Surety Bond Quarterly - Fall 2015 - (Page 16)

Feature Contractors in a New Age of Product Delivery Contractors are expanding their roles, and as they do, they'll have to share design liability. IF YOU THINK design liability coverage is only for those licensed by states to provide professional services in architecture, engineering, surveying, or the other recognized professions, you're a few decades behind the evolution of design and construction. Victor O. Schinnerer & Company, working with CNA, BY FRANK A. MUSICA first provided professional liability insurance policies to construction contractors in 1996. With the accelerating blurring of the "bright line" established by practice and the law between design responsibilities and construction work, that portion of the insurance industry-where construction contractors and specialty subcontractors purchase a policy to cover their direct or vicarious liability for design negligence-is the fastest growing segment of many carriers' professional liability book. Clients want new delivery systems: Contractors respond The evolution of the industry has led many firms, which traditionally constructed projects, into broadened roles as program managers, design-builders, and construction managers. As clients give contractors a greater role in the total project delivery system, such as through the singlepoint responsibility of design-build, the concomitant is that clients demand greater responsibility. As technology advances-such as the sharing of design information and the accumulation of design advice through building information modeling-some in the construction process embrace the risk, allocate it effectively, provide the service, and collect the fee. With technology enabling a constant flow of design information throughout the creation of capital assets, the roles of designer and constructor are becoming more fluid. That fluidity also means that design responsibility and liability are increasingly flowing to all parties in the project delivery system. 16 SURETY BOND QUARTERLY | FALL 2015 Changes in the traditional design and construction process, which include early contractor involvement, design-assist, design-build, and relationship or threeparty contracting, have challenged the legal system to reevaluate sources of duty and liability. While contractual arrangements and entity formation methods can minimize exposures and allocate direct contractual risks, some exposures are extremely long-term and will not simply fall on those who are licensed design professionals. Many contractors are willing to take the risk of design responsibility as part of a strategy to provide a broad range of services to clients and to increase their control over client expectations and project outcomes. Contractor design liability has existed for decades Contractors routinely have been responsible for elements of design. While some of the risk of negligence for this design delegation stays with the prime design professional, much of the risk is shifted to those actually performing or furnishing the design services-the contractor, specialty subcontractors, or subcontracted design professionals. This exposure is created by distributed design responsibilities imposed by the complexity of new projects and the increasing delegation of design responsibility to contractors and specialty subcontractors; it should not be ignored by contractors, subcontractors, or prime design professionals. To turn these exposures into opportunities, contractors need to be aware of how to insure against design liability exposures. Many have already acknowledged this expanded role by recognizing their professional liability exposures and properly insuring the risks. For design professionals and anyone else providing design solutions, risk arises from the possibility of causing harm due to their negligence in performing design services. Professional liability insurance programs for contractors cover design services performed by the contractor's in-house staff as well as vicarious liability when design work is provided by a design firm or specialty

Table of Contents for the Digital Edition of Surety Bond Quarterly - Fall 2015

2015-2016 Executive Committee
NASBP Upcoming Meetings & Events
From the CEO - Resources: Forms, Opinions & Risk Management Practices
Practical Insights: What You Need to Know - Key Takeaways
Alternative Project Delivery, Alternative Risks
Contractors in a New Age of Product Delivery - Sharing Design Liability
DBIA Releases New Bond Forms for Design-Build Projects
AIA’s New Teaming Agreement: AIA Document C102TM–2015
ConsensusDocs Contracts Help Ensure Smooth Sailing
NASBP’s Seven Virtual Seminars on Leadership
Guidance in Addressing Ethical Dilemmas
Web-Exclusive Features
2015 NASBP Resource Directory
Index to Advertisers

Surety Bond Quarterly - Fall 2015