Sharing Answers to Questions Arising During the Members’ Forum
On August 6, 2020, the OAA held its first digital Annual General Meeting. During the event, members posed some questions on topics such as Pro-Demnity, the practice of architecture, and terminology. The answers are shared below.
What are the total numbers of licensed Architects, Intern Architects, and registered practices in Ontario?
Each year, the OAA reports a variety of membership statistics within its Annual Report, which is made available on the OAA Website, generally in the month of April each year. At the close of 2019, there were 4,482 licensed members: 4,302 Architects and 131 Licensed Technologists OAA, 1,716 Intern Architects, and 1,191 Certificate of Practice holders.
In the past, Pro-Demnity had a regulation for all architects using another professional insurance provider, in addition to the mandatory Pro-Demnity coverage, to be excluded for non-limited coverage for the legal support. These individuals are still paying the same premium for Pro-Demnity insurance coverage as the individuals who are not using other insurance providers. In my opinion, something is wrong there. Pro-Dem should not be charging the same premium in these two situations. The architects who are buying additional insurance from other insurance providers are receiving less protection from the Pro-Demnity Insurance Company and the premium should be reduced.
(The following response comes from Bruce Palmer, Pro-Dem President and CEO.) The short version of this answer is that our approach treats all “excess” coverage the same, requiring the entity that earns the premium for the excess coverage to pay any costs above $300,000. A more complete explanation needs an understanding both of how Pro-Demnity’s insurance plans are structured, and of how the insurance industry works in general.
Insurance in general
Although the insurance industry in Canada is very competitive, it is not unusual for different insurers to need to work together on common claims and, relatively often, a policyholder may have different layers of similar coverage with different insurers. In this context, the general rule is that insurers share the costs of the shared claim in the proportion their limits relate to the total loss. For a simple example, if there was a $1 million claim and one insurer had $250,000 of coverage and the other had $750,000, then all the costs—defence, expert witnesses, and the final settlement—would be split 25/75. This is pro-rata cost allocation.
This concept is straightforward for a property claim, but gets complicated with professional liability claims, where the sum claimed often greatly exceeds the final payout, where the action frequently involves multiple defendants (not just the architect), and where the time to settle the claim is often several years. In these cases, it is hard to quantify both the actual claim against the architect (is it the full value of the suit or some smaller proportion?) and the actual proportion the various insurers should pay (in defending a $1 million claim that settles for $500,000, is the split 25/75 [based on the alleged loss and expenses incurred in defending against that allegation] or 50/50 [based on the final outcome]?). Time also affects the calculation: paying 75 per cent “as you go” is very different than reimbursing 75 per cent of the costs several years from now.
Pro-Demnity structure
Back in the 1980s—when Pro-Demnity started, in the absence of any commercial insurers being willing to insure architects—most claims were well below $250,000 and defence costs were rather limited. Few architects bought excess limits (even if they could find an insurer willing to issue them a policy) and the issue of sharing pro-rata with other insurers was not really a problem. Over the years, this situation has changed dramatically: many architects now buy in excess of mandatory limits, and expenses now routinely represent about 70 per cent of the actual costs of a claim (in other words, a $300,000 damage payout may very well have $700,000 in defence costs associated with it). The need to share pro-rata, as the rest of the insurance industry already does, is far more important in order to fairly allocate costs to the insurers who are earning the premiums being charged for that coverage.
As a relatively small insurer focusing only on architects, Pro-Demnity carefully manages its exposure to risk. Since 100 per cent of our premiums come from Ontario architects, we are acutely aware than any additional expenses we incur result in all Ontario architectural practice paying more.
As part of our risk management, we reinsure all claims greater than $250,000. This means that when we issue a million dollar per claim limit, Pro-Demnity is responsible for the first $250,000 and our reinsurers pay the rest up to the policy limit (and our reinsurer takes a portion of the overall premium reflecting this fact). This is largely invisible to our clients as Pro-Demnity handles all the claims and underwriting—it is our name on the policy—but it has a significant financial impact on us, limiting our exposure to very large claims while still ensuring we can offer large limits to Ontario architects.
