Short answer
Prime consultant liability for an architect means the client looks to you for the whole design, including the work of consultants you hire. Your professional liability may respond for work you are legally responsible for, but it does not insure your consultants. Use written consultant agreements, flow down the client’s insurance requirements, collect certificates, and tell your insurer about new services or new owners. Whether a policy responds depends on its wording and the facts.
Owner-hired vs. prime-hired consultants
When the owner hires the MEP engineer directly, the owner has a contract with that engineer. A problem with the mechanical design usually leads the owner to the engineer first.
When you hire the engineer, the owner’s contract runs only to you. The owner sees one design team led by the prime. A complaint about the HVAC or electrical design lands on you, even if a consultant produced the drawings.
Responsibility between you and your consultants depends on the contracts and the facts. Have your attorney review how your agreements allocate it.
Flow-down requirements
A flow-down requirement passes your client’s insurance terms down to your consultants. The client asks you to carry certain coverage. You then ask each consultant to carry similar coverage.
A practical consultant agreement often covers:
- Professional liability limits that match or approach what your client requires of you
- A requirement to keep coverage in place for a set period
- Certificates of insurance delivered before work starts
- Notice to you if coverage changes or lapses
Collect the certificates early and keep them on file. If a problem appears later, you will want to know who insured each consultant and for what limits. Standard forms such as the AIA Contract Documents architect-consultant agreement show how many firms structure these terms.
Our article on passing a claim down the chain explains what happens when a consultant’s work becomes the issue.
Adding a licensed owner or member
Growth often brings ownership changes. A firm may add an architect as a member of the LLC to support larger work. That change can affect your policy.
Tell your insurer about ownership changes and new disciplines. The application describes who owns the firm and what services it provides. An insurer that learns about a change late may need to review coverage, and an inaccurate application can create problems at claim time.
If an owner also runs a separate business, mention that too. Our article on running two LLCs under one practice explains why carriers ask.
Bigger contracts, bigger asks
A first large master services agreement often brings higher requirements. Common examples include:
- Higher professional liability limits
- Coverage that must stay in place for years after completion
- Broader contract wording on indemnity and additional insureds
A requirement to stay insured for years after completion needs careful wording, since professional liability policies are claims-made. Our article on contracts that require coverage for years after completion explains how firms usually answer it.
Have your agent and your attorney review the contract before you sign. Raising an issue early costs less than fixing it after you agree.
Questions to ask your agent
These questions can start the conversation:
- Do I need higher limits as prime?
- What should my consultant agreement require?
- Do I need to report the ownership change now?
- How do I verify my consultants’ certificates?
What we see at Hardcover
A firm stepping up to prime on a large multifamily master services agreement asked how subcontracting MEP would change their exposure. The owner would no longer hire the engineers directly.
We walked through consultant agreements, flow-down requirements and collecting certificates before work starts. The firm also asked whether adding an architect as an LLC member would affect its insurance, so we covered what to tell the insurer.
Related questions
We’re acting as prime and may sub out the MEP. How does that work?
Hire the MEP firm under a written agreement, require insurance that matches your client’s requirements and collect certificates before work begins. The client then looks to you for the whole design, so your contract review matters.
Does my professional liability cover my consultants?
It may respond for work you are legally responsible for, but your consultants need their own policies.
What is a flow-down requirement?
A contract term that requires your consultants to carry insurance similar to what your client requires of you.
Should I tell my insurer when I add a partner?
Yes. Ownership and service changes can affect your policy.
General education, not legal advice. Hardcover is an insurance agency, not a law firm.