Short answer
Design build professional liability insurance is usually different from a standard A&E policy. Standard policies are built for design work, and many limit or exclude claims from construction you perform yourself. Design-build firms often need a form that contemplates both design and construction, plus contractor’s general liability. Coverage depends on the actual policy terms, exclusions and underwriting.
Two kinds of design build professional liability insurance exposure
Design-build comes in two main forms, and each is underwritten differently.
- Architect-led: The design firm also builds or manages construction.
- Contractor-led: The contractor hires the designer, or designs in-house without licensed architects.
Contractor’s E&O forms are usually rated differently than A&E forms. Many owners ask whether a carrier will offer design-build coverage at all when they don’t do it yet. Some will, so ask before you take on the first project.
Why your current E&O may not be enough for design-build
Many A&E policies exclude or limit claims that come from construction work you perform. The policy was priced for design services, and construction exposure is a different risk.
Carriers that write design-build forms build the coverage to contemplate both design and construction from an E&O standpoint. The wording matters most here. Check how your policy defines professional services, because that definition often decides which activities the policy treats as covered work.
Construction means site control and decisions about means and methods. Standard design policies often treat those decisions differently from design advice. A design-build form may address them, depending on the carrier.
You will also need contractor’s general liability
Building brings job site operations, which means a contractor’s general liability application and pricing. Professional liability won’t respond to most bodily injury or property damage claims from site work, since those fall outside design advice.
Contractors also tend to face higher insurance requirements from clients and municipalities. Review what each project asks for before you bid.
Should the design and building companies be separate?
Some firms keep the design company and the building company separate, with separate contracts. That structure can be reasonable, but it doesn’t remove the question of coverage. Underwriters look at how the companies relate and who performs which work.
Additional insured requests between the two companies still run through general liability, not E&O. A client who asks to be named an additional insured is almost always asking about general liability.
Don’t rely on contract wording alone
Some owners word contracts to avoid looking like a contractor. Colleagues sometimes suggest this as a way to avoid contractor coverage. Insurers generally look at what you actually do, not only how the contract describes it.
If your firm directs, manages or performs construction, plan for coverage that matches that work. A mismatch between the work performed and the coverage purchased can lead to gaps when a claim happens.
A simple example
An architecture firm designs a small commercial building and then takes on construction management and some self-performed work. Its standard A&E policy was written for design only. If a claim alleges a construction defect tied to the firm’s own building work, the carrier may question whether the policy applies, depending on the wording and exclusions. A design-build form would be built to address that overlap.
What we see at Hardcover
A one-person landscape design-build shop asked whether contract wording could avoid contractor coverage, since colleagues did it. We explained that the coverage has to match the work actually performed.
What to check
- Does your policy exclude or limit construction work you perform?
- Do you design only, build only or both on this project?
- How does the policy define professional services?
- Does the contract require contractor’s general liability?
- Does the contract ask for additional insured status, and on which policy?
Related questions
Does my architect E&O cover design-build work?
Often not fully. Many A&E policies limit coverage for construction you perform, so ask whether a design-build form is available.
Do design-build firms need general liability?
Yes. Construction operations bring bodily injury and property damage exposure, which general liability is designed to address.
Can I list a contractor as an additional insured on my E&O?
Usually not. Additional insured status is mainly a general liability feature, so the request typically runs through that policy.
Does contract wording change what coverage I need?
Insurers generally look at the work you actually perform. Wording alone may not change how a carrier views your operations.
Is design-build coverage different for owner’s representatives?
Owner’s representatives face their own coverage questions. Our article on owner’s rep professional liability explains how those differ.