Internally, we cap our expense payments at $300,000 and all expenses above this amount are repaid to us by our reinsurer. For simplicity, we do not exactly follow the pro-rata approach previously described. Instead, we use a “hard cap” on our expenses with our reinsurers: most claims have expenses that are still well below the $300,000 cap and this approach simplifies things for both ourselves and our reinsurers.
In some cases, of course, architects choose to place their excess layers with other insurers. In the past, these insurers did not share in paying our costs, even though we were defending their portion of the claim as well.
To use a real-life example, an architect may be part of an $8 million lawsuit. Pro-Demnity’s coverage is $250,000 and the architect (in this case) had a further $3 million placed elsewhere. We defended the claim and were able to negotiate a settlement where the architect’s contribution was about $190,000 (paid by Pro-Demnity, with the architect—because of our disappearing deductible clause—paying only 76 per cent of their deductible). In defending this claim, which started as an $8 million claim against the architect and others, Pro-Demnity paid about $400,000 in legal and expert witness costs. The other insurer—who was saved a considerable sum of money by our actions—paid nothing, profiting immensely from the payment of these expenses by Ontario architects. Quite frankly, we would have been better off financially to have paid our $250,000 claim limit and let the other insurer deal with the problem. We do not do this for three reasons:
- It will cost the architectural practice more (they will not be able to take advantage of our disappearing deductible, for example).
- The amount settled would likely have increased: after more than 30 years in the insurance business, I can confidently state that the other insurer would have done the same math we did and settled for somewhere between $250,000 and $650,000… costing the architect a second deductible, and likely having an impact on the firm’s (non-Pro-Demnity) insurance pricing at the next renewal.
- It weakens the profession and sets it up for more lawsuits, sending a clear signal to lawyers that they should sue architects more often because they can get better than expected settlements (which is what anything above $190,000, in this example, would be).
We do not believe this is fair: that large, profit-making insurance entities charge premiums for coverage and pay nothing in expenses while all Ontario architects pay more through their Pro-Demnity policies. As a result, we decided to implement the same rule externally that we use with our reinsurers. In this way, Pro-Demnity continues to defend Ontario architects and, in fact, pays all costs in the vast majority of cases. In a few cases, where the complexity of the case drives costs above $300,000, we now require the excess insurer—whose interests we are defending—to contribute, just as we require the same of our reinsurers.
I hope this explanation helps you understand why we have undertaken this action. Fundamentally, I agree that all architects should get the same coverage and value for the premiums they pay, and that is what we are trying to make happen. If you buy your excess limits through Pro-Demnity, our reinsurers (who earn the premium on the excess portion) pay for expenses above $300,000. If you buy your excess limits through another insurer, the other insurer (who earns the premium on the excess portion) pays for expenses above $300,000.
We believe our approach is both fair and prudent. In most cases, the excess insurers continue with their free ride while we ensure that Ontario architects are well-defended. In a few cases, we are making them put their premium dollars to work, as they are now on the same footing (and footing the same proportion of the bill) as our reinsurers.
Why is it BCIN holders can act as architects in the design and permit process of small structures? Why is it that OAA cannot stop anyone other than OAA licence-holders to be involved in this design and permit process?
Under the Architects Act, the practice of architecture includes:
- the preparation or provision of a design to govern the construction, enlargement, or alteration of a building;
- evaluating, advising on, or reporting on the construction, enlargement, or alteration of a building; or
- a general review of the construction, enlargement, or alteration of a building.
However, under section 11(3) of the Act, there are exemptions within the practice of architecture under which others (i.e. Building Code Identification Number [BCIN] holders) may provide services. This includes Part 9 buildings of certain occupancy types (which demands a minimum requirement of a BCIN), as well as the interior spaces of Part 3 Buildings. It was not until 1984 when the existing Architects Act came into force that there was a restricted scope of practice identified for architecture. The scope that is exempted from the practice of architecture has always been an area in which the general public could provide design services along with architects, and now is generally limited to BCIN holders along with architects.
