Design/build construction involves a design professional or remodeler contracting for both the design and construction of a project. The benefits of this method have resulted in an escalation of the demand for design/build services.
Contractors and designers have stepped up to meet this demand, but many do so without a complete understanding of the risks and responsibilities they may be assuming in design/build contracts.
For example, even if the design work is subcontracted to an architect or engineer, ultimately, the design/builder is liable to the owner for the adequacy of the design and therefore should not rely exclusively on the design professional's insurance.
Traditional liability insurance policies do not cover all (or in some cases, any) of these potential liabilities. Some states impose strict licensing restrictions that impede contractors' attempts to move into design/build.
Contractual liability coverage is usually limited, and in some cases, it may not be broad enough to encompass the contractor's assumption of risk. Fortunately, some of these obstacles can be overcome contractually and through the purchase of appropriate professional liability insurance.
The International Risk Management Institute (IRMI) has recently published a new book, Design-Build Risk and Insurance, which identifies problematic contract provisions, licensing statutes, insurance requirements, and other potential pitfalls design/builders may encounter and offers strategies for overcoming these obstacles. To order a copy of this book for $49, visit www.IRMI.com and go to "Products and Services" or call (800) 827-4242 and ask for customer service.
Ann R. Hickman, CPCU, ARM, is the editor of Design-Build Risk and Insurance and a senior research analyst at IRMI.
