Short answer
A condo exclusion in professional liability, or a higher premium for condo work, usually comes from construction defect risk. Carriers treat condo projects as higher risk, so even a small share of condo fees on your application can raise your premium or limit which carriers will quote. Some carriers may decline the work entirely. Underwriting appetite, policy terms and exclusions vary by carrier.
Why carriers worry about condo exclusion professional liability risk
Condo projects can lead to construction defect claims. Homeowners associations often bring them years after the building is complete.
Many architects and engineers who see their quotes change have a similar history. One client told us their past claims were “pretty much always around condominium work.” That is one person’s experience, but it matches why carriers look closely at this type of project.
How the application captures condo work
Applications typically ask what percentage of your fees comes from condos and townhomes. Even a small percentage can trigger supplemental questions. Some carriers may decline a firm with any condo exposure.
Many owners ask what a figure like 5% on the application actually means. It means the carrier is measuring how much of your work carries this type of risk. It does not usually mean the policy excludes only that portion.
Interiors work inside a condo unit may also be counted. Be precise about what you actually do, since the answer can change how the carrier rates your firm.
What condo work does to your premium
The effect depends on your share of fees. Small condo exposure usually raises the premium, but in our experience it does not typically double it. Carrier appetite varies, and some will not write small firms with any condo exposure at all.
Our article on why two firms with the same revenue pay different premiums explains how project type and other factors affect pricing beyond revenue.
A simple example
A small architecture firm has done mostly single-family and commercial work. It plans to add one condo project that will make up roughly 10% of its fees. At renewal, the carrier asks supplemental questions about the project. The firm should expect the premium to rise and should not assume it will double. A different carrier may view the same exposure differently.
Options when a condo project comes along
When a condo project is on the table, a few paths are worth discussing with your insurance agent:
- Ask whether a project-specific policy or a specific excess limit makes sense for that one project.
- Compare carriers, since appetite for condo work differs.
- Build the cost of insurance into your fee for the condo project.
Many firms also ask whether condo work is worth doing at all. That depends on your fee, your risk tolerance and what coverage costs. Run the numbers with your insurance agent before you commit.
Answer the application accurately
Leaving condo work off the application to get a quote creates bigger problems at claim time. A carrier may question coverage if the application was inaccurate. Our article on why your professional liability application matters at renewal explains how the answers you give can come back later.
What we see at Hardcover
A small firm’s prior carrier declined to renew after learning about a small share of condo work. We had to find a carrier whose appetite allowed it.
An architect adding a condo project estimated it would be about 10% of fees. We told them to expect an increase, not a doubling.
What to check
- What percentage of your fees comes from condos, townhomes or multifamily work?
- Does your application count interiors work in condo units?
- Does your current policy contain a condo exclusion or limitation?
- Would a project-specific policy or specific excess limit fit a single project?
- Are your application answers accurate and complete?
Related questions
Why does condo work increase my E&O premium?
Condos produce more construction defect claims, so carriers price them as higher risk.
Can I get project-specific coverage for one condo job?
Sometimes. A project-specific policy or specific excess limit can be options, depending on the carrier and project.
Is there a separate rider for a particular project?
Some carriers may offer project-specific options. Ask your insurance agent what is available for the project.
Can a small share of condo work get me declined?
It can. Some carriers will not write firms with any condo exposure, while others will. Appetite varies.