Alternate design-build approaches can moderate liability risk
While more players are entering the construction professional liability market, signs are indicating a general contraction occurring in terms of the limits underwriters are willing to provide.
It is taking more time and negotiation to build the liability towers insureds need, with more players involved in the layering of limits to secure necessary coverage. One broker doing business with Zurich recently reported that an account with a liability tower of $100 million built with four insurers was now requiring eight to retain the same limit. From a capacity standpoint, this trend is apparent across the market.
Design-build projects continue to be one of the most common drivers of professional liability claims. Because the contractor retains primary responsibility for the various phases of construction, including the hiring and management of all subcontractors, the project owner may not be engaged in the process to a significant degree. With multiple teams on the same project, if coordination and communication are not maintained effectively, incorrect assumptions and cost overruns may give rise to disputes resulting in professional liability claims.
Project design approaches are evolving
While traditional design-build remains widely used, the construction industry has seen movement toward more collaborative delivery models such as progressive design-build (PDB) or integrated project delivery (IPD).
Under the PDB approach, the project owner initially engages a contractor based on qualifications and collaborates across each progressive phase of the project. This collaborative approach provides the owner with a greater sense of control during each phase, improving risk management by minimizing the potential for disparate assumptions and surprises.
While PDB can mean a longer pre-construction phase and potentially higher initial costs due to its collaborative, consultative orientation, the approach can be better suited for complex or evolving projects.
A landmark report released in 2025 by the American Council of Engineering Companies (ACEC) queried 581 engineering firm leaders across 439 firms. According to the study, 76% of respondents have engaged in PDB projects, with 88% reporting increased project volumes, and 81% reporting rising construction values over the past five years. ACEC reported the trend has been fueled by demand for more integrated and transparent delivery models, especially in transportation, water and wastewater, aviation, and both public and private buildings.1
According to the study, fully 76% of industry stakeholders reported being satisfied or very satisfied with the PDB approach, with minimal dissatisfaction registered at 6%. ACEC concludes these findings underscore the growing acceptance of PDB as a preferred method in markets that demand accountability, early collaboration, and flexible project evolution.
A more formalized collaborative approach is IPD. Under an IPD approach, the owner, designer, contractor and key subcontractors become parties to a single master agreement, typically known as the Integrated Form of Agreement (IFoA). The IFoA lays down mechanisms designed to align incentives and better enable collective decision-making, creating a culture of shared accountability and thereby reducing the risks of disputes and claims for delay or disruption. A key feature of the IFoA is the inclusion of an incentive compensation layer (ICL) that allocates a portion of the project’s budget to profit for the project team.2
Megaprojects on the rise
Such alternative and more collaborative approaches to project design and delivery can be particularly useful in the management of megaprojects, defined as those starting at $1 billion.
To accommodate the dramatic expansion of artificial intelligence (AI), many of these megaprojects are data centers, projects which can easily run into multiple billions of dollars. While large in square footage and of high value, an advantage of data center projects is that many of them are based around easily templated designs with substantially similar geometries and similar HVAC requirements. The project owners know exactly what they want, so the potential for delays, disputes and litigation is reduced.
Disputes typically occur when changes skew a project into costs not anticipated in the bid or delays due to design changes.
At the other end of the complexity continuum are professional sports stadiums. Each new project has to be better looking than the old one, and unique in the pantheon of professional sports stadiums. All of which means a design is more susceptible to added costs and delays.
Other projects which may be more susceptible to disputes include hospital renovations and new construction, infrastructure projects (rail, highways and airports), large commercial buildings, and processing plants for metals and other materials.
Disputes typically occur when changes skew a project into costs not anticipated in the bid or delays due to design changes. In a typical design-build situation, the bid entered will have specific assumptions and expectations regarding delivery on timing and budget. Yet
sometimes, “value engineering” may rear its head, with the substitution of a component or product at a critical point in the project. Costs begin to spiral, and it may be necessary to accelerate other processes to finish on time. And with new tariff regimes raising costs for materials and components, new cost multipliers have been added to the project’s budget.
Conclusion
Whatever the approach used in contracting, building and delivering a project, the fundamentals of project risk management have not changed.
When advisable, contractors should secure documentation spelling out limits of liability for design exposures, making sure the limits tied to subcontractors are adequate for the risk exposures they represent.
Establish solid lines of communication and coordination between various teams to ensure transparency during all phases, which can help to avoid confusion that can lead to unnecessary risk. For example, do both the general contractor and the architect have their own mechanical designers? Is the existence of duplicate mechanical design expertise likely to cause an overlap in the scope of duties between various contracts? To borrow from the “too many cooks” analogy, when there are too many leaders during a particular phase, confusion and potential conflicts can result in delays, unanticipated costs and professional liability claims.
Ensure well-written contracts clearly define the scope of the project and avoid going out of scope as laid out in the contract, which can mean taking on additional liability you did not intend.
References:
- “New Report: Progressive Design-Build Is On the Rise – Here’s What You Need to Know.” American Council of Engineering Companies. 12 June 2025.
- S., Denys. “Integrated Project Delivery (IPD): What is it.” ConstructionFront.com. June 2025
The information in this publication was compiled from sources believed to be reliable for informational purposes only. All sample policies and procedures herein should serve as a guideline, which you can use to create your own policies and procedures. We trust that you will customize these samples to reflect your own operations and believe that these samples may serve as a helpful platform for this endeavor. Any and all information contained herein is not intended to constitute advice (particularly not legal advice). Accordingly, persons requiring advice should consult independent advisors when developing programs and policies. We do not guarantee the accuracy of this information or any results and further assume no liability in connection with this publication and sample policies and procedures, including any information, methods or safety suggestions contained herein. We undertake no obligation to publicly update or revise any of this information, whether to reflect new information, future developments, events or circumstances or otherwise. Moreover, Zurich reminds you that this cannot be assumed to contain every acceptable safety and compliance procedure or that additional procedures might not be appropriate under the circumstances. The subject matter of this publication is not tied to any specific insurance product nor will adopting these policies and procedures ensure coverage under any insurance policy. Insurance coverages underwritten by individual member companies of Zurich in North America, including Zurich American Insurance Company. Certain coverages not available in all states. Some coverages may be written on a nonadmitted basis through licensed surplus lines brokers. Risk engineering services are provided by The Zurich Services Corporation.
