One of the more challenging issues facing an Architect and Engineering firm is a contractual obligation to defend their clients from third party claims. This is not covered under a Professional Liability practice policy. A&E firms can unknowingly sign new contracts, assuming this contractual obligation and exposing the firm to uninsured defense expenses. There is an insurance policy to bridge this gap called Contractual Defense Protection.
Contractual Defense Protection (CDP) is a unique product that addresses this exposure, yet many A&E brokers are not aware of the existence of this product. In simple terms, this policy works in conjunction with the A&E practice policy and covers the gap created when an A&E agrees to defend their client against third party claims.
CDP would apply when an A&E’s client has a claim from a third party. The client would seek coverage under the “Duty to Defend” provision in their contract. If the A&E broker submits a claim to their practice policy insurer, they would reject such tender based on the contractual liability exclusion or the fact that the client is not insured under the A&E’s practice policy.
The broker would then submit the claim to the CDP carrier. The CDP carrier would then help the broker perform its “Duty to Defend” for the broker’s client, such as suggesting a qualified defense attorney.
More importantly, the CDP carrier would be responsible for paying the expenses incurred by the broker defending their client against the third-party claim, thus protecting the A&E’s cash flow. There is no deductible on this program and there is a 20% coinsurance provision.
This product is a great opportunity for insurance agents to win new A&E accounts as you identify this uncovered gap in coverage for your prospects.
About the Author:
Anthony Bottone is a Regional Practice Leader at Wholesure. Anthony focuses his efforts on assisting his retail insurance agency partners in finding solutions for their hard-to-place professional liability & management liability risks. Anthony can be reached at [email protected].