Got a Demand Letter? Here Is What Happens Next.
Getting a claim is stressful. The process is more predictable than most firms expect. Report it early, let the carrier assign a lawyer, and know how your deductible works before you need it.
From the Letter to a Lawyer.
Call us, and report it quickly
Professional liability is usually claims-made, so a claim generally has to be reported to the carrier during the policy period. Call us as soon as you get a demand letter, subpoena or lawsuit and we will walk you through reporting it. Your policy also explains how.
The carrier reviews it
The carrier reads the letter or complaint, asks you for the contract and project file, and decides how the policy applies.
A defense lawyer is assigned
On a covered claim, the carrier usually appoints a lawyer from a panel of firms that defend design professionals. The carrier hires and pays the lawyer directly. You are not paying and waiting to be reimbursed.
The claim is defended
Many claims against design firms end without any payment for damages. Some settle. A few go to trial. The carrier will want your consent before settling on most policies.
What Not to Do.
- Don't admit fault or promise to fix the problem at your own cost before talking to the carrier.
- Don't offer a settlement or a fee refund on your own.
- Don't wait to see if it goes away. A late report can put coverage at risk.
- Don't change or throw away project files, emails or notes.
What to Gather.
- The demand letter, subpoena or lawsuit
- Your contract or proposal for the project
- Drawings, reports and key emails
- A short timeline of what happened, in your own words
How the Deductible Works on a Claim.
A claim has two parts: the cost of defending you, and any damages paid. Your deductible terms decide which of those you share.
Standard deductible
You pay your deductible as defense costs and any damages come in, whether or not the claim ends in a payment.
Definition →First dollar defense
Your deductible applies only to damages. If the claim is dismissed with no payment, you may owe nothing toward defense.
Definition →Aggregate deductible
Caps the total deductibles you pay in one policy year, no matter how many claims you have.
Definition →Defense outside the limits
Defense costs do not reduce the limit available to pay damages. Inside the limits, they do.
Definition →Claims, in Plain Words.
What counts as a claim?
It depends on the policy. Many count a written demand for money or services, a lawsuit, or an arbitration demand. Some also let you report a situation that could become a claim. Check the definition in your policy, and when in doubt, report it.
Who pays the lawyer?
On a covered claim, the carrier hires and pays the defense lawyer directly. How defense costs interact with your deductible and your limit depends on the policy.
Can I choose my own lawyer?
It depends on the policy. Many let the carrier appoint counsel from its panel. Some let you choose with the carrier's approval. If it matters to you, ask before you buy.
When do I pay my deductible?
With a standard deductible, as costs come in. With first dollar defense, usually only if damages are paid. Your declarations page shows which you have.
Will I be sued personally or will my firm?
Claims usually name the firm that signed the contract, and often the individuals who did the work. Most firm policies also protect employees for work done for the firm.
Does professional liability cover a fee dispute or a job site injury?
Usually not. Fee disputes are generally excluded, and bodily injury that is not about your design is usually a general liability claim.
What if I already switched carriers?
With claims-made coverage, you generally report to the policy in force when the claim is made, as long as your retro date reaches back to the project. See how claims-made coverage works.
How claims-made coverage works →
General education only, not legal advice. Your policy’s reporting conditions and wording control. If you have received a claim, follow the instructions in your policy and contact your carrier.
Tell Us About Your Firm. We’ll Tell You What We See.
Starting out or renewing, with a policy in hand or not. If something is worth discussing, we’ll call. If not, we’ll say so.