However, under the Act, BCIN holders cannot hold themselves out to be architects, regardless of the work they are doing. Misrepresentation of the protected title “architect” and misleading claims or advertising (inadvertently or purposely) could lead the public to conclude they would be receiving architectural services from a licensed and regulated professional. Under the Act, the OAA can—and does—take certain actions to enforce the rules and prevent illegal practice. For more information, click here.
What are some concrete steps taken by the OAA to support equity, diversity, etc.?
The OAA is committed to addressing inequities within the architectural profession and within its own operations. In the strategic planning sessions held in early 2020, OAA Council identified equity, diversity, and inclusion as priorities of utmost importance, and the lens through which all decisions should be made. The growing awareness of racial and social injustice within our society has highlighted the need to accelerate our actions to promote an equitable profession. Below are a few actions that the OAA has taken in recent years and in recent months.
The OAA has actively lobbied the Ontario government in support of removing exemptions to the Employment Standards Act (ESA) that allow for unpaid or underpaid internships. At the December 5, 2014, OAA Council meeting, OAA Council passed a motion to send a letter to all members regarding unpaid internships. In the letter, the OAA affirmed that the profession has an essential and ethical obligation to ensure internships are paid, recognizing the value and contributions of Intern Architects.
In 2016, the OAA examined the issue of gender parity and noted the growing number of women entering the profession. On September 22, 2016, Council adopted a policy that saw to a representation by women on OAA Committees that is proportional to the number of women that are members of the Association.
In 2018, the OAA held a roundtable focused on Truth and Reconciliation, which was attended by Indigenous architects. The resulting report lead to the establishment of the OAA’s Truth and Reconciliation Working Group. Its mandate is to explore and recommend a means to establishing an OAA De-Colonialization for Architecture Project that will examine the current professional regulatory landscape and consider actions the OAA might take to encourage the evolution of the profession and practice of architecture in Ontario toward the recommendations of the Truth and Reconciliation Commission.
In 2019, the OAA conducted a membership survey to gain insight into the experiences, needs, and expectations of its members. In acknowledging the lack of Black and Indigenous members, questions were added to address discrimination and harassment within the profession. Of those who responded to the survey, 30 per cent indicated that they had experienced either workplace harassment or discrimination.
On June 3, 2020, the OAA sent an email to its members condemning anti-Black racism and asking for feedback on ways the OAA could do better. On June 7, 2020, OAA.chat added a new forum dedicated to equity, diversity, and inclusion, where members could voice their concerns and provide feedback.
On June 10, 2020, a message from President Kurtin was sent to all members calling for action to propel change within the profession. Her message called for the OAA to expedite existing programs and complement them with new initiatives, putting a framework in place to ensure momentum is maintained.
Several members have provided thoughtful and pointed feedback via the OAA.chat forum. All feedback is carefully reviewed as part of a larger coordinated effort to develop meaningful and impactful initiatives. In addition, on June 15, 2020 members from OAA Council and members from Black Architects and Interior Designers Association (BAIDA) met virtually to discuss their written response to the OAA’s call for feedback.
On June 25, 2020, OAA Council moved to approve three concrete actions to advance its mandate of equity, diversity and inclusion, specifically:
- explore steps to enhance data collection on human-rights-based data on OAA members;
- enhance efforts to share information (e.g. articles, books, podcasts, and webinars) that address the intersection of antiracism and design; and
- facilitate a roundtable discussion on discrimination within the profession.
Following the adoption of the above action items, OAA Communications staff, with the oversight of an appointed Council member, collect and review relevant items that are shared on OAA.chat, and on the OAA’s Instagram, Facebook, and Twitter accounts.
