Professional liability claims are up for architects and engineers, according to a survey of professional liability insurers. This is the case even as architecture and engineering firms generated larger premiums in 2019 due to increased billings.
A great deal of claim activity focused on residential and infrastructure projects. The disciplines with the highest claim severity included:
- Structural engineering
- Architecture
- Mechanical engineering
- Civil engineering
“There was a long stretch there where everybody was very happy,” commented a partner at the brokerage Ames & Gough, which performed the survey. “Now, for whatever reason, we are seeing some claims creeping into the market.”
Ames & Gough sent out surveys to 23 professional liability insurers, out of about 40 in the market. Fifteen firms answered the survey, but they accounted for the bulk of the professional liability market share.
The survey found that 80% of the carriers saw professional liability premium growth in 2019 — half with increases of 10% or greater. Forty percent of carriers said they had seen an increase in claims, many by as much as 10%.
“One trend that I am seeing is higher limit demands across the board regardless of discipline and/or complexity of the project. We are inundated daily with specific project excess limit requests,” said the Ames & Gough partner.
With claims up, rates are on the rise
Increasing claims will put pressure on insurance rates, and this is the first time that has happened since the Great Recession. Eighty-two percent of companies surveyed are seeking increases of 5% or less, with the remaining companies raising rates by 6% to 10%.
Some professional liability carriers blame the increasing claims at least partly on “social inflation,” which is the tendency of juries to hand down larger awards than they had in the past. Some specifically pointed to litigation funding firms as a driver of those larger awards.
Regardless of the precise reason for increasing claims, this is an area professional liability insurers will need to take note of. Are your PLI claims rising?
