services and pro bono work are difficult to underwrite. Professional liability insurance underwriters know emergency and pro bono work carry the same liability exposures as those found in fee based projects. In many cases, emergency services pose an even higher risk with very low fees. Nevertheless, a properly written professional liability policy should include coverage for claims arising out of rendering emergency professional services.
Caveat: We say “should” include coverage because no one can make official coverage determinations on behalf of an insurance carrier. Each unique set of claim facts determines whether or not a claim is covered by the applicable policy. Only the insurance carriers provide definitive coverage determinations. Rather than rely on hindsight, let’s explore what to look for in your insurance policy in relation to the TDPS agreement.
The first issue to address is the Named Insured on your professional liability policy. These policies are written with the design firm as the primary Named Insured. Although the policies automatically cover current and former owners, officers and employees of the firm (without the individuals actually being named on the policy) the policies cover these individuals only for work they perform on behalf of the firm. “On behalf of the firm” refers to contracts entered into by the firm. Since the proposed TDPS agreement would be entered into by an individual architect, not the firm, a significant coverage issue arises.
Please note the Named Insured issue isn’t unique to TDPS contracts. When working in states other than your home state, registration or licensing statutes may require that your professional services contracts be entered into by the individual Architect of Record. Essentially the individual is acting as a sole proprietor in those states and a Named Insured coverage gap exists.
To remedy these types of situations add the individual professional as an additional Named Insured on the firm’s professional liability policy. For example, a policy for Jones Architectural Group automatically covers Judy Jones, AIA as an officer of the firm. If Judy signs a contract as an individual, the firm’s policy must be endorsed to specifically name “Judy Jones, AIA” as an insured. Most professional liability carriers should be willing to add Judy as a Named Insured as long as the services being performed remain within the systems and controls of Jones Architectural Group; and revenue generated by the contract is recorded as part of the firm’s revenues.
A second area of concern when performing emergency professional services is certification forms you may be asked to sign. If not worded correctly these certification statements could be construed as uninsurable warranties and/or guarantees. This blog is not intended to address all the ramifications of warranty-type statements. Please seek professional guidance before signing any certification forms associated with the TDPS program.
The third issue we will address is a potential lack of coverage arising out of pro bono projects. Most professional liability insurance policies cover liability arising out of pro bono work. Unfortunately some cut-rate professional liability policies narrowly define covered professional services as “those services performed for others for a fee”. The “for a fee” stipulation basically functions as a coverage exclusion for pro bono work. At a minimum, design professionals need to review the “Definitions” section of their policy to make sure pro bono work is not excluded by the way in which the policy defines “Professional Services”. You should also pay particular attention to the definitions of “Claim”, “Demand” and “Wrongful Act” to determine if these definitions conceal pro bono exclusions or otherwise limit coverage unexpectedly.
In conclusion, if you decide to participate in the TDPS emergency services program read the proposed “Memorandum of Understanding” agreement carefully. Make sure you understand the entire agreement. Know that professional liability coverage varies from carrier to carrier. Seek advice from your attorney and specialized professional liability agent/broker before proceeding with work under this program. Above all, don’t hesitate to ask questions.
Thank you for utilizing your professional expertise as a valuable contribution to our community.
Brian R. Hadar, CRIS and Melissa Pratt, CIC of McLaughlin Brunson Insurance Agency, LLP
Written: November 2014