Short Answer
When a plan error claim becomes a professional liability claim, the policy generally responds to defense costs and a third party’s alleged damages, subject to the policy’s terms.
It usually does not pay for the firm to redo its own work. Coverage depends on the policy wording, retroactive date, reporting requirements, and how the parties share responsibility. The policy limit and deductible also affect what the firm pays.
How is a plan error different from a plan error claim?
A plan error is a mistake in the work. A plan error claim is a demand for money or services from someone who says the mistake harmed them. Many errors are caught and corrected without ever becoming a claim. If you have just found one, start with our article on what to do after finding a plan error.
This page starts when a demand arrives. It also explains what the policy may do if an error develops into a claim.
Does professional liability insurance pay defense costs for a plan error claim?
Many architects and engineers professional liability policies include a duty to defend. This means the carrier handles and pays for the defense of a covered claim. The policy may also give the carrier the right to select counsel.
Policy forms vary. Some policies pay defense costs in addition to the limit. Others reduce the limit as defense costs are paid. The deductible may also apply to defense costs.
This matters because a plan error claim can require a full defense even if the firm is ultimately found not responsible.
For example, a firm may carry a $1 million limit. If defense costs reduce that limit, less money may remain for a settlement or judgment.
What damages can follow a plan error, and are they covered?
A plan error claim often alleges economic losses. Common examples include added excavation or material quantities, removal and replacement of completed work, redesign, delays, and workarounds for tie-ins to existing conditions.
A contractor may claim costs from building to the plans. An owner may claim added project costs or lost use.
Professional liability policies generally respond to amounts the firm becomes legally obligated to pay because of a wrongful act in its professional services, subject to exclusions.
Some costs may count as expenses the owner would have paid even if the plans were correct. Whether that applies depends on the facts, contract, and applicable law.
Policies may also limit coverage for liability the firm accepted only through a contract. This can include guarantees or warranties. Discuss these provisions with the carrier and counsel.
Does professional liability cover the cost of fixing the firm’s own drawings?
Usually not. Time spent revising drawings generally becomes the firm’s own cost of doing business. Many policies exclude or limit coverage for redoing services or returning fees.
The coverage focuses on claims by third parties. It generally does not cover the firm’s own cost to correct its work.
A firm may agree to pay a contractor’s extra costs to keep a project moving. However, many policies require the insured not to admit liability or assume obligations without the carrier’s consent.
Check that language before agreeing to pay anything related to a plan error claim.
What if someone else shares responsibility for the error?
A plan error rarely has a single source. A surveyor may have staked from the plans. A contractor may have had an opportunity to catch a discrepancy. A reviewer may have missed it. Subconsultants may also have supplied data.
The contract and applicable law determine how the parties share responsibility.
A firm can face a plan error claim even when others contributed to the problem. Being named in a claim is different from being found responsible.
Our article on whether a structural engineer can be sued for a problem they didn’t cause covers that distinction in more detail.
From an insurance standpoint, the carrier may also consider whether other parties, their policies, or subconsultant agreements could respond.
How does claims-made reporting affect a plan error claim?
Most professional liability policies for architects and engineers are claims-made and reported policies.
In general, the claim must be made against the firm and reported to the carrier during the policy period. A stated reporting window may also apply after the policy ends.
The retroactive date also matters. Work performed before that date may fall outside coverage.
If the firm changes carriers or closes, an extended reporting period may affect whether a later plan error claim can still be reported.
Because timing matters, firms should raise a known error with their broker or carrier promptly. Do not wait to see whether a claim follows.
Many policies allow firms to report circumstances that could lead to a claim. That may help tie the matter to the policy in force when the firm discovered the issue.
How do limits and deductibles apply to a plan error claim?
The policy limit is the most the policy pays for a claim. Most policies also have an aggregate limit for the policy period.
Related claims arising from the same error may be treated as a single claim. If so, they may share one limit and one deductible.
If defense costs reduce the limit, those costs also reduce the amount available for other covered amounts.
The deductible is what the firm pays before the carrier’s obligation applies. It may also apply to defense costs.
Contracts often require minimum limits. As a result, both the firm’s policy limit and the amount remaining after defense costs can matter.