The OAA’s Continuing Education offerings have been enhanced to include updated sessions on shifting leadership from diversity to inclusion, harassment and discrimination, and unconscious bias. These three webinars, under a Council directive, have been made free to all OAA Architects, Licensed Technologists OAA, Intern Architects, and Student Associates, with registration fees waived by the Association. The first one happened earlier in September and had more than 500 people attend. Members can still register for the other two, with one happening later this month and another in October,
Efforts are also underway to develop a formal roundtable that will be held virtually later in this year. The OAA has also retained an Equity Specialist Advisor, with expertise in the fields of equity, anti-racism, and human rights, to assist with the event and advise on the collection of data.
The OAA believes that the way to secure lasting change is to better understand the issues within the profession, before making more substantive changes. (As one of our members pointed out, if you can’t measure the problem, how can you solve it?) By gathering, reviewing, and analysing qualitative and quantitative feedback from its’ members, by consulting with affected communities and stakeholders, and by scanning for industry best practices, the OAA is confident that it will implement an impactful and sustainable plan that will lead to a profession that is truly equitable, resulting in a built environment that is inclusive and accessible to all.
Can anything be done about minimum fees? Due to COVID-19, fees are being significantly undercut to the point of being unfeasible. Other professions seem to be able to maintain some sort of standards. This does have a bearing on Pro-Demnity etc. as per our ability to fulfil professional roles.
The issue of professional fees is one that has been under discussion for many years. The OAA supports and recommends the use of the RAIC’s Guide to Determining the Appropriate Fees for an Architect. The COVID 19 pandemic has certainly heightened the issue as uncertainly around our economic stability is at an all-time high. The OAA continues to work as a member of the Construction & Design Alliance Ontario (CDAO) to press for fair and transparent procurement processes within public sector, which includes appropriate fees for consulting services.
It is the case that some professions do have standardized fee schedules established; however, these are instances where the professional’s services are paid for by a public entity (i.e. the government in the case of health care) or by a private insurer (i.e. dentists).
OAA Council engaged in a detailed discussion at its March 2020 meeting and agreed that the following elements would be considered in the strategy around professional fees under current initiatives.
Quality Based Selection (QBS)
Under the Vice President Strategic/PACT portfolio, update the OAA QBS documents and consider participation in the national study being proposed that will provide stronger evidence as to why lowest price is not best. Based on these two items, develop better information and marketing tools for QBS that can be rolled out to procurement folks and to members.
Architects Act and Regulations
Under the Vice President Regulatory/Regulatory portfolio, consider how the legislation might be further strengthened to support and enforce the matter of charging ‘fair and reasonable fees.’
Education
Under the Vice President Education and Vice President Practice portfolios, review all information that is already available to members regarding professional fees, specifically how to price services, and ethical consideration—and how to develop more awareness/education. Information already exists in Practice Tips, the CHOP, the MBA Kit and Excel sheets, the aforementioned RAIC Guideline, the Fundamentals of Running an Architectural Practice course, and the Admission Course. It is also being considered in the context of the research under way to strengthen two-tier licensing—that is, the requirements for a Certificate of Practice.
Communication
Under the Vice President Communications/communication portfolio, consider a BlOAAg series on determining appropriate fees. Also better understanding of the onus on the profession to charge the appropriate fee.
What has the OAA done to stop the use of the term “Architect” in the IT industry?
Under the Architects Act, the OAA controls the title ‘architect’ as it pertains to the practice of architecture. More specifically Section 46(2) of the statute states:
(2) Every person who is not a holder of a licence, certificate of practice or temporary licence and who,
(a) uses the title “architect” or “architecte” as an occupational designation;
(b) uses,
(i) an addition to or an abbreviation of the title “architect” or “architecte”,
(ii) an occupational designation, or
(iii) a term, title, addition or description,
that will lead to the belief that the person may engage in the practice of architecture;
While this may be frustrating, the OAA does not have the authority to enforce against any person, organization, or entity for use of the title Architect when not being used in connection with the practice of architecture.
What work is underway with public agencies who propose engaging architects through contracts that do not respect our professional practices (i.e. those that would have us contravene our insurance policies limits which are designed to protect the public)? What will OAA do on behalf of its members if the public sector employers force its members to offer services without insurance?
