Design Professional Liability Insurance Fundamentals – Understanding Risk Exposure

Design professionals represent a diverse group of experts including architects, engineers, land surveyors, environmental consultants, and construction managers. These professionals have very specific risk profiles requiring a distinct type of insurance coverage. Their specialized and detailed work can create unique and significant liability exposures. Protecting these professionals from unexpected and costly liability suits is essential to keeping their businesses sound and operational.

Design professional liability insurance (also referred to as PLI, E&O or errors and omissions insurance) can protect design professionals from many of these risks. But not all design professionals face similar exposure. In many cases, risk exposure is predicated upon the total number of design professionals contributing to a specific project, the varying ways they contribute, the respective amounts they contribute, and the methods used to contribute. New project delivery systems exacerbate the complexity of risk exposures by creating a more intricate network of interactions among these professionals. Today, these professionals may be geographically dispersed and interacting both synchronously and asynchronously, impacting the scope and complexity of their projects, and the associated risks of said projects.

The increasing sophistication of modern architecture and engineering, the new and evolving systems, and the aforementioned project delivery systems, can dramatically increase the number of contributors involved in a project’s design, and create a highly complex network of relationships among these design professionals. Identifying and managing risks created by evolving paradigm shifts in modern design are integral in managing professional liability among design professionals. These types of professionals and their respective professional liability consultants need to consider delegation of design responsibility, sharing of design responsibility and the other factors impacting design responsibility to help determine their respective risk exposure and applicable professional liability coverage.

Obviously, risk exposure can be impacted by the size, scope and duration of a project. Designing a private residence or modest commercial building carries a different risk profile than a large scale municipal project, bridge or office tower. That said, under-assessing a company’s liability exposure can lead to major problems with possible future litigation, while over-assessing a company’s liability exposure can lead to substantive overpayment of premiums, adversely impacting profitability.