Short answer
Professional liability coverage territory tells you where work and claims can happen, but it doesn’t settle whether overseas design work is covered. Who counts as an insured and what you disclosed on the application often decide that. Ask your agent to get the insurer’s answer in writing, since coverage depends on your policy terms, exclusions and underwriting.
How does professional liability coverage territory treat work done abroad?
Territory wording answers three separate questions:
- Where is the project?
- Where does the team produce the work?
- Where would someone bring a claim?
Many A&E policies cover services performed anywhere, as long as someone brings the claim in the US or Canada. Some go further. Therefore, check your declarations and the policy’s definition of coverage territory. The IRMI glossary entry for coverage territory gives general background on the term.
Who is an insured when the design team is overseas?
Policies usually cover the named firm, its owners, and its employees for work done on the firm’s behalf. However, people employed by a separate foreign company often don’t qualify as insureds just because they work on your projects.
A foreign sister company or affiliate is usually a separate entity. It may therefore need its own policy in its own country. One insurer told a client in writing that claims against a separate foreign entity would not affect the US policy, because the policy covers the US entity. Wording differs by policy, so confirm yours.
Insurers often treat offshore drafting vendors and freelancers as subconsultants. Depending on its terms, your policy may defend your firm over their mistakes, but it doesn’t insure them. In this situation, review our articles on bringing a 1099 architect into your firm and your own subconsultant terms.
Example: a hypothetical dual-licensed principal
A principal licensed in the US and abroad runs a US corporation that holds the client contracts and the license. A sister office overseas produces much of the design. Before paying the first installment, the principal asks the insurer for its position in writing on three points: claims against the separate firm, risk management requirements for overseas staff, and work produced abroad by non-employees.
In this hypothetical, the written answers stay on file with the policy. Whether the policy responds to a later claim depends on its terms, exclusions and underwriting. Either way, getting answers before you need them is a sound habit.
What should you tell the insurer on the application?
Applications often ask about affiliated firms, prior claims, and work performed outside the US. Answer fully, because a “yes” with no details may leave a gap that causes trouble later.
- Disclose claims against related firms even if you believe they don’t apply. Let the underwriter decide, and ask for the answer in writing.
- If your policy requires all professionals to complete a risk management course, ask whether that includes staff abroad.
- Ask whether working with an offshore drafting team changes your application.
Many policies use a claims-made basis, so timing and disclosure matter.