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The use of Web sites to provide information and plans to clients while a project is in progress can lead to later disputes about design changes or even the use of preliminary design information. To avoid such disputes, firms need to establish ground rules with clients about which plans constitute the final, sealed versions.

Insurance Coverage Implications
As the use of technology such as the Internet, email, design software, and computer networks transforms the architectural and engineering professions, those firms need to make sure their risk management programs reflect the changes. As firms review their loss control and prevention efforts, they need to recognize that their new risks may not be fully addressed by their traditional insurance program. Firms also need to document the best-practice procedures they have instituted to cover their technology risks and communicate those practices to their underwriters.

In the insurance industry, the explosion of digital technology over the last decade has necessitated the development of new products to address the emerging coverage needs of companies in the technology sphere. Many new products have been developed since the late 1990s in response to the rapid spread of Internet-based business and communications.

Today, insurers offer coverage for risks such as the theft of confidential data, loss or corruption of data caused by hackers or malicious code, and lost income when a network attack cripples or shuts down a company’s Web site. Insurers also offer liability coverage for the release of confidential information, retransmission of a computer virus due to inadequate network security, intellectual property disputes, and even costs to restore public confidence after a cyberattack.

While insurers have developed a wealth of expertise in new technology risks, businesses in other industries may not receive the benefit of that knowledge. The insurance industry often operates in separate niches: some insurers are experts in new technology and others in architecture and engineering. Insurers with expertise in traditional architecture and engineering liabilities may struggle with the new risks faced by large multi-disciplined firms.

The adoption of new technology by design firms has led to hybrid exposures that may go unaddressed in a firm’s insurance program. Technology coverage forms are typically used for companies in the technology space, while architectural and engineering firms typically will be covered under an A&E form. A&E forms, however, may not adequately address information technology exposures, such as copyright infringement or multimedia liability arising from the posting of information on the Internet.

Many policy forms explicitly define A&E services as professional services including work such as architectural services, electrical engineering, interior design, master planning, and other traditional areas. Those definitions may fail to reference the technology services rendered in support of the architectural and engineering services.

The definition of professional services is a crucial issue for larger firms that are involved not only in traditional architectural and engineering services but also with the operation and maintenance of systems, programming of manufacturing systems, and process engineering. Those additional services may be a key portion of a multi-disciplined firm’s business, complementing their traditional services. The traditional definition of professional services for an A&E firm, however, may not cover those new areas of business. Such risks may need to be addressed through adding endorsements or by manuscripting policies so that the professional services definition explicitly mentions the new services.

CFOs and risk managers need to ensure that their insurance programs are up-to-date in addressing these new exposures. Some of the newer editions of A&E policy forms now explicitly address issues such as software development under a product exclusion. Coverage in that area may be provided via a carve-back for software design, or the form could be specifically modified to fit the client’s needs. While software copyright infringement is a huge issue in business today, it is not provided as a standard coverage grant under A&E or technology policies. Clients may need to request such coverage separately and have it underwritten via a supplemental application.

Conclusion
In the current insurance market, there is adequate capacity in the traditional A&E markets as well as in the technology market. However, only a finite number of insurers can do both well — i.e., bring adequate expertise to address the new technology exposures for A&E firms and manuscript and tailor policies by providing the right endorsements.

To make sure that they are fully serving their clients’ needs, insurers must recognize the dangers in isolating their areas of expertise into separate niches. A lack of communication between underwriters with varying areas of expertise can leave a modern A&E firm uncovered for new technology risks.

Architects design the buildings where we live and work assisted by engineers who design the integral structural and other related components. Engineers also design the infrastructure of the modern world and the equipment that runs the global economy. Their adoption of digital technology promises to bring even more changes to the physical landscape of modern life.

In the world of technology, the insurance industry has played a crucial role by providing risk transfer opportunities to support the digital revolution. In many cases, they have not been as proactive in bringing that experience to bear in the A&E fields. Insurers, however, can play that same supportive role in working with architects and engineers as they adopt new technology to design bold, new projects.

By combining their talents and expertise in traditional markets with their skills in emerging technology risks, insurers not only open new opportunities for themselves, they serve their clients better and help architects and engineers build the modern world.

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