Why Interior Designers Need Liability Insurance for Errors and Omissions

For some people, the question of why professional liability insurance is needed comes up over and over again. Individuals who operate small businesses from their homes, or on the side, may feel that they do not get involved in projects large (a.k.a. hazardous) enough to worry about insurance. Or they may feel that the services that they provide don’t present any exposure for lawsuits.

The truth is that any individual (or business entity) that provides advice for a fee is liable for the soundness of that advice. If a client follows your advice, and something goes awry, you can bet that they will blame you for it. Likewise, as a professional, you are obligated to provide complete advice to your clients. Neglecting a detail that later turns out to be an important one can, and likely will, result in a lawsuit against you.

Like it or not, the need for professionals to carry liability insurance of this nature is very real. If there was not an exposure for loss, then the idea to create a coverage to protect against it would have never occurred. House insurance was created because families lost their homes to fires and were left financially devastated. Auto insurance was created because people were getting into accidents and not only wrecking their cars, but hurting themselves and others, sometimes severely, in the process. Liability insurance was created because professionals give advice, and sometimes that advice, however well intended, leads to a financial loss on the part of their clients. When a client, who has paid you and relied on your expertise, suffers financial loss directly or indirectly as a result of your service, they can sue you in order to recoup their losses.

While most people are fortunate enough not to be sued in relation to their services, those that have been know that the lawsuits can be large and financially devastating if you don’t have adequate insurance to back you. While every professional will not get sued, keep in mind that not every house will burn down and not every driver will hit a pedestrian. Insurance is intended for the "what if" scenarios. What if the unthinkable happens, and it happens to you?

Below are some examples of situations that could give rise to a lawsuit against interior designers:

1. Interior designer provided incorrect material specifications to the client

   i.e. the material provided is inappropriate for the intended use

2. Negligent specification of flooring.

   i.e. slip resistance ratings were not sufficient to prevent potential injury.

3. Error in design drawing of office space
   
   i.e. error in dimensions for design and construction of office space, resulting in space that cannot be utilized for intended purposes, or existing furniture that cannot be re-used within the space.
   
   
4. Non-compliance with building code
   
   i.e. non-compliant slope of interior ramp intended for barrier-free use, resulting in injury to office worker.
   
   
5. Error in noting dimensions in construction or millwork drawings
   
   i.e.wrong size of shelving or furniture for office being ordered and installed.
   
   
6. Error in designing and detailing custom shelving unit or fixtures
   
   i.e.unit or fixtures are not designed to be sufficiently structurally sound for intended purpose.
   

7. Referral of contractors
   
   i.e. you may be named as a third party in a lawsuit involving a dissatisfied client who is suing a contractor referred by the interior designer.

8. Error in design that results in non-compliance of fire safety codes.
   
   i.e. a gym, night club or other public venue is scheduled to open on a given date, but a flaw in design (e.g, improper fire exits locations) causes a delay in the grand opening. The result to the client will be lost revenue and marketing efforts.
   
   
   
   

   Vicarious Liability Defined

   Definition : When one party is held responsible for the actions of another, based solely on their relationship to each other.

   Exposures in Business:

   1. As a business owner or employer you are responsible for the actions of your employees while they are acting in the scope of their job-related duties.
   2. You can also be held responsible for the actions of hired sub-contractors or other independent contractors for work they are performing on your behalf. The types of situations where you could be held liable include, but are not limited to,
      1. work that is dangerous,
      2. projects that impose non-delegable duties on you under local, provincial or federal law
      3. negligence in the hiring of an incompetent contractor

   Vicarious liability and your insurance: Although vicarious liability is covered under a standard commercial general liability policy, it is wise for any insured to take the necessary precautions to protect their insurance policy and history. You have limited control over claims that arise out of vicarious liability, however they will affect drastically. Not only will it reduce your policy limit, but it will also affect your loss experience, which in turn affects your annual premiums. Vicarious liability claims can come from a number of sources, including your employees and sub-contractors. You will never be able to completely eliminate your exposures to vicarious liability claims, however you can take some steps to reduce your exposures:

   1. Keep your operations focused on interior design services. As soon as you broaden your operations you increase your exposures to vicarious liability claims with respects to the actions of your employees.
   2. Any contractors required to complete the work of your design should be hired by the property owner, rather than by yourself. Alternatively the property owner could hire a project manager or general contractor to perform these duties. In both cases, you have eliminated your vicarious liability exposures of the sub-contractors, as you are not holding yourself out as the project manager or as the general contractor. You may still assist in the co-ordination of the project to ensure your design is understood by the trades and is implemented appropriately.
   3. If you must hire a sub-contractor, you should ensure they have proper insurance in place by receiving a copy of their certificate of insurance and you may want to request that you be added as an additional insured under the policy.

   Examples of vicarious liability:

   1. As a project manager or a general contractor, you may be faced with vicarious liability charges if your sub-contractor:
      1. Fails to complete a job
      2. Performs the job incorrectly
      3. Are found guilty of other contract violations
   2. As an employer you can be faced with a number of situations involving vicarious liability, such as:
      1. Sexual harassment of one employee to another
      2. Discriminatory behaviour by an employee against fellow employees or customers
      3. Or any other action in which one of your employees personally causes harm, even if that employee acts against your employment policies.
   
   
   
   
   

***The information provided herein in intended to provide general information and not to replace the professional advice of your insurance broker. Should you have questions pertaining to your specific needs, please contact our office.