The OAA, through its Practice Advisory Services, continues to review RFPs and contract language at the request of members and also in the context of direct discussions with government and public client groups with a view to identifying items that might be in contravention of the Architect Act or Regulations thereunder, as well as ensuring good risk management approaches. These efforts may lead to the issuance of and RFP Alert by the OAA.
These efforts are also active through the OAA’s participation with the Construction and Design Alliance of Ontario (CDAO). Through these ongoing discussions, efforts are made to educate public procurement officials and create a better understanding of the consultant’s regulated roles and responsibilities. In concert with these efforts, the OAA has issued Practice Tip 39.1, which provides information and examples of unreasonable contract language to members in order that they can educate themselves around contract language and make informed go/no go decisions.
As communicated to members previously, contract language that exposes the consultant to liability beyond the extent of their insurance, or that imposes requirements on the consultant that is not covered by their professional liability insurance, does not completely negate professional insurance coverage. It may lead, however, to the architect being exposed without insurance, resulting in bankruptcy and/or personal loss. What is at the root of this issue is the desire to transfer risk away from the public client.
The OAA continues to actively express these concerns to members and public client groups such that good risk management includes ensuring funds are available to complete projects and repair any defects, or address claims should they arise. This is difficult to do when there are gaps in coverage as a result of unreasonable contract language. It is only reasonable that a public client would support this approach and the efforts to protect the public interest. It is not in the public interest to use contract language that may result in a claim being excluded from insurance coverage.
The idea of commoning as a social concept for a new society...are there any commoning ideas for our architectural community?
As we understand commoning is the activation of the power of social cooperation to get things done and which in turns brings community together. While not specifically referred to by that term, many of the initiatives currently being discussed and furthered by the OAA around equity, diversity, and inclusivity are focused on short- and longer-term goals centered around social cooperation, collective will and overarching shifts in thinking and culture. This idea has been shared with Council working directly on the Truth & Reconciliation Working Group and the advancement of equity, diversity, and inclusivity.
Further to the question with respect to regulation of fees, since Pro-Demnity premiums are tied to revenues, the lower the fee charged by a practice, the less they pay in premiums but the greater likelihood they will be attracting more claims. How will the OAA and Pro-Demnity address this problem?
OAA Council engaged in a detailed discussion at its March 2020 meeting regarding professional fees and agreed that the following elements would be considered in the strategy around professional fees under current initiatives:
Quality Based Selection (QBS)
Under the Vice President Strategic/PACT portfolio, update the OAA QBS documents and consider participation in the national study being proposed that will provide stronger evidence as to why lowest price is not best. Based on these two items, develop better information and marketing tools for QBS that can be rolled out to procurement folks and to members.
Architects Act and Regulations
Under the Vice President Regulatory/Regulatory portfolio, consider how the legislation might be further strengthened to support and enforce the matter of charging ‘fair and reasonable fees.’
Education
Under the Vice President Education and Vice President Practice portfolios, review all information already available to members regarding professional fees, specifically how to price services, and ethical consideration—and how to develop more awareness/education. Information already exists in Practice Tips, CHOP, MBA Kit and Excel sheets, RAIC Guideline to Fees and Services, Fundamentals of Running an Architectural Practice course, and Admission Course. This will also be considered in the context of the research underway to strengthen two-tier licensing—that is, requirements for a Certificate of Practice.
Communication
Under the Vice President Communications/communication portfolio, consider a blOAAg series on determining appropriate fees and improving the understanding of the onus on the profession to charge the appropriate fee.
It is understood that any project—even design on projects that never get built—can lead to allegations of error or omission. It is also understood that, proportionately, architectural fees charged by a practice are a good surrogate for measuring the risk being incurred by that practice. A smaller firm does fewer projects, leading to fewer claims on the whole. (This is true on an aggregate level, but may not be true for a single firm.) There has been no trend over time correlating size of practice with overall payouts, although ProDem continues to analyse data and look for trends.