Design Professional’s Common Contract Insurability Issues
Below are a couple of the common insurability issues that are raised during the Contract Review process.
Clients rely heavily upon estimates provided by Design Professionals when budgeting for projects, but no estimate can anticipate unforeseen conditions. Further, construction cost estimates based
upon historical data may not transfer to a particular project. Courts have found Design Professionals
liable for breach of contract, negligence, and even fraud where a project cost was underestimated
so it is important to address any cost opinions in the contract. We suggest that the Client is put
on notice that the Design Professional’s opinions or estimates of cost are based upon experience
and qualifications and represent their professional judgment, but are in no way a guarantee of the
ultimate cost of the project. We also recommend that the Client maintain a contingency fund.
Standard of Care
Absent a contractual provision, a design professional is required to meet a negligence-based standard of care
to provide services with the ordinary degree of skill and care that would be used by other reasonably competent
practitioners of the same discipline under similar circumstances. The law does not require perfection, merely
reasonable skill and care. Beware attempts to escalate the standard of care through contractual provisions or
verbiage regarding the “highest degree of care and skill”, “industry best practices”, “best services”, “expert”, “first
class”, etc. Any attempt to raise the standard of care can increase the risk of uninsurable exposures. Exclusions
on a Design Professional policy state coverage does not apply to any claim based on or arising out of liability assumed by any Insured under any contract or agreement unless such liability would have attached to an Insured even in the absence of such contract or agreement. Accordingly,
a Design Professional policy would be unable to respond to the portion of any settlement or judgment associated with a heightened standard of case based upon the contract. Aim for a reasonable, negligence based standard of care.
For a more detailed review of your client contracts, please contact your agent at Professional Underwriters.