uninsurable under a PL policy.
Further, a small to medium-size design
firm may carry only minimal PL cover-
age limits, and those limits may have to
cover more than one simultaneous claim.
Moreover, the designer's defense costs will
ordinarily be charged against the limits. So
a design partner or subcontractor may not
have much insurance for the contractor to
rely on. Contractor's coverage, by contrast,
is usually written for relatively higher lim-
its, which may be available for more than
one simultaneous claim, and defense costs
typically are not charged against the limit.
would be to engage D-B subcontractors
to execute particular components of the
project and require the subcontractors to
do their own design work (or hire their own
sub-designers). Although this does not
overcome the problem of insurance cover-
age for duties that go beyond the standard
of care, it does insert an additional layer of
protection for the D-B contractor.
A more reliable, but complex, solution
would be to limit the scope of the duty
owed to the owner in the first place and to
express that duty in terms of the standard
of care in the owner contract. One could
literally transcribe the standard of care
definition into the contract, for example:
design services shall be rendered by
or under the supervision of licensed
professional architects or engineers
and shall conform to the degree of
care ordinarily observed by other
competent architects and engineers
who render similar services as those
to be provided under this contract for
similar projects in similar geographic
areas."
phrases like "best," "superior," "perfect,"
"guaranteed," "suitable for the intended
purpose" or anything suggesting that the
design outcome must exceed the standard
of care. PL insurance generally will not
cover design services which allegedly fail
to meet an abnormal standard, even if
contractually required.
Similarly, when negotiating contracts,
general contractors should try to match
the scope of the indemnity clause in the
owner contract to the contractual indem-
nity coverage the contractor has in its
own insurance policy and that which the
contractor requires from its subcontractors.
The same advice would apply as between
a subcontractor and a next tier design sub-
subcontractor.
For example, if a general contractor's
own contractor's policy provides contrac-
tual indemnity coverage only to the extent
that the general contractor is at fault (the
tor requires no more than the limited form
from its subs, then that general contractor
should make sure the owner contract does
not impose a broader indemnity obliga-
tion than the general contractor's insur-
ance will cover. If this is not possible,
then the general contractor should be
sure to require parallel indemnification
from subcontractors or purchase broader
contractual liability coverage for itself, or
both. The "intermediate form" contractu-
al liability coverage would protect a gen-
eral contractor from contractual liability
for bodily injury or property damage for
which it and another party are jointly li-
able, and the "broad form" would protect
it so long as the indemnitee (usually the
owner) is not solely negligent. Broad form
contractual indemnification coverage is
rare, however, in PL policies.
tors or joint venture partners to provide
the "design" half of a D-B project do not
thereby escape the risk of design liability
to the owner or third parties who may suf-
fer injuries or losses because of a design
error. Design-builders have multiple ways
to protect themselves from such risks, but
the different avenues of protection have
to be coordinated, or their benefits may
be lost.