Contract - December 2014 - 18

PHOTO COURTESY RICHARD POLLACK

COLUMNIST

Obtaining the Best Insurance Coverage Will Benefit Your Firm
by Richard N. Pollack, FAIA, FIIDA

Most interior design and architectural businesses have some financial
and administrative components that the firm's leadership does not
properly focus on. One of those components is insurance, both
standard business insurance and professional liability coverage. I feel
comfortable making a blanket statement that no designers get excited
about discussing their insurance coverage, but like every part of
running a business, it is quite important. Designers need to know
enough about insurance to not be taken advantage of.
The first step is connecting with an insurance agent or broker.
As with any business relationship, you must feel very comfortable with
the person. A great place to start is asking business colleagues,
especially other designers, for referrals. You may need two insurance
agents, one for standard business insurance, such as general liability,
and one for professional liability. The reason for considering two is that
once an agent is dealing with your professional liability insurance, they
may not be as competitive for standard insurance. Business insurance
policies include those for commercial property (all risk and perilspecific), business interruption, business auto, workers' compensation,
and general liability (standard and umbrella). If your practice is in your
home, homeowners' insurance does not typically cover home-based
business losses.
Standard business insurance
Once you have identified a shortlist of at least three brokers for
standard business insurance, ask them to send promotional material in
advance of your first meeting. This allows you to get comfortable with
the industry's nomenclature, make margin notes to be clarified when
you meet in person, and start the process of comparing their services
and approaches. Before the meeting, ask the agents to suggest
policies and their limits and deductibles.
If you already have an agent or agents, conduct a formal review
of your insurance and broker when your policies are up for renewal.
With renewals or new policies, make certain that the coverage is
appropriate for your firm and that you are comfortable with the
deductibles. This is the same kind of analysis you should be doing
with auto and life insurance, and it is more important for your business.
When you meet with the agents, let them know that you want a formal,
written quote showing coverage, deductibles, exclusions, and
inclusions-and that you will be comparing it against other proposals.
The last part of your due diligence should be to check an
insurance company's record with your state department of insurance

18

to examine performance comparisons, as well as complaints and how
they are addressed. This is primarily to review the insurance company
itself, but you might also get information about the brokerage.
Professional liability insurance
Liability insurance is also called errors and omissions (E&O) coverage.
Commercial clients usually require this insurance, in addition to
standard business insurance, and it is typically more expensive. I have
seen many instances in which clients ask for high limits, from $5 million
to $10 million, which obviously have higher premium costs and a
greater impact on profits. In my experience, I have been successful at
reducing those policy limits through conversations with the clients'
legal or insurance teams, sometimes factoring in that the high limits
requested are based on ground-up buildings, not interiors projects.
A good approach to reducing E&O premiums is to provide clients
with a draft agreement before they send their version. In my firm's
standard agreement, the E&O clause is worded to limit our professional
liability coverage to the amount of our fee. Our E&O broker reduces our
annual premiums based on the percentage of agreements that contain
the E&O liability limit-the higher the percentage, the lower the
premiums. Of course, clients often push back, and one strategy is to
explain that the higher limits raise our premiums, but we can accept
the higher limits if the client agrees to pay increased premium costs.
Some E&O brokerages and carriers will provide free lunch-andlearn sessions to educate your team about risk and include workbooks
with agreement language for negotiating with clients. A broker may
also offer the review of client contracts by an attorney.
In summary, the ideal approach to having the best insurance
coverage is to select the best broker, agent, or carrier for you;
aggressively compare coverage and cost; reduce professional liability
risk through staff education; and of course, don't make mistakes that
require an insurance claim!
Richard N. Pollack, FAIA, FIIDA, writes a regular column for
Contract on business practices in design and professional
development. Pollack is the CEO of San Francisco-based Pollack
Consulting, which supports firm growth and success through
improved business development, winning presentation
techniques, recruitment of top talent, business coaching,
and ownership transition implementation. His website is
richardnpollack.com.

contractdesign.com

DECEMBER 2014


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Contract - December 2014

Table of Contents for the Digital Edition of Contract - December 2014

Contents
Editorial
Industry News
Columnist: Obtaining the Best Insurance Coverage Will Benefit Your Firm
Product Focus: Global Appeal
Product Focus: Woven Poetry
Designers Select: Office
Designers Select: Healthcare
Designers Select: Hospitality
Designers Select: Education
Editor's Choice
Feature: The Supporting Actor of Interiors: Amuneal Creates Interiors that Enhance Interior Architecture
IIDA Best of Asia Pacific Design Awards 2014
Brand Report 2014
Industry News: Design School Rankings
Ad Index
Event: Attendees Inspired at Contract’s Design Forum in Aspen
Contract - December 2014 - Intro
Contract - December 2014 - Cover1
Contract - December 2014 - Cover2
Contract - December 2014 - 1
Contract - December 2014 - Contents
Contract - December 2014 - 3
Contract - December 2014 - 4
Contract - December 2014 - 5
Contract - December 2014 - 6
Contract - December 2014 - 7
Contract - December 2014 - 8
Contract - December 2014 - 9
Contract - December 2014 - Editorial
Contract - December 2014 - 11
Contract - December 2014 - Industry News
Contract - December 2014 - 13
Contract - December 2014 - 14
Contract - December 2014 - 15
Contract - December 2014 - 16
Contract - December 2014 - 17
Contract - December 2014 - Columnist: Obtaining the Best Insurance Coverage Will Benefit Your Firm
Contract - December 2014 - 19
Contract - December 2014 - 20
Contract - December 2014 - 21
Contract - December 2014 - Product Focus: Global Appeal
Contract - December 2014 - 23
Contract - December 2014 - Product Focus: Woven Poetry
Contract - December 2014 - 25
Contract - December 2014 - Designers Select: Office
Contract - December 2014 - 27
Contract - December 2014 - Designers Select: Healthcare
Contract - December 2014 - 29
Contract - December 2014 - Designers Select: Hospitality
Contract - December 2014 - 31
Contract - December 2014 - Designers Select: Education
Contract - December 2014 - 33
Contract - December 2014 - Editor's Choice
Contract - December 2014 - 35
Contract - December 2014 - 36
Contract - December 2014 - 37
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Contract - December 2014 - Feature: The Supporting Actor of Interiors: Amuneal Creates Interiors that Enhance Interior Architecture
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Contract - December 2014 - IIDA Best of Asia Pacific Design Awards 2014
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Contract - December 2014 - Brand Report 2014
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Contract - December 2014 - Industry News: Design School Rankings
Contract - December 2014 - Ad Index
Contract - December 2014 - Event: Attendees Inspired at Contract’s Design Forum in Aspen
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