Terms in Design-Build Construction Contracts
representation of business organizations, individuals and fiduciaries
in all courts. With extensive experience representing contractors,
industrial companies, financial organizations and corporate
fiduciaries, his litigation practice includes complex construction
cases, insurance disputes, real estate litigation, oil and gas litigation,
Uniform Commercial Code matters, intellectual property litigation and
defense of executors and trustees.
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lar delivery system in the construction
industry. D-B concentrates both design
and construction responsibility in the
same firm or team, providing the owner or
developer with "one neck to grab" for any
issues that may arise. It gives the design-
builder total control over the execution of
the project. Hopefully, both parties benefit
from reduced conflicts and expedited con-
struction, translating into lower costs and
greater profits.
Design-builders are usually general
contractors who enter into subcontracts or
joint ventures with design firms to under-
take a construction project. Some D-B
projects are led by design firms that sub-
contract with general contractors, but most
of the time it works the other way, with the
general contractor leading the team.
In contractor-led D-B projects, the de-
sign-builder may pass the design work on
to a subcontractor or joint venture partner.
But even if the design-builder is not itself
providing design services, as between the
owner and the design-builder, the latter
any design errors.
A general contractor will ordinarily
carry general liability (GL) insurance
to protect itself from potential liability
for personal injury or property damage.
Contractors usually require their subcon-
tractors to show evidence of their own GL
insurance and to name the contractor as an
additional insured on the subcontractor's
GL policy. However, both the contractor's
and the subcontractor's GL insurance most
likely exclude professional services.
protect itself against the risk of liability
for design errors. It can add a professional
liability (PL) endorsement to its GL policy;
it can purchase a separate PL policy; or
it can require the designer to provide
insurance for the benefit of both parties.
When relying on a designer's PL insurance,
however, the contractor must take care, as
additional insureds are normally not recog-
nized in PL policies.
proach, the subcontract or joint venture
agreement will include a clause that states,
regardless of insurance, the design firm
shall indemnify and defend the contractor
against any loss, liability or expense aris-
ing out of the designer's work.
Thus, the contractor may perceive
that it has three-way protection: its own
insurance, the designer's PL insurance and
contractual indemnification. Problems can
arise, however, if the PL insurance and the
contractual indemnity are not coordinated.
The designer could find itself assuming
uninsurable risks, and the contractor may
end up having to rely on its own PL insur-
ance, if any.
deviations from the "standard of care,"
i.e., the failure to render services with the
degree of care ordinarily observed by other
competent designers who render similar
services as those provided by the designer
in question for similar projects in similar
geographic areas. PL insurance does not
insure contractually undertaken obliga-
tions that go beyond the standard of care.
Guarantying a defect-free design, warrant-
ing fitness for a specific purpose, guaranty-
ing that the project will achieve a specific
outcome (such as a minimum LEED point
level), or agreeing to indemnify and defend
another party all may go beyond the