Engineering Inc - January/February 2018 - 32

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Professional, an operating unit of W.R. Berkley
Corp. "But carriers can't collect enough premium to cover losses on condo projects, and
may limit offering coverage to firms with more
than 5 to 10 percent of their business coming
from these projects."
Corbett urges firms doing apartment work to
consider contract protections against a change
of use to condos, which can happen years later.
This condition should survive the sale of the
property to future owners.
Larger firms tend to have higher claims, often
on water, wastewater, highway and bridge projects, according to Farrar, while smaller firms see
more claims for condo and residential work.
"The carriers remain concerned about owners seeking higher project limits, creating even
deeper pockets to go after on lawsuits," says
Farrar. "Most carriers accommodate these limits; if the market were to harden, this coverage
wouldn't be available or would cost much more."
Berkley DP is seeing more claims resulting from design-build
projects, though Moonan suspects that may be due in part to
their rising prevalence. Jim Messmore, senior vice president at
Hanson Professional Services, Inc., and chair of the ACEC Risk
Management Committee, says the design-build claims tend to
arise out of contractual requirements, when designers are working for contractors rather than traditional owners.

"Residential is on the increase, and structural and geotech
seem to be targets more often," says Dan Cecchi, president of
Collins Engineers, Inc., and a member of the ACEC Risk Management Committee.
Additionally, while 2016 losses from hurricanes and fires
may not directly impact the A/E segment of the PLI market,
they could lead to some general belt-tightening among carriers,
according to Kevin Collins, senior vice president at Victor O.
Schinnerer & Co., Inc. "While there is still a wealth of capacity,
the market may be transitioning," says Collins.
Al Rabasca, director of industry relations, XL Catlin, says
catastrophic losses could affect the re-insurance market, which
in turn could flow down to primary carriers and possibly have
some ripple effect on PLI for design firms.
Even with a record 60-plus carriers competing for design professionals' business and nearly all aiming to gain market share,
in the past year two carriers-Arrowhead General Insurance
Agency, Inc., and OneBeacon Insurance Group-have left the
market while another carrier decided not to renew its coverage of
smaller design firms. Looking ahead, Tim Corbett, founder and
president of SmartRisk LLC, anticipates consolidation among
carriers that have not implemented underwriting discipline and
set aside enough reserves to handle the claims that are developing in the industry.

CLAIMS TRENDS

Communication and documentation issues may be the most
common source of claims, but technical errors and omissions
have risen in recent years.

Have Your Rates Increased, Decreased or
Remained Flat Over the Past Three Years?

RISKIER PROJECTS

Some carriers won't write insurance for condos and other residential projects, or structural and geotechnical projects.
"A firm that specializes in condos may still encounter difficulty
with finding carriers willing to compete for their business on competitive pricing and coverage terms," says Connelly.
The 2017 PLI Survey of Carriers showed that nearly half of
the responding carriers avoid or place restrictions on residential,
condo and geotechnical projects. "Structural engineers have
improved their business practices because they have been forced
to pay attention to how they run their business," says Larry
Moonan, executive vice president and COO for Berkley Design
32

ENGINEERING INC.

JANUARY / FEBRUARY 2018

■ Flat 70%

■ Increased 30%

■ Decreased 0%

Source: 2017 ACEC/NSPE/AIA/AIA Trust Professional Liability Insurance Survey of
Carriers (10 of 17 firms responding).

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