What types of insurance does an interior designer need?

The main type of insurance an interior designer will need is Professional Liability (also known as Errors and Omissions). This is the insurance most likely to be required by the designer’s clients, whether the designer works directly with homeowners or as a contractor for a larger firm.

Professional Liability is basically “mistake insurance”. If the designer makes a costly professional error, this insurance steps in to foot the bill. This might mean a design error that delays a construction project, a mishap in ordering materials that doubles the cost of a project, or any other kind of on-the-job mistake. As long as the mistake was an honest professional error, this type of policy protects the designer from the large expenses (or court costs) that can come with fixing the mistake.

Ideally the policy language should make it clear that any professional error is covered. Here is an example of this kind of broad policy language:

We agree to pay on your behalf all sums which you become legally obliged to pay (including liability for claimants’ costs and expenses) as a result of any claim first made against you during the period of the policy arising out of your business activities for any negligent act, error, omission, misstatement or misrepresentation.

In other words, this policy will pay for any professional error the designer makes. It will pay for legal fees, court costs, and damages in the event the designer is sued for negligence, and will even cover the costs of a frivolous lawsuit. Ideally, the policy will say something like “We have a duty to defend any covered claim, even if such claim is groundless, false, or fraudulent.” This means that even if the carrier thinks a lawsuit is groundless, they are bound by their own contract language to defend the designer.

For designers who work as contractors for larger design/development firms, this type of insurance is almost certainly going to be a requirement prior to starting work. Firms that contract with independent designers want to make sure that if a mistake occurs, it isn’t going to bankrupt the designer (or become the responsibility of the firm). A policy with $1mil. limits is an affordable way for the designer to protect his/her own business, as well as the clients and firms he/she works with.

Many designers also have to visit jobs sites to meet with clients, architects, or general contractors. Therefore it may also be wise for the designer to add a General Liability policy as well.

General Liability insurance protects the designer in the event someone is injured at the job site and blames the designer. For example, while meeting with the client at the construction site, the client bumps his head and decides to sue the designer (who had set up the meeting). General Liability will foot the bill for claims related to bodily injury and property damage, whether the designer is actually to blame for the injury or not. For designers who meet with clientele at or near construction sites, a General Liability policy can be an crucial piece of protection.

When combined, these two policies shield the designer from most of the everyday risks associated with their work: they protect the designer from claims stemming from professional mistakes, design flaws, injuries on a job site, accidental damage to someone else’s property, and frivolous lawsuits.

What are some ways a designer can tell if their policy is high quality?

First, make sure the policy is part of an Architect’s and Engineers program. The front of the policy should look something like this:

This means that the policy takes into account the risks that come along with working in construction, even peripherally, and contains broad contract language and many industry-specific coverages. Long story short: this policy is more likely to pay a claim related to construction than a “miscellaneous” (a.k.a. boilerplate) Professional Liability policy.

Most importantly, an “Architects and Engineers” style policy will not contain the kinds of worrisome exclusions often found in “misc.” professional liability policies. It is crucial that the policy not contain clauses that exclude coverage for core parts of a designer’s business.

For example, say an interior design firm brought on an in-house engineer. Almost every “misc.” professional liability policy contains the following exclusion:

So all claims pertaining to engineering are automatically excluded from this policy. If the engineer makes a professional error, the legal fees and claim costs would NOT be covered! This is the danger of a “misc.” policy, rather than one tailored to a designer’s actual operation.

Construction-related lawsuits can take many forms. For example, a homeowner hires a general contractor who then sub-contracts in a number of electricians, plumbers, and other contractors. Meanwhile, the owner hires an interior designer to plan the interior. Ten years after the job is complete, the homeowner discovers a construction defect in the home, and decides to sue everyone that ever worked on the home in any capacity, including the interior designer. Even though the designer is not at fault and the job was a decade ago, he/she still has to pay for a lawyer, take time off work to appear in court, and pay travel expenses, just to make the claim go away. The interior designer’s insurance policies should cover all of these costs. Therefore the policy must contain language that encompasses even these sorts of peripheral construction lawsuits.

Imagine that designer had a “misc.” professional liability policy that contained the following typical exclusion: “This policy excludes all claims based upon, arising out of, directly or indirectly, or in any way involving suitability in design, or performance of any structure with respect to its ability to bear weight”. This policy language is designed to exclude coverage for just the type of lawsuit mentioned above. Though the designer had nothing to do with the defect, the carrier will use this language to deny the claim and refuse to pay the defense costs. In construction, lawsuits like this can pop up any time, so the policy must protect the designer from this common risk.

There are other ways to tell if an interior designer insurance policy is high quality:

1. Look for industry-specific extra coverages, such as coverage for Defense of Licensing Proceedings, FHA/OSHA/ADA regulatory proceedings, and automatic coverage for the designer’s sub-contractors.
2. A quality policy might contain Subpoena Assistance and Supplementary Payments, which covers the costs associated with taking off work or traveling to appear in court during a construction-related lawsuit.
3. Ideally, the policy should include something called “complimentary future claim mitigation”. This means that if the designer even suspects there may have been an error, or a dissatisfied (or overly litigious) client, the designer can contact the carrier before the situation turns into an actual claim. The carrier will advise the designer on how to address the situation and keep it from getting worse.
4. Another favorable coverage is Public Relations Crisis Management. In the event the designer needs to hire a public relations firm to repair the company’s reputation after a lawsuit or professional error, the carrier will pay for those costs as well.

In conclusion, an interior designer’s insurance needs are more intricate than meets the eye. There needs to be coverage for all kinds of construction-related lawsuits, and policy language that is tailored to fit the designer’s business.

If you would like to speak to a broker who has specialized in interior design insurance, reach out today to get a quote. They are also happy to review your current policy and explain what’s in it.