Addressing the disconnect between the no-fault environment of integrated project delivery and the pro-fault environment of professional liability insurance, at least two insurers are getting ready to offer project-specific policies for buildings. The policies, which generally insure all design professionals who perform professional services on a particular project, can be expensive because they are highly customized, say insurers. But the concept behind them is a recognition of IPD’s shared responsibility between the designer and the contractor.
Schinnerer & Co., Chevy Chase, Md., an underwriter for CNA, Chicago, spent 20 months crafting its program, says Kevin Collins, a Schinnerer senior vice president. It should be available in July.
Lexington Insurance Co., Boston, has been monitoring developments around IPD for nearly four years, says Robert Rogers, an assistant vice president. Lexington also “seeks” to write project-specific policies. The company has a working group of owners, designers and contractors who meet periodically to discuss insurance needs in an attempt to help develop a template for IPD project policies.
Lexington so far has not created a template because each IPD project it has studied has had a different contractual arrangement. “We hope the future brings a more consistent contractual approach,” says Rogers. Until that happens, Lexington intends to continue considering individual projects, offering a coordinated approach to risk management and claims resolution. “This sort of approach has an intuitive applicability to IPD’s goal of coordinated design and construction,” says Rogers.
Collins agrees that program development has been hampered by the lack of contract standardization. “Exposure and the assumption of responsibility are still being defined or worked out,” he says.
Schinnerer’s program will cover an individual project for a prime designer alone; the prime designer in combination with a general contractor or either or both in combination with underlying subconsultants. Schinnerer’s program is flexible enough to cover the contractor, which could be vicariously liable for design because of blurred lines of distinction between design and construction with IPD.
The project-policy program is flexible enough to be used for design-bid-build, design-build and IPD under a multiparty contract, says Collins. However, each case has to be dealt with on an individual basis. Schinnerer also could foresee a wrap-up policy, which would include design and construction coverage for all project entities, he adds.
Project-specific policies cost from 0.5% to 1.5% of the construction value, says Collins. “It’s not insignificant by any stretch,” he adds. But it makes sense, depending on the number of consultants. Coordinating many different policies over the life of a project is complicated, he says.
“Carriers and sureties should be involved earlier in the project process [under IPD],” says Kurt Dettman, a consultant with Constructive Dispute Resolutions, Hingham, Mass. “They should be treated as part of the team to make sure insurance covers all the risks of a job,” he says.