Construction Design/Build Liability Exposures

Posted by John Cofini on Mon, Nov 16, 2020 @ 04:56 PM

construction-design-build-liability-exposuresThe design/build model is gaining traction. Instead of dealing with a separate contractor and designer, owners can deal with a single provider. This can result in a faster, streamlined project. At the same time, it can lead to new and increased liability exposures for the design/build provider.

The Construction Industry Is Changing

According to The Next Normal in Construction, a report from McKinsey, the COVID-19 pandemic is accelerating disruption in the construction industry. Construction companies are currently dealing with many changes, including digitalization, new materials, sustainability requirements and skilled worker scarcity.

Change isn’t always bad, but even when it’s positive, it can take some major adjustments. Transition periods can be especially fraught with risk exposures. As a result, liability and claims may increase.

Property Casualty 360 says that construction projects have become larger, more complex and more expensive. The stakes – and the potential losses – are also greater. Claims of certain types, including defective products and supply chain, have been on the rise.

Now, the design-build model is adding project complexity and claims risk.

The Design-Build Model Is Growing

DBIA market study projects that design-build construction spending will grow by 18% between 2018 and 2021. By 2018, these projects are expected to be worth $320 billion, representing 44% of construction spending.

According to Property Casualty 360, this represents an important evolution in the construction market. As more and more contractors embrace in-house design services, their liability exposures are changing. Insurance coverage and risk management strategies need to keep up.

Contracts Should Be Ironclad

In the design-build model, responsibilities that are typically very distinct and definable can become somewhat murky. If something goes wrong, this can become an issue.

The Construction Business Owner says that this is why fair and balanced contractual agreements are necessary. Standard forms from the American Institute of Architects, the Engineers Joint Contract Documents Committee and the DBIA can provide a good starting point but should be revised as needed to be consistent with other contracts in place.

Takeaways for Design-Build Contractors

  • Check your insurance. It’s important to check your insurance policies to make sure that all of your activities are covered. This isn’t something you want to discover AFTER a claim has been made.
  • Work with an insurer that understands your industry and its unique risks. Ask about experience handling claims in your industry, as well as risk management tools that can help you avoid those claims in the first place.
  • Check your contracts. Solid contracts are always essential, but this is especially true in design-build projects. Work with your BNC agent to ensure that contract and insurance issues are addressed adequately and consistently.

Contact us to learn more

Tags: construction design/build, construction design/build iability