Example
A civil firm designs a 500-foot roadway reconstruction for a private owner. A datum conversion was applied incorrectly, and the proposed elevations sit about half a foot too high.
The error is not caught before construction. A surveyor stakes from the plans, and the contractor places base course and paving through one section before the tie-in at an existing driveway shows a difference of roughly 6 inches.
The contractor sends a written demand for the cost of removing and replacing the completed work, plus delay. The owner then writes to the firm alleging added costs.
The firm carries a $1 million per-claim limit with a $10,000 deductible, and it reports the matter to its carrier under the policy’s notice provisions.
Several things now happen at once. The carrier reviews the claim against the policy and may appoint defense counsel, and the deductible applies under the policy’s terms. The firm’s own time to reissue corrected drawings is likely an out-of-pocket cost.
The surveyor’s stakeout and the contractor’s field verification raise questions about shared responsibility, and part of the owner’s added cost may be argued to be work that would have been needed under a correct design. Whether the policy pays, and how much, depends on the wording, the contract, and the facts.
What to check
- Is the policy claims-made and reported, and what is the retroactive date?
- What do the reporting conditions require for claims and for circumstances that could lead to a claim?
- Does the policy include a duty to defend, and do defense costs reduce the limit?
- What is the deductible, and does it apply to defense costs?
- Are there exclusions or limits for rework, fee return, guarantees, or contractually assumed liability?
- Does the policy restrict admitting liability or agreeing to pay costs without the carrier’s consent?
- Would related claims share one limit and one deductible?
- What limits and indemnity or limitation of liability terms does the project contract include?
- Do subconsultant agreements or other parties’ policies come into play?
Hardcover insight
A plan error rarely produces a single bill. It can create several costs that land in different places. Some may fall within the type of loss professional liability insurance is designed to address. Others may not.
Defense costs and third-party damages are where professional liability is designed to respond. A firm’s own rework time and voluntary payments to a contractor generally are not.
Firms sometimes expect the policy to absorb the full cost of a mistake. They may only learn how the costs are divided after a demand arrives.
Review the notice, consent, and rework provisions before a problem becomes a plan error claim. Know who at the firm should contact the broker or carrier. That preparation can make the first conversation much easier.
Small and in-house design offices where one person designs and checks the work can benefit from that preparation.
What were civil engineers saying about the cost of a plan error claim?
A recent discussion among Reddit civil engineers centered on an engineer who found that nearly every proposed elevation on an awarded roadway project was about half a foot too high before staking began.
Most of the discussion focused on fixing the problem early.
Commenters disagreed about who would pay. One expected the contractor to request a change order that the owner would absorb. Another said there should be no change order. A third warned that the engineer could receive an errors-and-omissions letter.
Several commenters noted that earthwork quantities are where the costs can increase.
Others described errors that reached the field. In one case, a design elevation left a precast piece a full foot short. In another, a survey error left a tie-in 4 inches high, and the contractor built it anyway.
These are anonymous comments and personal experiences. They are not verified guidance. Reddit discussion should not be treated as insurance or legal advice.
Related Questions
Does a contractor’s change order request count as a plan error claim?
It depends on how the policy defines a claim. Many policies define a claim as a written demand for money or services.
Whether a change order request qualifies depends on the policy wording and how the request is presented. Review the policy and follow its reporting conditions before responding.
Can a firm be sued for a plan error that someone else should have caught?
Yes, a firm can be named in a claim even when others may share responsibility. Whether it is ultimately found responsible depends on the facts, the contract, and the applicable law.
What happens if the claim arrives after the policy changes or the firm closes?
It depends on the retroactive date, the terms of the new or expiring policy, and whether an extended reporting period was purchased. Because claims-made coverage responds to when a claim is made and reported, these details should be reviewed before a change.
Does an error I found and fixed matter on my renewal application?
Applications commonly ask about known circumstances that could lead to a claim. A broker can help you decide what to disclose and how to describe it accurately.
This article is educational and does not provide legal advice or determine whether a specific claim is covered. Policy terms, exclusions, underwriting requirements, and applicable law vary. Consult your insurance professional and qualified legal counsel regarding your circumstances.